The Multinational Monitor


October 2003 - VOLUME 24 - NUMBER 10

T H E    F R O N T

Politics of Chemistry 101

Literally tens of thousands of chemicals on the market have never been tested for their impact on human health.

The European Commission, the governing body of the European Union, is aiming to change that -- if it can overcome opposition from the chemical industry and the U.S. government.

In 2001, the Commission issued a White Paper containing plans for a new European chemicals regulation policy. The policy, known as REACH (Registration, Evaluation and Authorization of Chemicals), would require companies to test chemicals already on the market by a set timetable, as well as to test new products before putting them on market. Companies would be required to submit the test data as part of a registration system for all existing and new chemicals with a production volume of a ton or more. Substances with a production volume of more than 100 tons (this would cover about 5,000 chemicals) would require evaluation by authorities of the submitted data, and development of a plan for more detailed testing focused on effects of long-term exposure. Substances which are carcinogenic, mutagenic or toxic to reproduction and persistent organic pollutants would require affirmative authorization before they could be placed on the market.

The European Commission estimated the cost of implementing REACH at about $4 billion. The Commission estimates the benefits at between $20 billion and $50 billion, based just on the workplace safety benefits. The World Wildlife Fund estimates the net benefits at $180 billion.

When the Commission announced the REACH proposal, the chemical industry reacted testily. The European Chemical Industry Council stated that it has a voluntary testing and risk management system in place, and that REACH was therefore not necessary. The council objected most strongly to the authorization component of REACH. "Decisions may be taken that increase the number of chemicals that are restricted or banned arbitrarily," the council said in a statement issued in response to the initial EU announcement.

The U.S. government's response was similar. A September 2003 report from the U.S.-based Environmental Health Fund documents a full-fledged campaign to derail REACH involving the Departments of State and Commerce, the Environmental Protection Agency (EPA) and the U.S. Trade Representative (USTR).

The report, based on internal government papers obtained from anonymous sources and under the Freedom of Information Act, document a series of meetings between U.S. government officials and chemical industry representatives.

Although industry representatives from the American Chemistry Council and the American Plastics Council at times pushed U.S. government officials to work more aggressively to block adoption of REACH, the government papers show that it was Bush administration officials who more frequently complained that industry was not opposing the plan vigorously enough.

"The U.S. chemicals industry has been slow to respond to the White Paper [initially proposing REACH]," asserted a briefing paper for Assistant Secretary of Commerce Linda Conlin. But government bureaucrats didn't have time to wait for slothful industry to take action, according to the briefing memo. "Because of the slow pace of industry response to the Strategy ÷ Commerce, USTR and EPA drafted a preliminary set of questions on the Strategy and provided them to the Commission in December. USTR also met with Commission officials at that time."

Eventually, the Bush administration produced an undated "nonpaper" criticizing REACH. Its language borrowed directly from industry attacks on the proposed European regulations.

Top administration officials enlisted in the campaign to block adoption of REACH. Secretary of State Colin Powell in 2002 sent an "action request" cable to U.S. embassies in EU countries, urging them to raise concerns with local government officials, and in 2003 sent a cable directly to European countries, urging them to stop the European Commission from adopting REACH. The U.S. Ambassador to the EU, Rockwell Schnabel, repeatedly criticized REACH in public and private settings. Commerce Secretary Donald Evans in May 2002 assured a DuPont executive that the United States was working actively to sabotage REACH.

The U.S. State Department failed to respond to requests from Multinational Monitor for comment on the U.S. lobbying campaign.

But after the report documenting the U.S. campaign was published, Greg Lebedev, ACC president and CEO, told Chemical Week, "We would be mad as hell if the Bush administration didn't lobby on behalf of American manufacturing interests."

Meanwhile, the European chemical industry was hard at work. In September, British Prime Minister Tony Blair, German Chancellor Gerhard Schroeder and French President Jacques Chirac sent a letter to the European Commission criticizing REACH.

Underlying the industry's strident opposition to REACH is the precautionary principle. The precautionary principle asserts that the entity introducing a product into the environment or food supply must bear the burden of showing it is safe.

The REACH rules requiring authorization for hazardous substances to be permitted on the market embodies the precautionary principle. "In contrast to the current system, which requires authorities to carry out cost/benefit analyses before they can act to remove a product from market or restrict its use," explains the European Commission White Paper proposing REACH, "the producer or user of the substance should be obliged to provide information substantiating any claim that the benefits from continued use of a substance outweighs the potential adverse effects on human health and the environment." Under present rules, the White Paper explains, delay benefits industry, because products are allowed on the market until shown to be unsafe; under REACH, the incentive will be to get testing done promptly, because a lack of data on safety will lead to precautionary restrictions on use.

That is a model of effective government action that industry generally, and the chemical industry in particular, hopes to block at any price.

Already, the campaign to pull back REACH has had a major impact.

At the end of September, a leak revealed that the European Commission was planning to scale back REACH. The proposed revisions closely track complaints from the United States. Under the new proposal, polymers will be exempt from regulation; registration requirements for chemicals that appear in other products will be eliminated, unless the chemicals are categorized as dangerous; no safety information will be required for chemicals produced in quantities of less than 10 tons a year; and greater secrecy will be afforded to safety data submitted to regulators.

"REACH appears to be moving away from the White Paper and closer to the White House," says Joseph DiGangi, who authored the Environmental Health Fund report on U.S. efforts to undermine REACH.

Still, DiGangi says, important elements are retained -- including the requirement that hazardous chemicals obtain authorization before being allowed on the market.

