Malaysia today accused the European Union of unfairly using a proposed chemicals regulation scheme as a non-tariff barrier to hinder access to its markets.

Deputy Minister for International Trade and Industry Ahmad Husni Hanadzlah criticised the REACH system, saying it will create significant hurdles for developing nations and discourage exports to European countries.

"Developing economies and especially SMEs (small and medium enterprises) may not be able to comply with REACH requirements due to insufficient capacity," he told an international conference on chemical control and trade.

Ahmad said the the elimination of tariffs under the WTO and regional trade arrangements had prompted some nations to adopt non-tariff measures (NTMs) to protect local industries.

"While NTMs are generally applied on all importing countries and are not barriers that restrict trade, there are instances where these measures are clearly discriminatory in nature," he said.

High standards imposed

The European Parliament and Council of the EU are currently considering the Registration, Evaluation and Authorisation of Chemicals system (REACH), which will impose high standards of chemical regulation for health and industry reasons.

REACH will require businesses that manufacture or import certain levels of chemicals to register them with a new European agency after a series of tests.

The minister said the United States and Australia have expressed concern over the potential impact of REACH on the chemical and manufacturing industries of exporting countries.

But Thierry Rommel, Head of the European Commission delegation to Malaysia, said the EU was in compliance with international agreements and WTO members were free to express their misgivings.

"The European Commission will take note of the objections and concerns and see how these concerns can be addressed within the normal processes of the WTO," he told AFP.

He added that the system will not be discriminatory, as it will apply equally to companies within and outside of the EU.

After the electrical and electronics sector, Malaysia's chemical products industry was the second largest contributor to manufactured exports in 2004, worth RM25 billion.

Malaysia and the EU will soon conduct a feasibility study into signing a free trade agreement.