Europe’s Global REACH: Costly for the World; Suicidal for Europe

Published by the Hayek Institute, Brussels

Full Document Available in PDF

Regulations enacted in the European Union (EU) increasingly are having worldwide impacts, warranting greater attention among policymakers in the United States and around the world. Not only do EU directives affect the 25 EU member nations, EU regulations can become trade barriers and impact thousands of businesses around the globe that are directly or indirectly linked to the EU’s substantial share in the world market though international trade. In addition, passage of regulations in the EU builds constituencies for them to be introduced as global standards through intergovernmental organizations. These actions are bolstered by those who think that global standards will level the playing field or make compliance schemes uniform and efficient. Unfortunately, such rationales are often used to edge out competition and promote protectionist policy.

Currently on the horizon is the proposed EU Chemicals Policy, which represents what will be perhaps the most expansive regulation of the chemical industry ever. Known as REACH—which stands for registration, authorization, and evaluation of chemicals—this directive is likely to cost society billions of dollars, reduce innovation, and limit U.S. access to EU markets. Its protectionist effects are expected to trigger World Trade Organization (WTO) disputes. Meanwhile, the benefits of the proposal are likely to be small given that it attempts to reduce the effects of trace levels of chemicals, which have produced little documented adverse effects on public health.

The EU chemicals policy would employ the so-called precautionary principle by requiring companies to prove that their products are safe before their introduction into commerce. Currently, government officials bear the burden of proof and must prove a product unsafe before removing it from the market. REACH would reverse this burden, demanding that firms conduct extensive tests to demonstrate product safety. Since manufacturers can’t prove anything is 100 percent safe, this policy will likely produce arbitrary bans of many relatively safe substances and discourage innovation.

The impact of this new program is likely to expand if left unchecked. The Organization Economic Cooperation and Development (OECD) and the United Nations (UN) Environment Program are looking into applying REACH globally. In particular, REACH is likely to become a focus of the UN’s Strategic Approach to International Chemicals Management (SAICM), a relatively new effort designed to create institutions that will coordinate global chemical and waste policies. Although SAICM is supposed to represent a voluntary effort, its proposed declaration, policy statement, and global action plan indicate that it will be an ambitious attempt to develop, expand, and enforce a wide slate of chemical and hazardous waste regulations around the world. It is potentially a powerful vehicle for those who seek REACH expansion. The details of the SAICM program are still being negotiated, but the UN is expected to finalize its declaration, overarching policy strategy, and global plan of action in February 2006.1

In addition, U.S. states—starting with California—are looking into enacting their own versions of this law. Most recently, Sen. Frank Lautenberg (D-N.J.) has begun working in tandem with environmental groups to build momentum for a U.S. version of REACH. To that end,he commissioned the Government Accountability Office to assess the need for revisions to the Toxics Substances Control Act—amendments that could transform that program into a REACH-styled law. Sen. Lautenberg followed that report with the introduction of legislation designed to get the process moving in the direction of a U.S. REACH law, which he has euphemistically labeled the Child, Worker and Consumer Safe Chemicals Act (S. 1391).

In addition to impacting U.S. trade, REACH will build momentum for global chemical bans under various international agreements. For example, the U.N. Environment Program’s Global Convention on Persistent Organic Pollutants (POPs), which currently bans 12 substances, has provisions for additional bans. European nations are already using the POPs treaty to propose worldwide bans on substances they have already eliminated domestically, even when such products have valuable uses in the United States. For example, Europeans have proposed banning the pesticide lindane which is used in the United States to fight lice and other vectors. As the EU bans more products under REACH, you can be sure that they will propose them as bans under POPs or other agreements—potentially removing more valuable products from the world market. REACH is currently undergoing some revisions as part of the legislative negotiations on the policy. But modifications are unlikely to mitigate the fundamental problems outlined in this paper. Indeed, the basic concept is fatally flawed. Its benefits are highly dubious and the costs to economic freedom and development—even if mitigated by reducing REACH’s scope—are likely to remain substantial.

Download the full study (PDF):

Europe’s Global REACH: Costly for the World, Suicidal for Europe

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