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Here is Europe’s plan for a crisis-proof single market

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Blog of Commissioner Thierry Breton

When the COVID-19 pandemic took the world – including the EU – by surprise, there was no playbook on how to navigate through the crisis.

Some countries – including in the EU – initially had selfish reflexes, closing borders and hording essential products.

But against all odds, the EU finally chose the path of solidarity, creativity and assertiveness. But let’s face it – with some improvisation. 

As Commissioner in charge of the single market, I had to personally call ministers and appeal to their sense of solidarity, as we are ill-equipped to effectively and quickly counter the restrictive measures that are too often – we have seen it more recently in the areas such as fuel or grain – the first reaction of our Member States when under pressure.

Together with my team, we had to identify and call all the mask and vaccine producers in the EU one by one to ask about their production capacity and to get them to fulfil our contracts or give priority to our orders.

We asked other industries to temporarily repurpose their production lines.

We called our contacts in the US and China to keep supply chains open.

Basically, my only tool was my phone!

We therefore managed the crisis with ad hoc actions, in an improvised manner.

It may have worked, but we owe it to our citizens to be better prepared for the next crisis, whatever its nature. We cannot rely on goodwill alone. Because judging by the last few years, and the forecasts for the future, we are living in an era of “permacrisis” in which we can no longer improvise.

We must be better prepared to anticipate and respond to the next crisis. This is the objective of the Single Market Emergency Instrument (SMEI) we are presenting today, which is the direct result of the experience of the last two years and has four main objectives

1.  Better anticipation

First, better anticipation. The best way to manage a crisis is to anticipate it, in order to mitigate its impact or prevent it from happening. Let’s imagine, for example, a major incident (a natural disaster, an attack on an industrial complex) in a country or region on which we depend for the supply of fertilisers or raw materials. In order to understand whether this poses a real risk to the European Union, it is important to have a better understanding of the situation.

Monitoring of the supply chains in question will allow us to have data almost instantaneously for the entire single market. Requests to economic operators for information on their production capacities, available stocks or diversification possibilities will support our decision-making.

Strategic reserves built up by Member States will increase our resilience before a crisis fully materialises and the products we need become extremely expensive or simply unavailable because other countries are already stockpiling them. 

2.  Avoid fragmentation

Secondly, avoid the fragmentation of our single market. We have seen that in times of crisis, Member States are tempted to introduce internal market restrictions (on exports of masks, cereals, border closures) and discriminatory measures (dual pricing of fuel), thus aggravating the effect of the crisis.

These restrictions have led to a danger of shortages of masks, ventilators, vaccines, cereals and fertilisers. They risk undermining European solidarity and aggravating the economic impact of a crisis.

Remember also the impediments to the free movement of our travellers, health workers and other essential service providers, the day-long traffic jams at closed borders…. 

Fragmentation is poison for crisis management.

The tools we currently have at our disposal are either too weak (pleas for solidarity by letters or phone calls) or too long (infringement procedures). An accelerated and reinforced notification procedure will give the Commission the power to adopt a decision to declare null and void a unilateral measure of a Member State that restricts the free movement of goods, persons and services. 

3.  Supporting our industry’s efforts

Third, support the efforts of industry. Economic operators are best placed to secure and diversify their supply chains. But when already hit by a full-blown crisis which disrupts the single market and our supply chains, industry risks being left on its own. That is why strategic reserves built up by Member States at an early stage in a coordinated matter can play a decisive role.

We also cannot afford to rely solely on the autonomous ability of industry to reorganise immediately in response to new market conditions, especially in the midst of a crisis. During the pandemic, industry reorganised itself to contribute: masks were produced by textile companies, fans by car manufacturers. To support such efforts in the future, we will accelerate testing, accreditation or conformity assessments to put those products faster on market. 

4.  Getting the right tools, just like our partners

Fourth, we are equipping ourselves with the tools that our partners have but that we lack. When the Biden administration blocked vaccine supply chains because of the “America First” principle, it was only when the European Union put in place an export authorisation regime that we were able to negotiate from a position of strength and unblock the supply chains, component by component, product by product.

In preparing the SMEI, we looked closely at what our partners have in place and took inspiration from that. The strategic reserve systems in Japan and South Korea, for example. But also the American DPA, which allows the President to oblige companies to accept priority rated orders – among a raft of possible measures.

While we have drawn inspiration, we have not emulated these word-for-word, as we favour dialogue with industry first and remain an open continent committed to international trade.  

An instrument of solidarity

Designed for difficult, exceptional times – for major crises and not for minor incidents –, we hope we will never need to use this instrument. I would almost call it a “sleeping instrument”. But if another crisis does occur, we will be better prepared.

During the vaccine crisis, we were faced with Member States pushing us to ban all exports. We prefer a less intrusive, more targeted approach.

This European toolbox is above all about having the tools to avoid a fragmentation of the single market and the balance of powers to prevent a breakdown in global supply chains. It is also an instrument of solidarity, which caters for Member States’ differences in terms of fiscal power.

So yes, SMEI is an innovative proposal. But the times demand it.

Europe has taken steps in defence, health and energy that were unthinkable a few years ago. It is time to take a big step towards more resilience and solidarity in our single market.

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