Sunday, August 26th, 2012
When plastics industry leaders met with Senators, Representatives, and Congressional staffers on July 25, 2012 during the SPI Congressional Fly-In, one of the key discussion topics was the continuing increase in federal regulations on U.S. manufacturing in general, and on the plastics sector in particular.
While most acknowledge that the burden created by federal regulations is already heavy and continuing to grow, the details had not been well quantified until now. The Manufacturers Alliance for Productivity and Innovation (MAPI) commissioned NERA Economic Consulting to examine the qualitative and quantitative impacts of federal regulations on the U.S. manufacturing sector.
Not only are the negative impacts severe, and the number of regulations, both major and minor ones, has been rising steadily for some time, as is evident in this graph:
New Major & Non-Major Federal Regulations on Manufacturing, 1981-2012
Since 1998, according the NERA report, the cumulative inflation-adjusted cost of compliance with major manufacturing-related regulations grew at an annualized rate of 7.6%. Over this same period, annual growth in the physical volume of manufacturing sector output averaged only 0.4%, while U.S. inflation-adjusted GDP growth averaged 2.2% a year.
From 1993 through 2011, 1,110 manufacturing new regulations were promulgated. The estimated cost of compliance for the manufacturing sector in that period was $1,353 billion, which was 1.4% of the $94,641 billion in manufacturing shipments during that period.
The MAPI/NERA study’s cost findings are based solely on major regulations because the federal government does not track costs of non-major regulations. However, since about 95% of all regulations are not major, NERA suggests that their aggregate cost burden could be as large as that of the major regulations.
The agencies generating the highest regulatory costs for manufacturers from 1993 to 2011 were:
- Environmental Protection Agency — $117 billion
- Department of Transportation — $25 billion
- Department of Health & Human Services — $10 billion
- Department of Homeland Security — $7 billion
- Department of Energy — $5 billion
- Department of Labor — $3 billion
Plastics Industry Is Hit Hard
While SPI President & CEO Bill Carteaux was attending a briefing on the MAPI/NERA Regulations Impact Report last week, he tweeted out two of the plastics-related stats that, for obvious reasons, jumped out at him. Federal regulations will reduce the output of the plastics sector by almost 6% over the next decade and cost the industry more than $10 billion in 2012 alone. And regarding America’s critical foreign trade balance, federal regulations will reduce plastics sector exports by almost 18% in 2012 alone.
Since federal regulations still are on the increase, their impacts are sure to continue past the end of this year. For a detailed picture, you can download
the full NERA study from the MAPI website. While we can’t call it enjoyable reading, we nonetheless recommend it highly, and sincerely thank MAPI and NERA for the excellent research and report.