Reagan to U.S. Exporters: Dump Away

U.S. Secretary of Commerce Malcolm Baldrige and Secretary of State Alexander Haig recently submitted a report to President Reagan which calls for a relaxation of existing U.S. controls on exports of banned substances.

If enacted, the Baldrige-Haig proposal would make it easier for U.S. chemical and pharmaceutical companies to "dump" banned or dangerous, unapproved products upon unsuspecting foreign customers, particularly in the Third World.

The Baldrige-Haig proposal recommends two fundamental changes in U.S. hazardous export policy:

• The elimination of existing requirements that the U.S. government alert foreign governments as to shipments of toxic chemicals or pesticides which are either banned or restricted for use in the U.S.
• The repeal of a 44-year-old prohibition on the export of drugs that the U.S. Food and Drug Administration has not approved for domestic sale.

The 14-page report, recently released to the press, is heavy on ideological rhetoric and extremely short on the facts. It asserts without any documentation that export notifications represent "a burdensome regulatory procedure that fails to achieve its intended purpose." In support of this claim, the proposal cites only the views of the American companies that the government is supposed to regulate: "U.S. industry reports that in many cases, this procedure has proven ineffective and costly."

Instead of export-specific notifications, which place the responsibility for flagging U.S.-exported hazards firmly in the hands of the U.S. government, the Baldrige-Haig report recommends a policy that would throw the difficult task of pinpointing such dangerous exports into the laps of foreign governments.

The report proposes that the U.S. government inform foreign governments only about the U.S. regulations covering hazardous products in the U.S. The U.S., Baldrige and Haig maintain, should do away with notifying foreign governments of specific shipments of hazardous products by U.S. companies. Generally, the U.S. government should notify foreign governments only under two circumstances, the report says: first, whenever the U.S. changes its own regulations; and second, in an annual report which would include a list of banned, restricted, unapproved and "export only" products.

The Baldrige-Haig Report devotes only a single paragraph to the controversial question of whether the United States should permit the export of drugs not approved for sale here - a practice which has been prohibited since passage of the Food, Drug and Cosmetic Act in 1938. The report states flatly that "this simply results in the importing country obtaining the product elsewhere." From this assertion flows a stream of horribles - adverse effects on U.S. balance of trade, shifting of manufacturing facilities to overseas locations, and loss of sales for individual firms without benefits to foreign customers.

The recommendation in favor of exporting unapproved drugs is especially troubling. The U.S. government's long-standing policy against such exports reflects American concerns that foreign people not be used as "guinea pigs" for drugs which have not been fully tested and approved for domestic use. This is a sentiment shared by developing country leaders. At the 1980 World Health Assembly, Indian Prime Minister Indira Gandhi complained that "sometimes dangerous new drugs were tried out on populations of weaker countries although their use was prohibited within the countries of manufacture."

The report's logic is almost as appalling as its insensitivity. The arguments Baldrige and Haig proffer for weakening the existing export requirements actually demonstrate the need to strengthen them.

The report states, for example, that "many developing countries... lack sufficient scientific capability to use effectively the export-specific notices." But rather than draw the rational conclusion that the U.S. government - possessing greater technical capability - should take more responsibility for guarding against hazardous exports, the Baldrige-Haig proposal in effect does just the opposite: it would increase the burden on Third World countries to detect and stop proposed imports of banned substances.

Another of the Haig-Baldrige excuses for changing the present regulations is that they inadequately deal with the alleged problem of the re-export of hazardous products: "none of the Acts require that hazardous substance notices be delivered to the country where the product will be used, if different from the country of first import. Thus, the intent of the Acts is thwarted when re-export occurs."

If the re-export problem is a real one and the administration is truly concerned about it, it should propose legislation - analogous to that governing military sales - making it illegal for a foreign purchaser to re-export the U.S. product without appropriate notification.

