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January 29, 2005

The Commissioner Speaks Out!

Margot Wallstrom continues her blog. As before, will attempt to get the following into the comments as well as here:

How interesting that you should combine the Lisbon Agenda and the Reach Directive in one post. The latter is a perfect example of why the former will never be acheived as the following true story of my own little company will show.
Now, I may actually be wrong here in some details, for there are only so many tens of thousands of pages of regulations and directives that a three man company can read through before we decide to flee the Continent.
In essence Reach states that if we bring in more than 1,000 kg a year of a new chemical, or new formulation, that material must be extensively tested to make sure that it poses no dangers to human or environmental health. Sounds sensible but rather ignores the way the world works. As above, I run a little three man company and one of our customers is Airbus, that organisation that has nothing to do with the EU but which you all thought you’d celebrate anyway. We supply them with experimental alloys for their next generation of planes. Our last shipment to them was 2,000 kg of what we must assume will be covered under Reach, for it is a mixture of 2% scandium oxide and 98% aluminium oxide then heat treated. Two chemicals, in a formulation, yes, pretty sure this would be covered under REACH. Value? $80,000 or so. Cost of testing? $100,000 or so. It’s difficult to see how doubling the cost of experimenting with alloys moves us closer to the goals of the Lisbon Agenda, the creation of the most innovative economy in the world.
It does, of course, as with everything in this nightmare being built for us, get worse. At various times over the research program we have shipped slightly different formulations, 1% scandium, 10% scandium and are toying with the idea of a 5% scandium product. Different combinations of chemicals there, so Kachingg! another $100,000 each to be spent under the new, upcoming system, for which of course we have to thank Ms. Wallstrom.
More. We are also part of a group (including again Airbus, also QinetiQ, UMIST, Oxford University and others) looking at whether these scandium containing alloys will help make aluminium easier to weld. It’s an area where the research being done in Europe is well ahead of that in other regions. The end aim is to be able to weld aircraft fuselages, saving some 10% of the weight of each aircraft. A huge benefit not just for manufacturers but also reducing fuel consumption immensely.
Now, the kicker here is that there are many more variations of the welding rods possible, desired. There are formulations with 2.2% scandium, 1.8%, others with 1% copper, 0.5% magnesium, all with slightly different properties and thus all likely to be used in future. In fact, at least 10 likely variations. Oops! that’s a cool million $ just for the welding rods, for of course all of these are different formulations of chemicals and so all need to be tested under REACH.
Expand this across all of the companies working on new products (this is, amazing as it may seem to some, what innovation means) across a continent of 450 million people and you can see that the costs are going to be vastly higher than whatever number has so far been plucked out of the air. For what no one seems to have heeded was the advice of Frederic Bastiat (yes, despite my disgust with the EU there have indeed been occasional Frenchmen worthy of remembrance) to always look for what is hidden. The cost of the testing of new chemicals and formulations, combinations of them,   is what has been added up. What has not been even noticed is the costs of all the new formulations that will not be made, as the costs of testing them are vastly greater than the resources available to do so. It is small companies that drive economies, create most of the new jobs, do most of the innovating, people setting up with a bright idea on a string and a prayer, and imposing a cost of $100,000 on each and every one of these will mean that tens of thousands, hundreds of thousands of ideas, are never pursued, not really quite the way in which we should be striving towards the goals of the Lisbon Agenda now is it?
In fact, deterring innovation in this manner is simply the best way, short of letting the unelected and economically illiterate design our economy for us (or have we already done that?), to drive our children and grandchildren into relative penury.
Alternatively, if you are economically literate, do you believe that innovation is a Giffen Good?

Ceterum censeo Unionem Europaeam esse delendam.

Update. Comment made it through the moderation process. Now, wonder if I’ll be able to get graphics through next time?

January 29, 2005 in Margot Blogging | Permalink


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Tim, in India they have been doing just that -- economically illiterates making policy. And the results are as one would expect.

Posted by: Atanu Dey | Jan 30, 2005 3:18:32 AM

wait. for teh walding rods. wil they need more then 1,000 kg of ech kinda rod just for testing? an does this aply to fromulations that arent improted?*

if u changed teh foramula very vary slihgtly for each 999 kg cuold u get away wiht that?

evan if u get of teh hook on that one its stil crazy of corse. the e.u. sounds like a mony python parady of a goverment.

by the way masachuhsats is losin population so for us this is good news. come on ovar! were reglated to deth by nromal standrads but after the e.u. youll thikn its heven. an bring hayek! shes a hottie! ok!

* i.e. lfet-handed stelth protectoinism.

Posted by: HA HA HA | Jan 30, 2005 9:34:18 PM