The Washington Post reports on changing rules in the European Union on the regulation of chemicals. The E.U. has flipped the old equation and put the burden of proof on the regulated, rather than the regulator. Basically, this means that it is a chemical producer's job to prove that its chemicals are not dangerous. This has greatly displeased chemical manufacturers in the United States and the Bush administration, both of which have fought hard to push the American approach, where chemical products are essentially innocent until proven guilty.

There are a couple of interesting factors to note in the E.U. move here, the first of which is the ability to use market power to lead the way in policy. This is usually called the "California effect" in the U.S., since that is the state most prone to using its market power to improve regulation, particularly environmental standards. At 27 countries and around 500 million people, the European Union represents the largest market in the world, and if U.S. manufacturers want to sell their products in that market, they've got to be up to European standards. In this way, Europe is able to take the mantle of environmental leadership and essentially force U.S. and other international manufacturers to comply.

The second point of note is why the E.U. would do this when it obviously costs manufacturers a lot of money. The reason is that European Policy is bound at its foundation to comply with the "precautionary principle," the idea that perhaps it is not best to wait until a product is harming the population before investigating its properties. By checking the risks of products before they enter the market, the level of safety for consumers and the environment is obviously elevated. As the Post article points out, many Americans are shocked to learn that this is not the case in their country, and that only about one quarter of one percent of all chemicals on the U.S. market have actually been closely examined by the EPA--that's one in 400 of about 80,000 chemicals on the market.

This is a very positive move by Europe. Though prices of some items may go up, it moves the market closer to pricing that reflects the true costs of a product by including externalities that otherwise reap their costs on human and environmental health. The patchwork of regulation by U.S. states and municipalities on the issue doesn't really work to anyone's benefit, so kudos to Europe for taking a bold step and upending the status quo on a global scale.

I guess it's about time to start calling environmental leadership through economic power the "Europe Effect."