Companies based in Europe could be forced to prioritise production of key products and stockpile goods under draft European Union rules announced on Monday which would give the European Commission emergency powers to tackle supply crises.
The proposed Single Market Emergency Instrument comes in response to supply bottlenecks caused by the simultaneous COVID-19 pandemic and Russian invasion of Ukraine, and echoes similar measures adopted by the United States and Japan.
The proposal is expected to face strong pushback from businesses and some EU countries, concerned that this amounts to over-reach by the EU executive Commission.
The draft rules empower the Commission to order EU states to reorganise supply chains and increase supplies of crisis-relevant goods as quickly as possible. This includes expanding or repurposing existing production capacities or setting up new ones and placing crisis-relevant goods on the market.
Businesses could be made to prioritise the production of certain critical goods.
Critics say the rules smack of China-style state capitalism and may breach companies’ contractual obligations and expose corporate secrets.
Businesses that provide incorrect or misleading information risk fines up to €300 000 euros (R5.3 million) while those that fail to comply with an order to prioritise key products could be hit with daily periodic penalty payments of 1.5% of the average daily turnover.
For 30 years, the Single Market has helped keep 🇪🇺 strong and united.
Through the new #SingleMarket Emergency Instrument, we’re better prepared for disruptions that could affect the EU economy.
This follows a commitment made by President @vonderleyen in her 2021 #SOTEU speech. pic.twitter.com/zGuf6d6rT0
— European Commission 🇪🇺 (@EU_Commission) September 19, 2022
