Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
This month, the European Parliament voted in favor of a massive new expansion of the European Union's (EU) chemical regulations. Known as REACH—which stands for registration, authorization, and evaluation of chemicals—the policy is likely to cost society billions of dollars, reduce innovation, and limit access to EU markets. Meanwhile, the proposal's benefits are likely to be insignificant if not negative since economic decline presents more serious risks.
Cost estimates on REACH range from the European Commission's estimates of €2.8 to €5.2 billion to those released by the Nordic Council of Ministers, which range from €3.5 billion for REACH's direct costs, plus 1.5 to 2.3 times that amount for indirect costs—ranging up to a total of €11.5 billion and €28 billion—or about $13.6 billion to $33 billion.
REACH's impact isn't only going to fall on Europe because the United States and other nations are inextricably linked to the EU economy through trade. The U.S. exports more than $20 billion in chemical products and invests more than $4 billion in the EU chemical and related industry sectors annually. In addition, U.S. firms export more than $400 billion in products containing chemicals, some of which may fall under the scope of REACH regulations. The U.S. also imports more than $40 billion of chemicals from Europe each year.
The U.S. government mission to the EU has pointed out that REACH is expected to adversely impact tens of billions of dollars of trade in chemicals and products. Affected sectors will likely include textiles, pharmaceuticals, electronics, automobiles, and advanced materials. According to the Commission's own study, users of specialty chemicals are likely to suffer serious repercussions.
REACH advocates have maintained that even at these high prices, REACH is affordable. Yet they fail to acknowledge some important realities. REACH will hit small and mid-sized firms very hard, which could have broader economic impacts. Moreover, these estimates mostly only consider the costs of filing registrations; they fail to consider indirect costs or the cost of various other REACH phases such as its eventual regulations and product bans. As a French industry study produced by Mercer Studies notes, the costs of REACH will be much higher than estimated because a number of factors create a “domino” effect, creating cost impacts down the entire supply chain and around the world.
While it is clear that REACH will be expensive, all the benefit claims are highly speculative; many don't even rise above the level of hearsay.
For example, the Commission's 2003 Extended Impact Assessment of REACH claims that REACH might save 4,500 lives based on data provided in a World Bank study. This claim is repeated in the Tufts study conducted for the Nordic Council and is used as a basis for findings in the World Wildlife Fund study. Yet if one reviews the original source it is easy to see that the figure is inappropriate for REACH benefit considerations.
The World Bank report relates to problems as associated with high-level exposures to agro-chemicals, most of which are related to improper use of chemicals. REACH is not designed to address acute poisoning from or misuse of chemicals whose properties are well known. It is supposed to encourage study with the hope of uncovering yet unknown risks. In addition, many of the substances involved in the World Bank study are likely pesticides that will be exempt from REACH.
The European Commission sponsored only one study on benefits. It attempts to quantify REACH benefits in terms of occupational safety. A critical review of this study indicates that it should be disregarded because it violates nearly all the standards of good science. It does not collect data in a systematic fashion; it makes extrapolations from a sample that is not representative of the larger population and is too small to offer meaningful conclusions; it provides no evidence that it was properly peer reviewed; and it cannot be replicated because the data is either unavailable or unclear.
Worse, our analysis found that some of the data noted in the study doesn't match the original sources, some of the sources are nothing more than references to telephone conversations, and errors in the report charts simply add to the confusion.
Finally, the study ignores the reality that the source studies indicate that occupational health is improving, and chemicals are a small and shrinking source of problems—facts that undermine the case for REACH. A recently released study by the Commission-funded European Trade Union Institute for Research, Education, Health, & Safety carries similarly fatal flaws, which are detailed in another paper hosted on the Hayek Institute website ( www.fahayek.org  ).
In contrast, actual data on chemicals, cancer and other health impacts indicates that REACH focuses on the wrong thing. In its World Cancer Report (2003), the World Health Organization (WHO) cites a world-renowned study by scientists Sir Richard Doll and Richard Peto. According to Drs. Doll and Peto, pollution accounts for only 2 percent of all cancers, while diet and smoking account for more than two-thirds of all cancers. Neither Doll and Peto nor the WHO mentions exposure to chemicals through consumer products as a serious cause of cancer, which is a key focus of the chemicals strategy. The WHO suggests that cancer prevention efforts should focus on three factors: tobacco use, diet, and infections, which together account for 75 percent of all cancer cases worldwide.
REACH is due to be considered by Council of Ministers in Europe and then will need a final vote by the Parliament to become law, which is expected to happen early in 2006. It is astounding that REACH has made it this far through the EU policymaking process. Any serious analysis of the law reveals that the economic impacts for REACH are not good for Europe and its trade partners, and its impacts could be particularly dire for new EU member nations. Meanwhile, the documented benefits of this program are nonexistent.