Europe’s hidden weapon in combatting COVID-19: The Single Market

Johan Bjerkem underlines the key role the Single Market has played in tackling the current crisis, and why it should now be strengthened.


While not in the public eye as much as, say, the European Central Bank’s pandemic purchase programme, a series of Single Market-related measures taken by the European Commission have shown that the EU has been able to act effectively and rapidly in areas of EU competence. Measures have been taken to ensure the lifting of national export bans, continued circulation of goods and essential services and bolstered manufacturing of medical equipment. Decisions have also been taken to equip member states with the necessary flexibility to provide unprecedented levels of state aid and support to their respective economies. 

In other words, key parts of the Single Market continue to deliver critical supplies. By contrast, overall, most parts have (rightfully) been put on hold as a result of widespread confinement and economic measures.

All these facts are worth reminding for two reasons. First, to counter the narrative that the EU has twiddled its thumbs throughout this crisis. Second, to underline the policy areas in which the EU is significantly competent, has been able to act forcefully in the first days of the pandemic, and where now even more could be done. With no treaty reform envisaged for the near future, the EU should focus on these areas: the Single Market, and competition and trade policy.

However, we will not find the Single Market in the same state as we left it before the crisis. More structural and comprehensive measures, such as strengthening it, will be needed to ensure Europe’s recovery.

On the one hand, another ‘exit strategy’ would have to focus on gradually reducing – and possibly counterbalancing, at the EU level – member states’ economic support measures. The EU should support European countries that are heavily touched by the crisis and unable to uphold their economies forcefully. Supporting affected countries is not only about solidarity, but also concerns ensuring a well-functioning and fair Single Market.

On the other hand, in order to ensure rapid recovery, the Single Market should be strengthened. In a global economy where state intervention and protectionism might come to play an even stronger role, member states will have to count ever more on a well-functioning European market in order to prosper.

WHAT HAS THE EU EVER DONE FOR US?

Lifted national export bans

While most European governments initially reacted to the pandemic by banning the export of medical goods, the EU adopted guidelines which required them to lift these bans. Most governments complied.

Not only are such bans detrimental to the countries hit hardest by the virus, but most member states have also come to realise that they are just as dependent on equipment and goods originating from other countries. Given this interdependence, such bans will not help anybody.

Ensured the circulation of goods and essential services

The Commission also defined new measures to guarantee the circulation of goods and essential services, despite containment measures in and closed borders between most member states. ‘Green lanes’ have been set up at internal EU borders for quick border crossings and delivery of essential goods (e.g. food, medical supplies). These routes also help preserve EU value chains – which will be crucial for a rapid recovery once the crisis is over.

Moreover, the Commission has established a Clearing House for medical equipment, to coordinate and supply member states’ demand. The Clearing House also mediates regulatory obstacles or bottlenecks in medical supply chains.

Procured medical equipment jointly

While in the US, states are forced to bid against each other and the federal government to secure crucial medical equipment, EU member states have started placing joint public procurement calls. A first call was placed on 28 February for personal protective equipment (PPE). Since then, three other calls have been placed for ventilators, testing kits and additional PPE.

Offers have already been received, first contracts have been signed, and member states can now start placing orders. The Commission is also building a stockpile of medical equipment through the EU’s civil protection mechanism. It has already delivered a first batch of protective masks to Italy.

Adopted state aid decision at historic levels

In the first half of March, the Commission adopted a temporary state aid framework, allowing EU governments to provide liquidity and financial support at historic levels. The first COVID-19-related state aid decision the Commission took was on 12 March. Since then, over 90 decisions have been made.

This must be the fastest turnaround and largest number of state aid decisions by the Commission’s services in such a short amount of time. These decisions have contributed to the schemes put in place by member states to support health services, businesses and workers, and which amount to more than €2.4 trillion.

Made European standards available for free

On 20 March, European standardisation organisations and the Commission agreed to immediately provide standards for medical supplies free of charge (including medical devices and PPE). Making standards free will allow the production of desperately needed medical supplies to be ramped up. Established manufacturers will be able to convert their production lines, and new and innovative producers could emerge – and all respecting quality requirements. By conforming to European standards, producers benefit from a presumption of conformity and can access the Single Market rapidly.

