Article published on TCS on December 15, 2005.
The EU’s Council of Ministers has just rubber-stamped a landmark piece of legislation affecting chemical products. REACH, approved last month in the European Parliament, will have a considerable impact. Around 30,000 substances present in things we use every day, such as cosmetics, television sets or cleaning products, will have to be registered and tested since they are manufactured in quantities exceeding one ton per year. This has all been done in the name of public health and the environment.
Thanks to the precautionary principle, which inspired this legislation, the burden of proof on a chemical’s safety will be reversed. It will up to industry, who are presumed guilty, to prove that their products are harmless. This means governmental authorities will be able to forbid the production and marketing of certain substances, without proof of their harmfulness. This is more than just an attack on the foundations of a free society, according to which any individual is presumed innocent until proved guilty. This legislation seriously threatens our prosperity without offering any improvement in the field of risk management.
Before examining the neglected costs of REACH, it is useful to consider its supposed advantages. The project was largely supported using estimates relating to death and sickness due to chemical products. For example, a recent Tufts University study, using the European Commission’s data, claims that REACH could save 4,500 lives. Beyond the practical difficulties of blaming certain products for deaths when many other causes are possible, it should be clear that any quantified estimate supposes knowledge of the effects of the products in question. However, REACH aims in theory at identifying potentially dangerous chemicals, whose properties are largely unknown to today’s regulator. Such estimates are thus scientifically doubtful[[Cf. the Hayek Institute note: “Europe’s Global REACH : Costly for the World;
Suicidal for Europe”, pp. 19-37.]].
Whatever the real figures may be, they cannot prove that such legislation would be beneficial. REACH, consisting primarily of a transfer of risk management into the hands of the state, would have to be proven more effective than a private and decentralized management. It is not a question of statistics but of incentives. Public managers do not directly face the consequences of the choices which they make for citizens because their salaries and careers do not directly depend on them. Negligence in the choice of substances to be placed on the market or not is much more costly for industry, whose success depend on consumer support. There is no inherent benefit in business leaders poisoning their customers.
Nevertheless, it is clear that current legislation only loosely recognizes the responsibilities for pollution and damage caused by toxic products. But that suggests quite another track of reform than legislation prohibiting a priori the use of dangerous substances: taking pollution for what it is, an invasion of the victims’ property. The producers and users of any substance would then systematically have an interest in concerning themselves with possible damage their activities could inflict on others, since they would be held accountable in court. Under REACH, it’s quite possible that if real damage is inflicted by a substance authorized by the legislation, a victim might have no recourse.
REACH not only does nothing for risk management, it also severely restricts competition. The procedure first requires the payment of registration fees, that is to say a new tax, which could be shared between firms that agree to record their substances jointly. It also imposes massive “paper costs”, at the very least. Firms exporting to Europe will not be able to register themselves directly; the importers must fulfill this obligation for them. Thus, a systematic bias in favor of European firms with an already strong financial base will be encouraged, giving an impulse to the concentration of industry and isolating the better “established” companies from their potential competitors. This will hurt consumer purchasing power and affect the quality of available products.
REACH has thus the double consequence of forcing cartels on industry, hurting the interests of European consumers, and doing nothing to improve risk management.
Xavier Méra is an Associate Researcher at the Molinari Economic Institute.