A crisis-proof Single Market

DANIEL DEBONO – EU AFFAIRS MANAGER & HEAD OF BRUSSELS OPERATIONS – MBB

This year marks the 30th anniversary since the establishment of the European Single Market, the crown jewel of the European project providing freedom of movement of goods, services, capital and people. To many, the Covid-19 pandemic might already seem like a distant memory, but as the focus has now shifted to other priorities such as the War in Ukraine and the energy crisis, it is very important to learn the lessons from the disruption brought in the free movement of goods by the global pandemic and draw up a policy framework to address similar situations in the future. To this effect, the European Commission recently proposed the Single Market Emergency Instrument (SMEI).

SMEI is made up of three main pillars and focuses on contingency planning, a vigilance mode, and an emergency mode. Contingency planning would do everything possible to cushion the impact of a future crisis of a similar magnitude. A vigilance mode is a six-month temporary measure that would be enacted by the European Commission if following an assessment on the potential impact of the crisis, certain criteria are met. This may lead to the creation of a list of goods and services of strategic importance to be prioritised as well as monitoring actions to ensure their supply. An emergency mode would be activated by the EU member states and would also be applicable for a maximum duration of 6 months. This would require Member States to notify crisis-relevant information on free movement restrictions and certain crisis-response procedures which would enable products, designated as crisis-relevant goods to be placed swiftly on the market in an emergency context.

Crisis preparedness is always a positive initiative and therefore the SMEI is in principle welcome. But at the same time, it is very important that the framework, which is designed for extraordinary situations, is clear on the criteria that would stipulate its application and do not create unproportional burdens to stakeholders such as businesses, and in particular SMEs, in its implementation. Businesses require clear guidelines as to what is expected from them and while understanding the challenges for public authorities during crisis management, one must also be sensitive on requirements imposed on companies as they would also be undergoing a sensitive time and where they may not have the necessary resources to fully comply.

Some concrete examples of added burdens to businesses as proposed within the SMEI framework include the provisions requiring market operators to answer to information requests on crisis-relevant supply chains in relation to their production capacities and current supply chain disruptions, which can be commercially sensitive. Where businesses are unable to provide information, they are still obliged to provide a justification for the decline of the request. This requirement coupled with the threat of sanctions in the case of breaches, makes the administrative provisions under SMEI unproportional for businesses.

In this light, it would be in fact advisable that businesses and their representatives are given a greater voice within the advisory group that will be established by the European Commission in the context of SMEI to provide direct input on the impact of the crisis.

Additional obligations for companies under SMEI for instance include a requirement to monitor and ramp up the production of strategic reserves. While the objective is understandable one must not underestimate the direct and indirect impact on supply chains. Companies may also be sanctioned for failing to meet obligations. In this case, proportionality is very important, particularly for SMEs, as they have limited resources and ramping up productivity levels might not be realistically possible especially in the very short term.

In conclusion, a Single Market Emergency Instrument is an important step to ensure the seamless functioning of the Single Market during times of crisis and to make it more resilient in such future situations considering the disruptions experienced in the past. Given the direct impact on businesses, it is in everyone’s interest that business representatives are vocal and well consulted by the European Commission in ensuring that unlike the Covid-19 scenario, the free movement, particularly of goods and people remains intact.  Finally, it must be ensured that such crisis mitigation measures are triggered when absolutely necessary, that they are proportional, and non-discriminatory.

Daniel Debono is the EU Affairs Manager and Head of Brussels Operations of the Malta Business Bureau (MBB). The MBB is the EU advisory organisation of The Malta Chamber, and The Malta Hotels and Restaurants Associations. It is also a partner of the Enterprise Europe Network.

This article was first featured on The Malta Business Weekly on 7^th March 2023.