Examination of Witnesses (Questions 160
MONDAY 2 FEBRUARY 2004
Q160 Bob Spink: We met this morning
with a representative of the industry and also an NGO, WWF. We
have had evidence from both of these bodies that generally they
disagree on the level of costs and benefits of this legislation.
Which one is more likely to be correct?
Commissioner Liikanen: Ours!
Q161 Bob Spink: Of course. I never
Commissioner Liikanen: I must
say here we have spent a lot of time assessing the costs. On the
direct costs side, our figures are not contested actually. How
does it work? Nick Burge is an expert and he knows I have been
very insistent on this figures side of the issue. How does the
cost come? It comes from the number of the tests you need to do
for registration. Then you go through the tests, give the price
for every single one, count them together, and then you add the
other registration costs. That is it. Of course market prices
for tests may vary depending on the laboratories, but, I mean,
in general they can be estimated. I think it is pretty reliable
what we say on the direct costs. We had big discussions inside
the house between our different services, between, let's say,
DG economic and monetary affairs (our economics department), DG
environment and DG enterprise, on the indirect costs, let's say,
the cost to the final user or the indirect user. Is it more than
just the same costs that you had in the first case ? The difference
is that I am personally convinced there can be situations, if
your testing or assessment costs are very high for small volume
chemicals which are not a making a good return for you, that may
lead to a withdrawal from the market and the alternative may cost
much more. So I believe that is the case, but, the fact that we
changed the requirements for small volume chemicals, I think that
danger is now more limited. On the costs side, I think our figures
are, let's say, pretty reliable. On the benefits side, it varies.
Of course that is the issue that they disagree mostly.
Q162 Bob Spink: Before you come on
to that, on the costs side, how much have you factored in for
the consequential costs; for example, depressed innovation because
of the lack of available chemical for them to use, or, say, the
loss of intellectual property and all these concerns? Have you
factored those in at all?
Commissioner Liikanen: Yes. On
indirect costs, I just told you, yes, we have done this in our
models, and for that reason exactly we reduced essentially the
number of tests required for small volume chemicals. To give you
a figure, if I remember rightly: On the first draft proposal it
was about 80,000 euro for the one to 10 tonnes; we cut it by two-thirds.
I tried then to get one more test outwhich was, by the
way, an animal test. But that was difficult for people: they say
that for the health and safety at work reasons you cannot take
it away. Animal testing, by the way, is the most expensive part
of those testsI am sure that the industry and the animal
people will find that. So, after we cut it down, in the economic
models which are done, the indirect consequential cost goes dramatically
down. Dramatically down. If you have very high costs for these
small volumes, these kind of indirect costs are higher. But, as
I said, there, there are schools of economics which diverge. I
have been on the side perhaps of the highest assessment of the
indirect costs and that is why I want to tackle this. This part
has been the most heavily criticised part by the environmental
lobby, the fact that we changed it. On innovation, the consequential
costs for innovation, I just say that for that reason I do not
believe there is a fundamental increase in the products which
will be withdrawn from the market after the changes we made and
I have not been presented a strong case for that. Before it was
possible, because it was way, way too high.
Q163 Bob Spink: Before I interrupted
you so rudely, you were going to talk about benefits.
Commissioner Liikanen: Yes. The
problem isand I am talking about a very personal positionis
that in these issues you get costs in the short term and benefits
are medium and long term. That is always a problem. Secondly,
there are references to the studies on the benefits, which are
done by relatively serious organisations, but I must say the quantification
of those benefits is not extremely easy. That is why we always
use the reference to the study which has been done there. If I
take the indirect benchmark here, when I was in the autumn in
the United States, the American Chemistry Council announced a
campaign of $250 million a year for improving the image of the
chemicals industry, and that comes added to this liability surge
which they are suffering. If this is taken into consideration
for 15 years, the costs we are able to keep at around $2 billion,
it still costs, but compared to that it is not something unreasonable.
Q164 Bob Spink: We heard that one
of the reference points you have used in calculating benefits
in human terms was the asbestos model.
Commissioner Liikanen: That is
Q165 Bob Spink: How would you answer
Commissioner Liikanen: Asbestos
is not a comparable case but of course you must see that.
