The European Union’s Eleven Greatest Blunders

There’s no shortage of American rules and regulations that cost consumers a pretty penny with little or no benefit. From the Food and Drug Administration’s (FDA) harmful restrictions on life-saving harm reduction products to the endless infrastructure permitting review process imposed by the National Environmental Policy Act (NEPA), the Taxpayers Protection Alliance (TPA) has plenty on its plate. In pushing back against American regulators, it’s easy to forget what happens across the pond. The European Union (EU) is rife with examples of bureaucrats and policy officials abusing their discretion and undermining the rule of law. And, these ridiculous EU regulations tend to make their way to the halls of the U.S. Congress. To keep taxpayers and consumers from Portugal to Finland in the know and warn U.S. taxpayer and consumers what may be next, TPA presents “the European Union’s Eleven Greatest Blunders.”

1. Micromanaging Online Markets

The European tech sector is anything but competitive. This is largely the result of excessive regulation of the digital world, a trend that the EU is continuing with its recently enacted Digital Markets Act (DMA). The EU says the DMA will protect online competition, but its primary effect will be to discriminate against American tech companies. Five of the six designated “gatekeepers” (i.e., very large firms that the DMA regulates most heavily) are American – and the sixth, ByteDance, is Chinese.

The DMA prohibits gatekeepers from engaging in many standard business practices that economists widely recognize as deflationary and pro-consumer. Its comprehensive nature will slow innovation and ensure Europe’s continued stagnation in tech markets for decades to come. As American regulators consider similar proposals, the DMA should be regarded as a prime example of unintended consequences and the basic economic truth that micromanaging markets never yields the prosperity regulators promise.

2. Nonsensical Targeted Advertising Bans

Over the past 20 years, the proliferation of internet platforms and services has allowed billions of users to connect with each other at virtually no cost. But EU regulations currently being implemented threaten to end that model for good by undermining tech companies’ prevailing business models. Under the Digital Services Act, tech companies are prohibited from targeting advertising based on a large number of characteristics including age, political affiliation, background, and sexual orientation.

Thanks to these onerous rules, companies won’t be able to advertise children shows to children or campaign swag to ardent politicos. Because companies will have less ability to make money off advertising, they’ll likely have to start charging consumers for platforms that have always been free. Everyone stands to lose under this new, costly regulatory scheme.

3. War on Lavender Oils

The EU has made it its mission to go after “dangerous” products, including…lavender oil. Across the continent, essential oils fall under the EU’s “Registration, Evaluation, Authorisation and Restriction of Chemicals” (REACH) regulation promulgated by the European Parliament and Council. In the regulation’s current form, labeling requirements can add thousands of euros to product development costs (which are often passed along to consumers).

The impending revision of REACH, however, will result in essential oils being characterized as “MOCS” (more than one constituent substance) and subject to even more labeling requirements than under the status-quo. In addition, producers of these oils may be forced to add labeling to their vials warning of remote health risks, which could needlessly depress sales. The burden of implementation will fall heavily on poorer nations such as Bulgaria, which is the world’s top producer of lavender oil. Bulgarian distillery executive Nikolay Nenkov notes, “We fear that such measures will lower consumption, curb production and (thus) the sector might disappear in some regions, which is very bad considering it’s a long-standing tradition.”

4. Costly “Green” Policies

European households are already starting to feel the impact of costly “green” policies enacted by EU member states such as France and Germany. Fuel shortages and record-high automobile prices are just some of the unintended consequences of a pervasive anti-fossil fuel agenda.  In addition to these countries’ onerous policies, the EU has imposed its own bank-breaking climate mandates. The “European Climate Law” mandates continent-wide carbon neutrality by 2050 and a 55 percent reduction in greenhouse gas emissions by 2030 (compared to 1990 levels).

According to a 2022 analysis by the European Commission, this law will significantly reduce employment in the coal and lignite mining sectors, which are disproportionately located in struggling member states such as Romania, Bulgaria, and Poland.  Additionally, the “highest aggregate [worker training] costs are likely to fall upon countries that are relatively poorer… the countries that are affected more strongly also tend to have (on average) weaker institutions for adult learning than richer countries.” In other words, the EU’s disastrous climate policies will widen the divide between rich and poor member states and undermine energy independence, prosperity, and cross-continent unity.

5. Onerous Food Approval Process

The EU has instituted an incredibly burdensome licensing regime for “novel foods.” This category includes newly developed food or food produced using new technologies such as extracts from existing foods, agricultural products from third countries, alternative proteins, UV-treated food, and more. Since 2021, when the Novel Foods regime was updated to include the so-called Transparency Regulation, 51 new applications have been submitted. Of these, regulators have yet to evaluate 32, or more than 60 percent (as of July 2023). An additional 10 applications have terminated for failing to meet disclosure requirements. Terminated applications may be resubmitted after six months, a period that adds to the regulatory costs that businesses must pay.

Of course, regulators should do basic due diligence to protect consumers from dangerous substances that may be contained in novel foods. But onerous regulatory systems totally quash the societal and health benefits that novel foods can offer.

6. Compulsory Licensing Galore

Unfortunately, researchers and drug developers must live in constant fear that their life-saving products will be stolen by competitors. Europe has proposed a “compulsory licensing” regime, through which the EU Commission can in times of crisis force firms to share their intellectual property. In other words, once a compulsory licensing statute is triggered, the patent holder’s competitors may freely manufacture its products without first obtaining its permission.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) quickly sounded the alarm, warning that the policy “could be used to broadly abrogate the IP rights of innovators.” EFPIA added that compulsory licensing “prevents the innovators themselves – who best understand the technology – from choosing the best-positioned, trusted partners to bring a given product to market within the shortest possible time frame, in the interest of patients.”

