Monday, August 09, 2004

Health and safety – the new protectionalism

After our sorry little tale about Kenyan vegetable and flower growers being forced out of business by the deluge of red tape emanating from Brussels, now Chinese IT manufacturers are getting a taste of what it is like exporting to the EU.

According to the China Business Times, the EU has recently issued rules which will ban the imports of certain electronic and IT products from 1 July 2006 and which will drive hundreds of Chinese firms out of the European market,

The new rules reflect the obsession of the EU with product safety, and ban imports of second-hand electronic and IT products as well as imports of six "toxic" substances, such as lead, mercury and cadmium.

EU imports of such equipment amounted to $9.72 bn in the first quarter this year and are expected to reach $50 bn for the full-year, and were expected to reach $60 bn in 2005.

Hundreds of Chinese manufacturers will be forced to withdraw from the EU market or lose their comparative advantage due to higher production costs to comply with the new rules. Affected companies in Ningbo in the eastern province of Zhejiang alone stand at some 500, the newspaper said.

That is the wonderful "free-trading" EU for you. First it was tariffs and quotas, and when these were whittled down by GATT and WTO agreements, technical barriers were introduced. Now these have been largely overcome, the latest protectionist device is "health 'n' safety", thus circumventing existing trade agreements.

The facts is that all the banned materials used can be safely recovered, and have residual economic value, but as long as the EU can label them "toxic", it can go rushing to the law books for another round of protectionism, and there is nothing that exporting countries can do about it.

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