The government that intervenes extensively in the free market: now that Europe is almost stringing together crises, it seems to be becoming more and more normal. See, for example, the radical measures that are currently being considered to reduce gas prices. But with all these crisis interventions, the discussion flares up in Brussels: how far can the state go in an emergency, and who decides when that is?
This Monday, the European Commission presented a long-awaited legislative proposal that would allow it to interfere in the production and delivery of certain goods in times of crisis. With a so-called ’emergency instrument’, Brussels wants to be able to force European companies to build strategic stocks or to comply with delivery requests as a last resort.
This is the opposite of a planned economy: it is precisely intended to keep the market working
Thierry Breton Internal Market Commissioner
The law is mainly a response to the corona crisis and the shortages of, for example, mouth caps that arose at the time. The proposal was already controversial before it was presented and it sharpens the European discussion about the limits of the free market.
Europe is not the only place that is being talked about. The coronavirus crisis and persistent problems with global supply chains have prompted more countries to become more involved in the delivery of critical goods. Already during the corona crisis, the government of President Donald Trump used the so-called ‘Defense Production Act’ to enforce the production of respirators, among other things. Under successor Joe Biden, this originally military law is now more often used to guarantee the delivery of goods. In the meantime, in Japan and South Korea, among others, work is being done on strategic stocks.
“We equip ourselves with tools that our partners have, but that we ourselves still lack,” said European Commissioner Thierry Breton (Internal Market) on Monday. Much of what the European Commission is proposing focuses on making the EU more ‘resilient’ in the event of an emergency. “The best way to manage a crisis is to anticipate it and thus reduce or prevent its impact,” emphasized Breton. To this end, Member States and Brussels must first of all get a better overview of where potential problems can arise.
Act faster
But in preparation for a possible crisis, the Commission also wants to be able to act more quickly. Brussels can sound an alarm bell and, in extreme cases, oblige companies to stock up on emergency supplies. In doing so, they must give priority to European orders, possibly at the expense of other contractual arrangements. The Commission does not specify which goods are involved: after all, that can be different in every crisis.
Also read: ‘Strategic autonomy’ is now the buzzword in Brussels
The proposal fits in with a broader ambition of the European Commission to make Europe more autonomous and reduce dependence on other countries for important goods. To this end, Breton presented the so-called ‘Chips Act’ earlier this year, which also contains a clause that can enforce the delivery of microchips in the event of an emergency.
But the plans met resistance from free-market advocates. Earlier this summer, a group of nine member states, including the Netherlands, expressed their concerns about the ’emergency instrument’. The main objections are the power that the Commission appropriates to itself with the proposal. There are also concerns that Brussels wants to interfere too much in the direction and choices of European companies.
Companies remarkably critical
These companies themselves have also expressed themselves remarkably critically through lobbying club Business Europe. Not only about government interventions in case of emergency, but also because they would have to share business-sensitive information with governments in preparation for crises.
In response to all the criticism, the Commission has already refined the proposal in recent weeks, for example by building in more consultation moments and by granting companies a special position in certain cases. But that does not take away the crux of the criticism. Member States still fear that the concept of crisis will be stretched so far that Brussels will continue to interfere extensively with European production. That Breton spoke on Monday about “the era of the perma crisis” will not reassure them.
Brussels itself emphasizes that the proposal must guarantee that the European internal market continues to function smoothly, even if a crisis puts pressure on the continent. During the pandemic, it became clear how this could go wrong: especially at the beginning of the crisis, EU countries closed their borders, as a result of which the free movement of people virtually came to a standstill. Export restrictions for medical devices also put heavy pressure on the free market. “In fact, this protects the freedom of companies by ensuring that they continue to get the products they need,” said an EU official.
Breton also opposed criticism on Monday that he is working on a ‘planned economy’. “Would you say the same about the United States, where they have more far-reaching legislation,” Breton asked. “This is the opposite of a planned economy: it is precisely intended to ensure that the market continues to work.”
The Frenchman expressed the hope that member states and the European Parliament will approve the law in 2023, the 30th anniversary of the internal market. But the question is whether he has been able to remove all criticism before that time.
#Brussels #sharpens #debate #free #market #emergency #instrument #case #crises