Manufacturers hopeful that Trump administration will untangle regulatory knots

One of the many promises that candidate Donald Trump made on the campaign trail was to end the regulatory quagmire that is costly to manufacturers and consumers. President Trump has also promised to tackle this job. Trump met with the automakers on Jan. 24 to discuss this and other pertinent topics, the first such meeting with auto executives since a 2011 session with President Obama to tout a deal to nearly double fuel efficiency standards by 2025.

Since the arbitrary 54.4 mpg corporate average fuel efficiency (CAFE) standard was mandated, very few in the automotive industry have been pleased with this number, believing that, for the most part, it is unattainable. The automakers have urged the Trump administration “to rethink those aggressive fuel efficiency mandates,” said a report from CNBC.

A CNBC video showed Trump addressing this topic during his meeting with the automakers: “We want regulations but we want real regulations that mean something. I am to a large extent an environmentalist. I believe in it, but it’s out of control,” he said.

In a recent interview at the Detroit Auto Show, Mark Fields, CEO of Ford Motor Co., made the statement, “We want to fuel economic growth with regulations aligned with market realities.”

As the Trump administration prepares to rethink many arbitrary regulations, and not just those in the automotive industry, the National Association of Manufacturers (NAM) has released a new study revealing the sheer number of business and operational hurdles that manufacturers face on a daily basis as a result of the nation’s current regulatory structure. The study, called “Holding Us Back: Regulation of the U.S. Manufacturing Sector,” is based on extensive interviews, a survey of the NAM membership and an analysis of hundreds of specific federal regulations.

Manufacturers face 297,696 restrictions on their operations from federal regulations, the NAM study found, with an average of 3,300 new regulations issued each year. Eighty-seven percent of manufacturers surveyed say that if compliance costs were reduced permanently and significantly, they would invest the savings on hiring, increased salaries and wages, more R&D or capital replacement. Ninety-four percent of manufacturers surveyed say the regulatory burden has gotten higher in the last five years, with 72% saying, “significantly higher.”

Regulations hurt all manufacturers, but they hit small to-mid-sized manufacturers particularly hard. “For the last eight years, the outgoing administration has hindered small and mid-sized firms’ success,” said Drew Greenblatt, President and CEO of Marlin Steel and Chairman of NAM’s Small and Medium Manufacturers. “Time and money that could be spent on job creation are instead wasted on complying with out-of-touch federal rules. We believe in smart regulations, and simply want to see balance and common sense return to rulemaking. Congress and the next administration can work in the best interests of manufacturers by getting to work right away on rethinking red tape and regulations in a thoughtful and productive way.”

Many of the regulations that hinder companies such as those in the plastics industry, including resin producers, colorant and additive manufacturers, processors of resins and even moldmakers, since the Environmental Protection Agency (EPA) regulates metalworking fluids, are not made on the basis of scientific empirical proof of benefits but are written arbitrarily. Given that the law of unintended consequences is always at work, many times these laws create more problems than they solve. Some of these regulations conflict with other regulations, leaving a confusing mess for manufacturers to sort out.

For example, the Consumer Product Safety Commission mandated that flame retardants be incorporated into various plastic products, such as electrical and electronic products; textiles such as children’s pajamas; fabrics for upholstered furniture; and other consumer goods. Yet, some flame retardants were then found to be hazardous to the health of the users, and another regulation was created to mandate greater safety in flame retardants.

The permitted use of flame retardants in consumer goods varies from state to state, so a product that is legal in one state may not be in another. This leaves manufacturers with a knot of issues both in manufacturing products and in the distribution chain.

Many times regulations were put in place for a reason that is no longer pertinent, but the regulations are never updated. Regulations involving flame retardants were put in place in the 1970s in response to a study done that found that many house fires were caused by smokers carelessly dropping cigarette butts on the sofa or clothing catching fire because a burning ash dropped on the fabric. That was a time when there were millions of smokers in the United States.

Now that smoking has fallen significantly over the past couple of decades, perhaps the regulations for flame retardants need to be updated. While new flame retardants have been developed to improve the safety of electrical/electronic products and textiles, there continues to be an ongoing debate about the toxicity of flame retardants to human beings. Is the toxicity, which some say causes cancer and other human health issues, more dangerous than a fire caused from burning furniture or clothing?

Some flame retardants that were developed to replace those determined to be toxic were subsequently banned or voluntarily removed after discovering that they, too, may cause cancer or be genetic disruptors. The result of all this is a hodge-podge of federal and state regulations that make it difficult for manufacturers to know where they stand.

For the plastics manufacturing industry, flame retardants are the tip of the iceberg. There is the ongoing BPA issue, which has been entangled in various studies for more than two decades with dubious results as to its harm to humans. The science has not been settled as yet on this chemical, even as many plastics producers have eliminated BPA.

NAM’s study states, “Regulatory agencies impose a litany of requirements when it comes to processing and transforming raw materials into a saleable product. Such mandates include manufacturer registration, ingredient restrictions, specific processing and production standards, product standards, product bans, registration and licensing of products and byproducts, certification of compliance, reporting and recordkeeping.”

I would be willing to bet that many regulations are put in place without any cost/benefit analysis, or an evaluation of their unintended consequences. That leaves manufacturers stuck with “layer upon layer” of new regulatory mandates, notes NAM, that “create a burden on manufacturers that is significant, growing and impactful, diverting resources away from important discretionary activities like market innovation.”

Get the full report at www.nam.org.