Q166 Bob Spink: That was the point
that was made.
Commissioner Liikanen: Oh, but
not in our documents.
Q167 Bob Spink: No.
Commissioner Liikanen: No.
Q168 Bob Spink: Okay.
Commissioner Liikanen: I mean
it is not a similar point but it is an indicative issue, that
if there is a dangerous chemical which can have this kind of long-term
impact, of course, let's say, first of all, the liability suits
can be terribly expensive. This regulation has one logic which
to my mind is very important, which is that, once this regulation
is applied, industry takes responsibility for its actions. The
possibility of a liability suit is there, but it is very different
in logic compared to the American system.
Q169 Bob Spink: On impact assessments,
do you think it would help if Member States did their own or do
you think that should be totally sectorised?
Commissioner Liikanen: I have
no difficulty. I mean, anybody who wants to look at chemicals,
I welcome. I just hope one thing, after having spent a lot of
time with this issue, that people preferably do some homework
first, before they come to say, "You should do some extra
impact assessments" every time. The easiest political initiative
is to say that you should do more counting. It is better that
first people study what has been done, look at the methodology.
In the whole impact assessment issue, to my mind, we should aim
at consolidating methodologies: talk about methodologies first
before results are there. Once we agree on methodology, we cannot
then disagree on the results because the same mathematical rules
apply. It is very important to concentrate on methodology first.
If somebody wants to do other studies, it is fine. We have compared
these studies which have been done, let's say, in France and Germany
and so forth. We have had open workshops: everybody has been able
to present their case. On the direct costs side I think there
is not a huge difference; it is on the indirect or dynamic side
that there are differences of views. But most of those studies
have not been done on the basis of this proposal but on the basis
of the earlier drafts.
Q170 Bob Spink: Do you think that
the impact of substitution has been adequately considered in your
Commissioner Liikanen: As I said
before, you know, I am now very open, but inside the house there
were different figures discussedand I was of the extreme
line as far as costs are concerned, so that must be taken into
account. By the way we have changed the treatment of one to 10
tonne chemicals, small chemicals, and anything up to one tonne
is out, I expect that we are, let's say, within relatively reliable
Q171 Bob Spink: But then sometimes
the most toxic and most dangerous chemicals come in very, very
small volumes. Are you not going to miss a trick by having your
prioritisation the other way round, with the bigger volumes, which
tend to be more inert, studied first and the smaller volumes,
which tend to be more active and possibly more toxic, subsequently
Commissioner Liikanen: But if
they are really dangerous they will go to the authorisation procedure.
Q172 Bob Spink: Yes, but that is
not an answer, is it, because
Commissioner Liikanen: No, but
can I continue my answer? That was only the first sentence. First
reply: If they are the most dangerous they go to authorisation
Q173 Bob Spink: Yes, but if I
Commissioner Liikanen: Can I continue?
The second issue: This question about prioritisation has been
discussed, and I am intellectually open to that position, but
I just don't want people to start to turn upside down all the
logic, that, if we have 99.99% of chemicals that we try to cover,
actually it is the wrong part, this 99.99%, because we should
concentrate on the 0.01%. That is what it means in volumes. Common
sense says that if you cover 99.99%, you go rather far, but of
course you must also look at the 0.01%. But, instead, if we just
take the 0.01%, it makes the exercise much easier. In volume terms,
we cover the biggest part, but personally I am sure that the Council
and Parliament will concentrate very much on the prioritisation
issue. We in the House had a long debate on that. I understood
well the argument, that we should start by looking at the most
dangerous substances. In this balance which we try to have between
competitiveness and the environment anyhow, my colleagues said
that if we do not have one entire system, then we do not have
certain uniform, reliable base core data which we need. We were
in the final balance able to cut the costs down essentially from
12 to two billion euros, and strengthen the European Agency in
that field of European internal market. Now it is in Council and
Parliament. There are countries who are raising the prioritisation
Q174 Bob Spink: I am sorry, when
I interrupted you again, I wanted to saybecause we keep
hearing this argument, that if we know they are mutanogenic, carcinogenic
or sex-changing, then we look at them early anywaythat
the whole point of this legislation is not to catch those because
we know about those anyway and we should be dealing with those
anyway, but the point of this legislation is to make discoveries
about things that we currently do not have evidence on the public
record about and to get that evidence on the record so that we
can make decisions about them. So you would not know, would you?