One last inconsistency points up the absurdity of the Baldrige-Haig proposal. The report attempts to make a distinction between "defective" consumer products and "banned" toxic chemicals and pesticides. It recommends that existing export notice procedures be retained for the former, but eliminated for the latter. This could produce a situation where the U.S. would alert a foreign government as to the proposed shipment of banned TRIS-treated baby garments, but would provide no warning as to exports of TRIS itself even if it has been banned as a toxic chemical!

While the existing regulations could be improved, they have helped to prevent the export of hazardous products from the U.S. The present prohibition on the export of banned drugs has assured that the United States has not been the purveyor to the developing world of drugs, like thalidomide or clioquinol, which have already harmed public health in industrialized nations. Export notification procedures have enabled the South Koreans to reject the shipment of PCB-contaminated animal fats, the Canadians to halt the proposed import of children's lamps coated with dangerous lead-based paint, and the Greeks to stop the use of a pesticide never approved by the U.S. Environmental Protection Agency.

Finally, the current policies also appear to have brought about some restraint in U.S. corporate attitudes. Proctor & Gamble used its millions of recalled Rely tampons as fuel for its factories rather than offloading them abroad. Rohm & Haas, a Philadelphia-based chemical manufacturer, has refused to sell its voluntarily-withdrawn pesticide TOK to foreign countries which lacked the capability to protect workers using their product. The Reagan Administration is now sending quite a different message to American companies stuck with inventories of banned goods.

The Reagan Administration's move to dismantle the regulations on hazardous exports not only places it at odds with the previous administration's policy (see sidebar), but also with growing international acceptance of the need to control hazardous exports.

In 1980, the U.N. General Assembly passed a resolution calling upon exporting nations to discourage the shipment abroad of banned products in consultation with importing countries.

In 1981, at the initiative of the United States, the Organization of Economic Cooperation and Development (OECD) - whose 24 Western industrialized member countries account for the bulk of the world's chemical trade - began a study of the need for information exchange related to exports of banned chemicals. Just three months ago, the OECD expert groups, which included representatives of government agencies and chemical industries from the major chemical producing countries, agreed to a report endorsing the concept of export-specific notifications.

More recently, the West German government proposed that the OECD begin work on a code of conduct concerning trade in dangerous chemical products. It is ironic that the Reagan Administration is now retreating just as other nations are beginning to follow the U.S. lead.

S. Jacob Scherr is a senior staff attorney at the Natural Resources Defense Council. Patty Power, NRDC intern, assisted in the preparation of this article.

U.S. hazardous export policy until Reagan took over The Baldrige-Haig Report represents an attempt to turn the clock back in the five-year-old debate in the United States over U.S. hazardous export policy. Worldwide attention to the problem of "dumping" banned goods overseas was triggered in 1977 when the U.S. Consumer Product Safety Commission banned the domestic sale of children's sleepwear treated with the cancer-causing flame retardant TRIS. Within the next nine months, an estimated 2.4 million TRIS-treated baby pajamas were shipped abroad. In 1978, both the Carter Administration and Congress began reviews of the hazardous export problem. The Administration's effort took the form of an interagency working group co-chaired by Esther Peterson, the President's consumer advisor, and Robert Harris, a member of the President's Council on Environmental Quality (see MM, October 1980). In the House of Representatives, Rep. Rosenthal's Subcommittee on Commerce, Consumer, and Monetary Affairs held three days of hearings and recommended a tightening of controls on sales abroad of substances considered too dangerous or too little studied for use here. The congressional actions were the first to bear fruit. In late 1978, Congress amended the export provisions of the federal consumer product and pesticide laws. The amendments did not ban exports, but rather sought to assure that foreign governments (and in the case of pesticides, foreign customers) were given the opportunity to make their own decision as to whether to import such goods and under what conditions. Prodded by Rep. Michael Barnes' (D-Md.) introduction of a comprehensive bill on hazardous exports, the Carter inter-agency working group took the unusual step of publishing, in August 1980, a draft U.S. hazardous substances export policy in the Federal Register for public comment. Some 200 industry, labor, environmental and consumer groups submitted their reactions. Just five days before leaving office, President Carter accepted the working group's report and issued Executive Order 12264. The Carter executive order had four major components. First, it sought to improve the export notice procedures already required. Second, it called for the annual publication of a summary of U.S. government actions banning or severely restricting substances for domestic use. Third, it directed the State Department and other federal agencies to participate in the development of international hazard alert systems. Fourth, it established procedures whereby formal export licensing controls would be placed upon a very limited number of "extremely hazardous substances" that represented a serious threat to human health or the environment, and the export of which would threaten U.S. foreign policy interests. Export licenses for such substances would be granted only in "exceptional cases" where the importing country when fully informed, had no objection. Thirty-four days after Carter signed the new policy into law, President Reagan revoked Executive Order 12264 under the guise of "regulatory reform." He directed the Departments of Commerce and State to review existing export notice requirements for banned products and to make recommendations as to ways to make L. S. policy on hazardous exports "more consistent and cost-effective." In contrast to the Carter Administration's study, the Reagan review has been carried out behind closed doors. Already nine months overdue, the Reagan report has yet to be officially released. Only as a result of a recent press leak has the American public become aware of the Reagan Administration's plan to roll back the existing safeguards against "dumping" hazardous products. - S. Jacob Scherr