Throughout history, governments worldwide have often used crises – or supposed crises – to justify all manner of power grabs and other bad policies. Democratic nations should be very wary of granting governments vast emergency powers, which are often deployed to benefit government officials or their cronies.

7. Data “Protection” Regulation

The EU’s General Data Protection Regulation (GDPR) has squashed tech innovation since it was enacted in 2018. Stateside, it is most famous as the reason why American users must now navigate irksome cookie notifications. And besides its burdensome compliance costs, the GDPR threatens draconian punishments for noncompliance. It provides for fines of up to 4 percent of offending firms’ global revenues. In short, it totally fails to balance ensuring data privacy with promoting innovation in the tech sector.

The GDPR bears sizeable responsibility for the stagnation of Europe’s tech sector, which continuously underperforms its American and Asian competition. For example, one 2022 study found that the GDPR reduced innovation – and consumer choice – in the app market. “Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half,” the authors wrote.

8. Global Minimum Tax

Around the world, high tax rates lead to less employment opportunities, lower wages, and higher costs for consumers. Unfortunately, the U.S. and the EU have agreed to enforce a global minimum business tax of 15 percent, levied on multinationals with more than €750 million in revenues. While member states are slated to begin enforcing the policy in 2024, jurisdictional squabbles and disputes over the distribution of tax revenue (based on cross-border sales) will lead to plenty of compliance headaches and wasted taxpayer dollars.

And, once this tax system is implemented, households and businesses across Europe are in for a world of hurt. According to previous economic analyses of corporate tax hikes conducted by the Tax Foundation, a roughly 30 percent increase in the corporate tax rate would result in a 2 percent long-run decrease in wages and cost approximately 160,000 jobs. As a result, EU citizens of countries with currently low corporate tax rates such as Hungary (9%), Bulgaria (10%), Ireland (12.5%) and Cyprus (12.5%) will disproportionately bear the brunt of this misguided new policy.

9. Bank-Breaking Tariffs

The EU is determined to tax consumers as much as possible, bolstering tariffs on everything from stainless steel fittings to fertilizers. In December 2022, the EU Parliament and Council enacted a carbon border adjustment mechanism (CBAM) designed to penalize carbon-intensive products imported from abroad (mainly from poorer countries). While importers will initially only be required to document the carbon emissions created by these products, they will have to pay a hefty price (around 90 euros per ton of carbon) that will inevitably be passed along to consumers.

Economist Tyler Cowen notes that, not only is this an exceptionally costly policy, but it is also unlikely to result in cleaner energy. Cowen writes, “look at the EU itself over the past year. Its energy prices went up, due to the Russian attack on Ukraine, but the EU did not move toward greener energy…” Because these tariffs make exporting countries poorer and poorer countries tend to focus more on immediate issues than environmental improvement, it is far from clear that CBAM will bolster ecology. Nonetheless, EU bureaucrats insist on pushing their misguided “green” tariffs. 

10. Plastic Waste Ban (aka Paper Straws)

EU bureaucrats have declared war on plastic products, voting in 2019 to ban plastic straws, cutlery, stirrers, and even cotton swabs containing plastic. Evidently this wasn’t enough, and now the EU plans to yank mini-shampoo bottles out of hotels and enmesh deliveries in tighter wrapping. As a result of these new, onerous rules, consumers will likely have to pay more for a lower-quality product. Paper straws cost at least five times more than plastic straws, and costs quickly add up when consumers in the EU and U.S. likely use a combined 400 million straws per day.

For all these higher costs and transition pains, plastic prohibition doesn’t do much for the environment. According to a 2018 analysis by University of Oxford scholars Hannah Ritchie and Max Roser, high-income countries in Europe and North America keep their used plastic “stored in secure, closed landfills. Across such countries almost no plastic waste is considered inadequately managed.” This landfill-based system isn’t without its issues, but it is a far cry from the sad pictures seen on the internet of turtles tangling with plastic straws. This ocean pollution mainly comes from Asian and African refuse, not recycled materials from EU countries. Policymakers should bear this in mind before imposing price hikes on consumers.

11. Not-So-Mellow Banana Curvature Regulations

Yes, the EU really did impose regulations on banana curvature. Commission regulations dictate marketing standards for bananas across the continent, specifying that bananas shouldn’t be too curvy. This regulation gained quite a bit of notoriety during the Brexit debate, as politicians and media outlets claimed that the EU was on a mission to ban all bendy bananas. The truth is a bit more boring, but still frustrating.

According to a review of the evidence by the European Parliament Liaison Office, “Commission Regulation 2257/94 [superseded by 1333/2011] identifies certain restrictions for fruits that producers have to conform to in order to sell their produce within the EU. The regulation states that bananas must be ‘free from malformation or abnormal curvature.’” It must’ve never occurred to EU regulators that stores and their consumers are more than capable of determining how much curvature is too much curvature.

In conclusion…

The U.S. certainly isn’t alone in promulgating all sorts of weird and wacky rules and regulations. From carbon tariffs to banana curvature regulations, bureaucrats can’t help but to control the lives and raise costs on millions of consumers and taxpayers. TPA and free-market groups across Europe are committed to holding the EU accountable and documenting its many dubious rules. If U.S. consumers and taxpayers aren’t vigilant, these silly rules and regulations may be washing up on the shores of the United States.