The whole point of the legislation is to make new discoveries
about toxicity and what have you. Finally, on the operation of
REACH, you are going to review it after six years and then, thereafter,
after every 10 years. After six years, of course, you will only
have dealt with the known problemswhich, by definition,
we know about, so this legislation is not going to help them.
The thousand tonne plus, you will not at that stage have addressed
the 100 to 1,000 and the one to 100 tonne chemicals. Do you think
that six years is the right level to draw it, too early or too
Commissioner Liikanen: If I can
come back to this 99.99%. We must always think, when talking about
the environment, about what is the total impact on the environment.
If you cover 99.99%, of course there is the possibility that just
this 0.01% is the most dangerous, but I expect that some toxicity
will be covered by 99.99%. I mean, there is a certain logic also
in high volumes. Whether you can combine those two is another
issue. On six years, that was after my insistence. Just because
we start off with the big volumes, it does not mean that we know
everything about them. We must see whether the system is able
to handle these well. If there are real issues for this first
phase which we cannot handle, then we are certainly going to fail
for the rest. It is very good to review the system early, so that
if the first phase has been registered and assessed, we see where
we are and go forward. So I would prefer always, you know, early
reviews, but one part of the substances must be in the system
to have, let's say, a representative presentation of the volumes.
We know it is not all, but, I mean, it is one part. That should
be the easiest part. If there are problems with the easiest part,
there will certainly be problems with the small part.
Q175 Bob Spink: But six years is
an awfully long time. The system would surely have settled down
after a year or 18 months or two years or three years. You would
be able to audit the system and the costs of . . .
Commissioner Liikanen: If the
British Government is insisting that we do it after four years,
I will be very open-minded. That is not the breaking point.
Chairman: We will put the word in.
Q176 Dr Turner: Mr Liikanen, when
you published your White Paper, it kind of frightened the horses,
certainly as far as industry is concerned. Do you think you might
have had a slightly less painful process if you had done more
consultation before getting to the White Paper stage and you might
have considered alternative models to the actual REACH model that
you ended up with?
Commissioner Liikanen: May I put
a very direct reply? I do not believe there is any piece of legislation
in the UK which has been consulted so widely as this was. If you
have one example, give it to me. All those phases: drafts on the
internet, replies to everything, public hearings, White Paper.
I have been sitting in so many consultations. I do not believe
there is any single piece of legislation that has received this
level of attention, but if you have one I am happy to say that
I was wrong. Because I have tried that with every country and
I am not getting
Q177 Dr Harris: Fox hunting.
Commissioner Liikanen: That may
be. That may be! I am not sure about the open consultation on
the internet or impact assessment.
Q178 Dr Turner: For instance, one
of our major retailers, Marks and Spencer, told us in evidence
that there was little consultation before the White Paper and
they felt, rightly or wronglyclearly, in your view, wronglythat
by the time they read it in the White Paper it was pretty much
set in stone and their influence was not going to have that much
value. Clearly you would rebut that and I would be interested
Commissioner Liikanen: I am horrified
at the professional quality of Marks and Spencer when I hear this.
I have been their client for years.
Q179 Chairman: You do not get your
suits there, then.
Commissioner Liikanen: No, no.
You know why I say so?and here I am ready to be on the
record. I am sure that, as far as the costs of the industry are
concerned, the changes which were done in the Commission proposal
after the internet consultation have been the biggest ever in
the Commission's historythe biggest everand they
were very much based on the concrete evidence, especially from
the downstream users. Of course, the capacity of companies to
follow European legislation varies enormously. They are concentrating
their efforts on their core business, but if it is not in core
business it varies. I agree with you that there has been one problem
with this issue, that this White paper became a concept, especially
among those who have never read the whole document. It has been
complex, heavy process. You look at the label, then the draftists
look at the label, and the final proposal is not known by many
to have equal exactitude, so it had a negative connotation. But,
as far as our part is concerned, all these open procedures, including
impact assessment, and many phases, I think have been a quite
respectable effort to apply the rules of Better Regulation.