Local Manufacturing? Watch out for the EU.

Thursday, May 1, 2008 – 1:49 pm

New European Union environmental regulations could spell big changes –and challenges– for American manufacturing….

Book Review: Exposed: The Toxic Chemistry of Everyday Products – Who’s at Risk and What’s at Stake for American Power

I.
In 1976 the U.S. Congress passed a revolutionary new law: The Toxic Substances Control Act (TSCA). TSCA was the first attempt by any government to regulate the explosion of chemicals that had come into widespread use after World War II. Under TSCA, some sixty-two thousand chemical compounds were grandfathered into continued production and use with no testing requirements for toxicity or environmental impact.

Thirty-two years later, approximately 95% of all chemicals on the U.S. market have never undergone any public review or testing.

II.
In 2006, the European Union’s (EU) combined Gross Domestic Product surpassed that of the United States. The EU is now the world’s largest and most affluent economy.

III.
The EU is implementing broad new environmental regulations that are far more protective of the environment and consumer health than current American regulations. Among other areas, the EU standards are significantly more stringent in terms of holding manufacturers responsible for the full life cycle of their products (including disposal), requiring certain levels of recyclable content in many products, eliminating a growing list of chemicals and materials from the manufacturing process, and perhaps most significantly, making the precautionary principle of “better safe than sorry” the lens through which product and consumer safety decisions are viewed.

IV.

According to Spokane Public Library sources, there are currently 1,042 manufacturers in Spokane County. The U.S. Bureau of Economic Analysis put the area’s manufacturing Gross Domestic Product at $1.34 billion for 2005, the most current data.

V.
So what does all of the above mean for local manufacturing? As Mark Schapiro lays bare in Exposed: The Toxic Chemistry of Everyday Products – Who’s at Risk and What’s at Stake for American Power, it means a lot. Specifically, if American manufactures want continued access to the buying power of the EU market, they are going to have to comply with EU standards.

For roughly the past 30 years, the U.S. set the environmental standards for the world. With the historical power of the American consumer market at its back, the U.S. has been able to dictate much of the recent global trade policy. This is no longer the case. Schapiro illustrates time and again that as the federal government refuses to sign on to a growing number of international environmental accords, U.S. business is being left out in the cold. Since the U.S. is not a signatory to any number of international environmental agreements and we no longer have the most affluent consumer base, U.S. business now finds itself with a greatly diminished voice in the process of setting international standards and regulations.

At one point, Shapiro recounts a conference where additional chemicals were being nominated for banishment under a particular international treaty. As the U.S. isn’t a treaty signatory and could not participate in the discussion, the American delegation was forced to sit in the back of the room. To express the official U.S. opinion and concern, the delegates were reduced to passing handwritten notes to the Congo representative so that their statements could then be read and entered into the official record. Ouch. From setting the global agenda to sitting in the back and passing notes…. that’s a long way to fall in such a short time.

VI.
Surprisingly, there is good news in all this. One of U.S. industry’s main objections to passing similar regulations in the United States has been the issue of cost. The fear was, and is, that stronger regulations would price American companies out of competition. In the EU, that has not been the case. Schapiro highlights several industries that have reformulated their products for the EU market and have continued to post respectable margins of profit and growth. But if you are looking for another downside, here it is: these same industries may now have two separate production lines running – one that complies with EU standards and one that doesn’t. As it stands right now, the U.S. consumer market is being set up to be the dumping ground for products that can’t legally be sold in the EU. Ouch.

So how does U.S. manufacturing and our domestic consumer market reposition itself as the dominant global player? A few revolutionary acts of Congress may be in order.