Boosted the trade of medical goods

Finally, on 3 April, the EU decided to waive customs duties and value-added taxes (VAT) on the import of medical devices and equipment. This should make it easier and cheaper for member states to buy masks, testing kits and ventilators produced outside of the EU.

It is true that the national export bans have been replaced by an EU-wide scheme which allows member states to halt exporting beyond the Union – a move criticised by some as blocking the export of vital equipment to the EU’s neighbourhood and developing countries. However, agreeing on an EU-wide scheme has also allowed the Commission to gradually reduce the list of products requiring export authorisations, extend geographical exceptions (e.g. the Western Balkans, Norway) and oblige member states to authorise exports for humanitarian purposes swiftly.

WHAT MORE SHOULD THE EU DO?

Devise an additional exit strategy

The pandemic has pressured European governments to intervene in their economies as they have not done in decades, although in varying degrees. Governments have de facto nationalised wage bills and provided guarantees to firms, and are waiving taxes and taking on significant debt to avoid economic collapse.

The Joint European Roadmap towards lifting COVID-19 containment measures published at the start of April represents an attempt to provide the EU with a coordinated exit strategy. Regarding when to lift containment measures, the Roadmap rightly focuses on scientific and health criteria. However, it does not address the continent-wide, long-term need to gradually reduce and counterbalance state intervention in the economy.

Another ‘exit strategy’ will have to reduce the current large-scale support measures gradually and give way to a coordinated plan at the EU level to encourage a productive and sustainable economic recovery. While state aids are currently needed to support the economy, they are also distorting the Single Market, as some states provide more support than others.

These different levels of state intervention should be kept in mind and possibly counterbalanced at the EU level, to ensure fair support, which in turn is redistributed to all EU economies via the EU's recovery fund. Supporting affected countries is not only about solidarity but also about ensuring a well-functioning and fair Single Market post-COVID-19.

Strengthening the Single Market as the key to economic recovery

The Single Market will play a crucial role in Europe’s recovery from COVID-19. As state involvement and attempts to shield strategic sectors will become the global norm, EU member states will become even more reliant on their common market. To ensure a speedy recovery, the EU should, therefore, be as forceful in reinstating its Single Market as it was when putting it on hold.

However, in the post-COVID-19, it will not be enough to merely reinstate the Single Market as it was before – it will have to be improved significantly.

• Protecting critical European assets: Rather than adopt different regimes at the national level, member states should realise that they can protect critical assets better at the European level. To avoid ‘predatory’ takeovers of key industries and technologies, all EU member states should urgently put in place the screening of foreign direct investments (FDIs) and coordinate at the EU level. The EU’s FDI screening framework initially planned for the second half of 2020 should take effect now. It would allow the EU to recommend which FDIs to block on the grounds of security, public order or public health.
  
  
• Better enforcement of Single Market rules: The Commission should review its Action Plan for the better enforcement of Single Market rules, Single Market Barriers Report and SME Strategy to focus on the Single Market-related measures member states are currently taking. The joint Single Market Enforcement Task Force (envisaged by the Action Plan) should monitor member states’ actions and ensure the continued circulation of goods and essential services (e.g. via the green lanes).
  
  
• An international agreement on medical equipment: The EU should lead the global work on removing import duties from essential medical goods and equipment. The EU is well placed to do so as it has recently removed customs duties and VAT on the import of medical equipment. Analysts have even suggested a World Trade Organization (WTO) plurilateral agreement on medical equipment and supplies, which has support from some of its members.[1] 

Although calls to bring the production of medical equipment or other critical goods back home is increasing, we should not forget that it is impossible and undesirable for Europe to become completely self-sufficient. Instead, Europe should aim to diversify its supply chains and increasingly look for ways to obtain safe, stable and sustainable value chains that ensure Europe’s strategic autonomy, both during and after crises.[2] By ensuring Europe’s economic recovery, the EU’s industrial strategy will become a crucial supplement to a well-functioning Single Market.  


Johan Bjerkem is Policy Analyst of the Europe’s Political Economy programme.


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[1] Guinea, Oscar, “A Global Agreement on Medical Equipment and Supplies to fight COVID-19”, European Centre for International Political Economy, April 2020.
[2] Grevi, Giovanni (2020), “Europe’s path to strategic recovery: Brace, empower and engage”, Brussels: European Policy Centre.