EU seeks emergency powers to prevent supply chain crisis

Brussels is seeking emergency powers to force businesses to stockpile key products and break contracts during a crisis such as the war in Ukraine or the coronavirus pandemic, according to plans revealed by the European Commission on Monday.

The legislation, which intends to facilitate public procurement of critical goods and services, would deter the world’s leading exporters, such as China, from initiating similar measures without first informing the commission.

The “single market emergency instrument” would give the European Commission, the executive body of the EU, ample space to declare an emergency. Brussels would then be able trigger a number of interventionist measures to ensure the availability of goods, for example by facilitating the expansion or repurposing of production lines, the EU said.

Thierry Breton, internal markets commissioner, said the new legal tool would “provide a structural answer to preserve the free movement of goods, people and services in adverse times”.

“The best way to manage a crisis is to anticipate it, to reduce its impact or to prevent it from happening,” he said on Monday, adding that the new rules would allow Brussels to ask companies for information about their production capacity and inventory.

The proposals, which now need to be debated with member states and the European parliament, are unlikely to become law for several months but could be in place before the current commission ends its mandate in 2024. They are likely to require the approval of a qualified majority of EU states.

Breton said the new instrument would also allow regulators to prevent the fragmentation of the internal market. “We have clearly seen that in times of crisis, member states are tempted to introduce internal restrictions on the internal market (restrictions on exports of masks, cereals, border closures) and discriminatory measures (double fuel prices), aggravating the effect of the crisis.”

Margrethe Vestager, the EU’s executive vice-president in charge of competition, said: “The Covid-19 crisis made it clear: we must make our single market operational at all times, including in times of crisis. We must make it stronger. We need new tools that allow us to react fast and collectively.”

Diplomats said many member states expressed concern when commission officials presented the plans last week, with some arguing that they would go too far in allowing Brussels to intervene in corporate operations. Others accused Brussels of seeking to boost its powers without carrying out proper impact assessments of the proposed measures.

Former eastern bloc countries in particular were wary of a “command economy”, one EU diplomat said, adding: “It’s very sensitive. Member states have a lot of questions.”

During the Covid crisis, regulators in Brussels passed legislation allowing export bans on vaccines as a response to the US blocking shipments of shots to Europe. Member states also forced businesses to shift production to ventilators and face masks as they faced supply bottlenecks.

There are currently similar issues in the fertiliser market, said EU officials. High gas prices have driven up costs for producers and curbed production by 70 per cent across the EU.

Officials said the bloc needed to be better prepared to react to the next supply chain crisis. Several other countries already have measures in place for strategic reserves and priority orders, such as the US Defense Production Act.

Additional reporting by Andy Bounds in Brussels