ACC President and CEO Greg Lebedev dismissed the European Commission changes as just "a few perfunctory adjustments." He said the whole proposal needs to be scrapped. "This new REACH proposal may be the dream of some in the Commission, but it's a nightmare for consumer product and chemical companies who do business in the EU and globally. It's beyond me how companies would make their way through the regulatory fog under the REACH proposal."

More changes may be forthcoming. The European Commission is expected to finalize REACH rules by the end of October.

-- Robert Weissman

Nike's Come-From-Behind Win

The parties to Kasky v. Nike, a lawsuit which prompted the U.S. Supreme Court to explore the question of whether corporations have a constitutional right to lie, agreed in September to settle the case, prompting complaints from labor rights activists.

Nike and Mark Kasky, an activist who brought the suit, mutually agreed that investments designed to strengthen workplace monitoring and factory worker programs are more desirable than prolonged litigation, according to a statement released by Nike.

Kasky filed suit in California court, alleging that a Nike public relations campaign violated California's state consumer protection laws by misrepresenting facts about labor conditions in factories making shoes for the athletic shoe and apparel giant.

Before the trial court could consider the merits of the case -- whether Nike's claims were in fact truthful or not -- Nike argued that, irrespective of the validity of the claims, First Amendment free speech protections immunized the company from being sued for comments that were made to defend its corporate responsibility record, and that were not part of an advertising campaign.

In an April 2002 decision, the California Supreme Court rejected Nike's claim.

Nike appealed the case to the U.S. Supreme Court. The Court ruling sent the case back to trial, holding that it was premature to rule on Nike's claim. Whether Nike's speech should be characterized as "political" (and deserving of heightened speech protections) or "commercial" (meriting a somewhat lesser level of protection) was something that turned on the particular facts of the case -- exactly the kind of matter for a trial court to determine, the Court held.

Labor rights activists eagerly awaited the unfolding of the case, hoping that the "discovery" phase of the case -- the pre-trial phase during which the parties are able to ask the other side to turn over information relevant to the case -- would unlock a treasure trove of internal Nike documents concerning labor practices of the contractors the company employs in Asia and elsewhere to manufacture its shoes and apparel.

Right before the case was settled, however, Nike and Kasky announced their settlement.

As part of the settlement, Nike will pay $1.5 million to the Washington, D.C.-based Fair Labor Association (FLA) for program operations and worker development programs focused on education and economic opportunity.

Incorporated in 1999 out of the White House task force known as the Apparel Industry Partnership, the FLA promotes adherence to its code of conduct based on international labor standards, conducts independent monitoring of labor practices in supplier factories and coordinates public reporting of the findings.

Its membership includes 179 colleges and universities, prominent human rights organizations, consumer groups and participating companies.

Sweatshop activists expressed outrage at the settlement, alleging that the FLA is controlled by Nike and the shoe industry.

"Nike and its corporate buddies basically run the FLA," says Andy Eisen, a student at Lake Forest College and a member of United Students Against Sweatshops (USAS). "It's governed by and for the corporations that it's supposed to monitor."

Corporations are given six of the seats on the FLA board, and the FLA charter states that all major decisions require a super-majority of the corporations on the board to be approved.

Students also attacked the FLA's operations as secretive and ineffective, saying that most important information is being kept from the public.

"This is an organization that has been around for years, and yet has virtually no concrete accomplishments that it can point to," says Julia Plascencia, a student at the University of California Los Angeles.

Kasky, who works for the San Diego Naval Training Center Foundation in San Diego, California, did not return calls seeking comment, nor did his lawyer, Alan Caplan, of Caplan & Fielding in San Francisco.

In the statement issued announcing the settlement, Patrick Coughlin, a Kasky attorney, stated, "Ultimately, both Nike and Mr. Kasky agreed that this resolution benefits two key groups: factory workers and consumers worldwide. Given the FLA's collaboration across a wide spectrum of companies, universities and NGOs, it is an excellent vehicle for Nike to further develop its corporate responsibility efforts and allow interested consumers to measure the performance of Nike and other companies through public reporting. Mr. Kasky is satisfied that this settlement reflects Nike's commitment to positive change where factory workers are concerned."

The New York Times reported that "other terms of the settlement were not disclosed, and lawyers on both sides declined to say whether Nike had paid Mr. Kasky's legal fees or made other payments."

"The terms of the settlement were totally set by Nike," says Jeffrey Ballinger, executive director of Press for Change, the group that initiated the corporate campaign against Nike in the 1990s. "If any money is going to come out of Nike to settle this kind of case, it should go to workers who were cheated by Nike. End of story. Nike has never been forced to pay for the cheating that has taken place at their contract factories -- cheating that has been documented at their Indonesian factories for several years. Tens of thousands of workers were paid an illegal training wage. Nike admitted it in 1996."

In his initial suit, Kasky alleged that Nike had made a series of misrepresentations regarding its labor practices, including "that Nike products are made in accordance with applicable governmental laws and regulations governing wages and hours;" and "that Nike guarantees a Žliving wage' for all workers who make Nike products."

In announcing the settlement, Maria Eitel, vice president and senior adviser for corporate responsibility at Nike, said, "We have learned a great deal in the five years since this case was first filed about the challenges we and others face in addressing issues in manufacturing environments."

Nike also alleged in its settlement announcement that uncertainty about application of the California state consumer protection laws will deter it and other companies from providing information to the public on their corporate activities. "Due to the potential difficulties posed by the application of California Statute section 17200, Nike has decided not to issue its corporate responsibility report externally for its fiscal year 2002 and will continue to limit its participation in public events and media engagement in California," the company stated.

-- Russell Mokhiber