- EU want to be able to force companies to produce certain products & stockpile supplies
- Intention to shore up supplies in the event of a crisis
- May result in breach of delivery contracts
EU wants the ability to force companies to produce certain products and stockpile supplies in a crisis.
This is in order to shore up supply chains in the event of a crisis such as the coronavirus pandemic when some member states closed borders and restricted exports.
One of the biggest concerns to businesses is a “priority rated orders” system under which EU could stipulate what businesses must produce and who to sell it to. This may result in the breach of delivery contracts.
An EU official pointed out: “The instrument was meant to be targeted in scope, so as to address the risk of fragmentation in the single market in the event of [a] large-scale crisis. Now it is growing into an octopus of the planned economy, imagining it can stretch its tentacles across global supply chains and control them.”
When the EU commission detects a crisis could be coming it would – in consultation with member states – first declare “vigilance”. This would enable EU to request information from relevant companies about their supply chains and customers.
The EU could also ask governments to build up stocks and could make these measures compulsory imposing fines for failure to comply.
A second phase, which would require member state approval, would empower the commission to direct market activity and procure goods directly – again with fines for non-compliance.
During the pandemic, the EU passed legislation allowing export bans on vaccines in retaliation for the US blocking shipments of vaccines to the EU. Governments also asked businesses to move production to face masks, gowns and ventilators to combat the global shortage.
Various countries have measures in place for strategic reserves and priority-rated orders including the US Defense Production Act.
It is anticipated that the final version of the proposals will be adopted by the EU commissioners on September 13 ready for EU Commission President Ursula von der Leyen’s State of the Union address on 14th.
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