Reaching out to Europe
Hepeng Jia/ Beijing, China
For most Chinese chemical manufacturers, the European Union (EU)'s Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (Reach) scheme is not going to make it easy to reach the EU market. When Reach takes effect on 1 June, the strict environmental rule is expected to cut thousands of smaller Chinese manufacturers out of the EU market, according to industry analysts.
'On average, the registration and evaluation process will increase costs of the Chinese goods by 5 per cent, greatly eroding the already thin profits of the Chinese producers and exporters,' said Wang Zimin, deputy director of the industry department of China Petroleum and Chemical Industry Association. Chinese customs statistics show that chemical trade between China and the European Union amounted to US$16 billion in 2006.
Reach: opportunity or threat?
© EUROPEAN PARLIAMENT / PNO
Reach, passed in December by the EU Commission (see Chemistry World, January 2007, p8), will require producers of some 30,000 chemical substances used in the EU market to register them over a period of 11 years, with the most dangerous chemicals progressively phased out and replaced by safer substances.
Wang estimates that registration and evaluation costs for each chemical substance will be up to 85,000 (US$65,380), a significant cost for Chinese manufacturers.
The impact is not only limited to chemical producers. Manufacturers of toys, electronic home appliances, textile and pharmaceutical materials also need to register the chemical contents involved in the production of their goods. 'The problem is not only higher costs incurred by Reach, but also the fact that many small Chinese manufacturers do not have the awareness and necessary know-how to register their chemical products. The situation is likely to lead to their products being washed out from the EU market,' Wang told Chemistry World.
Zhang Xiangchen, director of the World Trade Organisation department of the Ministry of Commerce, told Beijing-based International Business Daily that his ministry is collecting manufacturers' opinions on Reach so that the government could adopt appropriate measures. But local media reported that when local trade authorities in Ningbo and Wenzhou, two export bases of Chinese goods, distributed questionnaires among exporters, few enterprises have heard of Reach. Even larger companies are uncertain: 'we are taking a wait-and-see attitude to see what government can lead us to do,' says Wang Haiying, a spokeswoman of Yantai Wanhua, a major thermoplastic polyurethane producer in Shandong Province.
Ye Yingmin, a senior consultant of Chem1 Consulting in Beijing, argues that the impact of Reach is not disastrous for Chinese manufacturers. In the short term, Ye says, EU importers are likely to actively help the Chinese manufacturers cope with the registration and evaluation process, as the EU market still needs cheap Chinese goods. Chinese manufacturers can also team up to lower their collective registration costs, he added, and overall the legislation should encourage Chinese manufacturers to produce more environmentally friendly products.