EU packaging law harms single market and economy

European Commission micromanages but neglects core task

The EU adopts hundreds of laws and regulations without any media attention. But some laws are so damaging to the European economy that they make headlines. The new packaging law, which entered into force on August 12, is also illustrative of how the European Union and the European Commission are increasingly engaging in economic micromanagement, with harmful consequences for the single market and businesses. The new rules are even so complex that the European Commission, which came up with them, is now calling on member states not to enforce them.

The Packaging and Packaging Waste Regulation (PPWR) is the new packaging law that applies across the EU (don’t click away just yet, it will get more interesting!). These rules are intended to reduce packaging waste, mainly through stricter requirements for the design, production and use of packaging.

The new rules apply to anyone who sells, packages, imports or ships products. Millions of people and businesses will have to deal with these rules. The EU has around 24 million small and medium-sized businesses. 22 percent of them sell goods through an online website or app. And one-third of those sell goods across borders.

Businesses that produce, use or import packaging must prove that it complies with European rules through an EU declaration of conformity. But, as the Dutch Chamber of Commerce points out, “it is still not entirely clear what the rules will mean in practice.” It is even unclear who qualifies as the manufacturer or producer. That is why the Dutch packaging producer organisation is calling for the situation before the law to remain the point of reference. Quite impressive, for a law the Commission already proposed in November 2022.

Other parts of the law will only come into force in the coming years. From 2027, for example, we will have to bring our own containers when getting takeaway food. And from 2030 some single-use packaging will be banned, such as packaging for sauces, fruit and vegetables, or small shampoo bottles in hotels.

One European law, 27 national authorities

Perhaps you are already thinking: maybe an EU whose economy declined in the first quarter of this year should spend less time introducing yet more rules and more time creating the conditions for economic growth. But it gets even worse. The new rules undermine the functioning of the European single market, while promoting that market is one of the European Commission’s core tasks.

European economy shrinks: does anyone care?

The most controversial requirement in the law is namely that companies selling and shipping packaged goods to another EU member state must register with that country’s ‘extended producer responsibility’ scheme. They often also have to appoint a ‘local representative’, who can be held accountable by local authorities. This should allow authorities to establish who imports which packaging.

Despite there being one European law, there is no single overarching registration for the entire EU. Instead, there are 27 different registrations, one for each country. As if dealing with one bureaucracy isn’t bad enough. This means that (small) businesses such as bookshops, wine merchants or smaller clothing stores that want to export to other EU countries may face 26 separate appointments, 26 different deadlines, forms and fees.

Smaller retailers and online sellers report that they can’t afford the cost and complexity of registering in 26 national systems and appointing 26 representatives. The cost of appointing a representative ranges from €600 to €2,000 per country. Failure to comply with the rules can result in sales bans and fines. In Germany, the law provides for fines of up to €200,000 per violation, although these will only apply from February 2027.

The European Commission now also acknowledges that its own law is so complex that it is even calling on member states not to apply part of the rules. A senior EU official told the German newspaper Welt: “We know that the new rules pose challenges for companies and require changes. That is why we have published Guidelines and FAQs. Nobody has to stop exporting products now. We encourage the member states not to apply the new rules and not to impose any penalties.”

The Commission also tabled a proposal in December to suspend the obligation for companies to appoint a representative in every country. Better to turn back halfway than continue down the wrong road, as the Dutch idiom goes. But these changes still need to be approved by the European Parliament and the Council of the EU, and they cannot agree. The member states have suspended their negotiations, while a first reading in Parliament on easing the rules is not expected until October at the earliest.

For dozens of businesses, however, it is already too late. Several small companies and entrepreneurs have announced that they are stopping exports to other EU countries. The Commission responded to posts online with “we hear you and we are here to support”. Fortunately, with an idiotic legislative proposal, entrepreneurs at least receive free moral support from EU officials.

The result: a law that was intended to reduce packaging waste, strengthen the single market and remove trade barriers, has instead led to legal uncertainty, more trade barriers and less exporting. This is increasingly what EU laws and regulations look like: introduce complex obligations, then discover that they are unworkable in practice, and subsequently quietly urge authorities not to enforce them. The European Commission has already been working for some time on weakening or rolling back its own legislation. This combination of unpredictability and a growing pile of complex rules with high compliance costs undermines confidence in the single market and makes it harder for businesses to add value to the economy.

European Commission neglects its core task: the single market

The single market is already not doing particularly well. The internal or single market is supposed to make it easier for people and businesses to work, trade and invest across the EU. The single market is based on two principles. 1) Mutual recognition: if a product or service is approved in one EU country, it may also be sold in other EU countries without additional rules. 2) Harmonisation of rules: the EU creates a common set of rules for products or services so that the same standards apply in all member states. This packaging law runs counter to both principles and actually makes it harder to trade within the EU, by requiring businesses to deal with 27 authorities.

In practice, the ‘single’ market is not that single at all. There are still too many different rules, product standards and national exceptions that make trade in Europe more difficult and more expensive. The International Monetary Fund estimates that the cost of barriers such as those in the packaging law is equivalent to a 44% tariff on goods. We can keep pointing to unfair competition from China and the United States, but the EU is its own biggest economic enemy.

Europe economically falling further behind the US

This law therefore fits into a broader trend in which the European Commission is neglecting or even undermining its core task of promoting the functioning of the single market. At the same time, the Commission is increasingly getting involved and claiming power in policy areas where it has little competence and only supports the member states. Over the past year, for example, the European Commission has presented a ‘Cultural Compass for Europe’, an ‘Affordable Housing Action Plan’, a ‘strategy for civil society’, and an anti-racism strategy.

Too much too little

The European Commission is, in short, doing far too much at the same time, while doing far too little in areas where it has authority and can have a positive impact. The European Union should stop looking for problems to solve, stop micromanaging the economy, and focus on core tasks such as promoting the single market and providing solutions where it can actually make a difference.