U.S. Dumpers U.S. manufacturers that since October, 1980 have exported pesticides abroad which are banned, restricted, or unapproved for use in the United States: American Cyanamid Ancyl Thurston Boots Hercules Agrochemicals Buckman Laboratories Burroughs Wellcome CIBA-GEIGY Dow Chemical International DuPont Eastern Chemical Elanco Products FMC Hooker Chemicals and Plastics Hopkins Agricultural Chemical ICI Americas Label Chemical Mobay Chemical Monsanto Montrose Chemical Corporation of California Ortho Chevron Chemical Prentiss Drug & Chemical Rohm & Haas Vesicol Chemical U.S. manufacturers that have exported regulated toxic substances - either asbestos or CFC (Chlorofluoracarbons) - since January 1, 1982. Allied Chemical Carboline Export Celanese International Crown International Diamond Shamrock DuPont Eastman Kodak General Lactex and Chemical Insta Foam Kaiser Chemical Maneco Matheson International Memeko Mobay Chemical Olin Pharmasol Rexnord RPM International Sealed Air Sigma Chemical Texaco Upjohn Source: U.S. Environmental Protection Agency

EPA miffed by Reagan draft Not everyone in the Reagan Administration is happy about the proposal of the State Department and the Commerce Department to dismantle regulations on the export of hazardous products. Surprising resistance to the, recommended change comes from the Environmental Protection Agency (EPA), which objected to the draft report at an interdepartmental meeting on June 10, according to EPA officials. EPA's stance on this issue calls into question the central justifications that Secretary of Commerce Malcolm Baldrige and Secretary of State Alexander Haig proffer for changing the regulations: that the current requirements create a "regulatory burden on both individual firms and the U.S. government." EPA administers the regulations covering pesticides and toxic substances, which combined represent the bulk of the products affected by hazardous export laws. But EPA denies that the current regulations constitute a burden. It's "not a whole lot" of work, the official says. "We got them [State and Commerce] to admit that there was no documentation of undue regulatory burden," says the EPA official, adding that "EPA wasn't involved" in the drafting of the proposal. "They didn't consult us." A different EPA official rejects the other basic claim of the Baldrige-Haig Report: that the current regulations create a "regulatory burden" on "domestic firms." The current regulations actually are "fairly simple," this official says. "We are not asking for a lot of information. All we are asking for is what they are shipping, when they are shipping it, and who they're shipping it to. We don't ask for the importer's name, or the quantity." The existing requirement that the U.S. government notify a foreign government when a U.S. company intends to export a banned or restricted product "focuses attention on the source rather than the nature of the product," Baldrige and Haig wrote. To shield the "source" - the company that manufactures and exports the hazardous product - Haig and Baldrige want to drop export-specific notifications that name the company. Instead, Baldrige and Haig propose a more anonymous approach, which would only describe U.S. restrictions. The reason for the change: "it will appropriately focus attention on the nature of the hazardous product rather than on its source." - Matthew Rothschild