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5th Dec 2022

EU seeks crisis powers to take control over supply chains

  • Companies which refuse to comply will face fines of up to €200,000 (Photo: europa.eu)
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The European Commission would be able to intervene in markets and ask European companies to prioritise some orders over others during emergencies, under a new instrument unveiled on Monday (19 September).

The so-called Single Market Emergency Instrument (SMEI) aims to avoid shortages, supply-chain disruptions and hoarding similar to those seen during the Covid-19 pandemic — when various EU member states introduced unilateral measures to secure masks, gloves or testing materials.

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"The Covid-19 crisis showed us that our single market isn't perfect. It is strong, but not unbreakable," said EU commissioner for competition Margrethe Vestager.

Unilateral measures introduced by some member states, she said, triggered shortages of supplies elsewhere when they were most needed.

"Rather than relying on ad hoc improvised actions, the Single Market Emergency Instrument will provide a structural answer to preserve the free movement of goods, people and services in adverse times," said EU commissioner for the internal market Thierry Breton, speaking along Vestager.

The SMEI instrument introduces a staged approach which would give emergency powers to the commission to monitor and tackle any potential threat that could trigger disruptions or shortages of key products within the EU.

In normal circumstances, the EU executive and member states will exchange information, conduct training, and hold simulations to prepare for possible crises, and issue early warning alerts when a potential threat or incident is detected.

If a crisis is identified, EU countries will then be asked to voluntarily share information regarding the supply chain of particular strategic goods or services.

This so-called "vigilance phase" will also allow the commission to call on countries to build up strategic reserves in order to prevent shortages.

Under the "emergency mode", where a crisis or threat has a negative impact on the availability or free movement of goods, the commission can request information from European companies and ask them to prioritise orders for specific goods needed during the crisis.

Companies which refuse to comply with Brussels' requests will be allowed to justify their position but could face fines of up to €200,000.

The emergency mode will also ban member states from restricting exports of critical goods or the movement of critical workers. EU countries would also have to notify the commission and justify any unilateral measures they may introduce — such as border closures.

The emergency mode, whose activation needs approval from a majority of EU countries, would also allow the commission to purchase crucial goods on behalf of EU member states — similar to the common procurement scheme in 2020 and 2021 for Covid-19 vaccines.

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