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Brussels is introducing wide-ranging powers to allow businesses to stockpile supplies and break delivery contracts to consolidate supply chains during times of the coronavirus pandemic.
The draft law, seen by the Financial Times, gives the European Commission greater flexibility to declare an emergency, triggering a series of intervention measures aimed at preventing production shortages in critical industries.
Businesses are unhappy after plans to protect the single market from supply shocks were revealed.
Martinas Barissa, internal market director at BusinessEurope, which represents employers in the group, said: “We would be very worried if this idea was adopted in such an interventionist form.”
“Member States could repeal contract law, compel companies to provide business-specific information and share their stockpiles, or limit their production in any crisis the Commission decides,” Barissas said.
Of particular concern to businesses is the “priority orders” system in which Brussels governs what companies produce and to whom they sell, undermining contracts with customers.
Companies have agreed to the proposal to prevent a repeat of the disruptions that occurred during the coronavirus pandemic when some member states closed borders and restricted exports, Barissa said. But companies believe the current scheme is too intrusive and should give businesses more flexibility, he said.
There is internal opposition to the plan, drawn up by Internal Market Commissioner Thierry Breton, and it could change.
An EU official said: “The instrument was designed to be broadly targeted to address the risk of fragmentation in the single market. [a] A large-scale crisis. It is now growing into an octopus in the planned economy, hoping to spread its tentacles over global supply chains and gain control.
The final version of the proposals must be adopted by EU commissioners on September 13 as Commission President Ursula von der Leyen takes center stage in her State of the Union address the following day.
According to the draft, the Commission, in consultation with Member States, will first declare a “vigilance” when it detects a potential crisis. That allows it to request information from relevant companies about their supply chain and customers. It may require governments to build strategic stocks. In some cases it may make these measures mandatory on pain of penalty.
The second phase, which requires member state approval, gives the Commission the power to direct market activity and directly purchase goods, again backed by unspecified penalties for non-compliance.
During the outbreak, the European Union enacted legislation allowing vaccine bans, and the U.S. retaliated by banning shots from the group. Governments have been asked to switch products to face masks, gowns and ventilators due to global shortages.
EU officials today have similar issues with fertilizers. High gas prices have reduced production in the union by 70 percent and increased prices for farmers. One said: “Over the past years we have had shortages of masks, ventilators, vaccines, grains and fertilisers. Rather than improvising solutions, we need to be better prepared to anticipate and respond to the next crisis.
The official said several countries had measures in place for strategic reserves and priority orders, including the US Defense Production Act.
“We got a lot of inspiration from the Americans,” the official said. “We don’t list the products because we don’t know what the next crisis will be. But obviously we are not talking about yogurt. Economic and social activities must be essential for the single market.
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