Legislative Outlook 2012: Even in an Election Year, Plastics’ Progress Will Prevail on Federal Issues

by William R. Carteaux

While there are some legislative prognosticators who believe the plastics industry should patiently wait out 2012 due to next November’s presidential election, I respectfully disagree. Though our resilient industry fared significantly better than other US manufacturing sectors during the tough economic times of the past few years, we cannot afford to wait on the challenges that remain. I am hopeful that the presidential candidate who emerges victorious next year will have a sound plan for economic growth and the skills to break the gridlock on Capitol Hill. In the meantime, SPI’s advocacy team will continue to aggressively navigate several legislative avenues of importance to plastics processors. Here is an overview of what I believe are opportunities to advance positive policy initiatives for the benefit of our industry in 2012.

Risk-Based Chemical Regulation

The Toxic Substances Control Act (TSCA) is currently being reviewed by Congress. Passed in 1976 (and not significantly amended since enactment), TSCA gives the US Environmental Protection Agency (EPA) authority to review and regulate chemicals and ensure that products are safe for intended use. But after 35 years, confidence in EPA’s regulation of chemicals – stirred by activist claims rather than scientific fact – has eroded to the point where individual states have legislated their own chemicals management laws, and retailers have taken it upon themselves to ban products from their stores.

SPI supports prudent modernization of TSCA to take into account 21st century advances in science. However, in the coming year we will work to defeat Senator Lautenberg’s (D-NJ) proposed “Safe Chemicals Act of 2011” (S.847) because it ignores risk assessment and the significant socio-economic benefits of products made with chemicals, such as plastics. Plastics play an important role in a sustainable society, and overly rigid mandates would be detrimental. Specifically, Lautenberg’s proposed bill would

  • Expand the law to encompass plastics processors, pulling the entire plastics industry supply chain into a regulatory regime that has historically been applicable only to chemical substance manufacturers and importers.
  • Threaten companies’ intellectual property rights and confidential business information.
  • Provide no meaningful pre-emption from a patchwork of state laws.

We are cautiously hopeful that efforts to amend TSCA will be predicated upon a meaningful and open stakeholder consultation process.

Increased Congressional Oversight of Federal Agencies

Critical to our nation’s economic recovery is the ability of plastics industry companies to operate their businesses efficiently and free of unnecessary regulatory burdens. In 2012, we will continue to spur Congress to have an increased role in oversight of the federal agencies that deeply impact the plastics industry – particularly EPA and the Occupational Safety and Health Administration (OSHA).

EPA continues to expand its regulatory reach in areas such as chemicals management (under its existing TSCA authority), as well as manufacturing sector-wide issues such as regulation of greenhouse gas (GHG) emissions. The “Energy Tax Prevention Act of 2011,” for example, would prevent the EPA from regulating GHG emissions from stationary sources under the Clean Air Act. Our organization will advocate for this legislation in order to lift burdensome regulations on plastics industry facilities, reduce their energy costs and bolster their competitiveness.

We also will advocate for modifications to an OSHA-proposed rule entitled “Occupational Injury and Illness Recording and Reporting Requirements NAICS Update and Reporting Revisions.” Proposed changes include requiring employers to report to OSHA, within eight hours, all work-related in-patient hospitalizations. In addition to concerns about the rule’s lack of clarity on classifications and interpretations, SPI also believes that many companies will not have the ability to fully comply with the 8-hour requirement.

I am hopeful that Congress will move on a handful of other “agency oversight” bills that we support (including “The EPA Regulatory Relief Act of 2011,” “The Regulatory Accountability Act” and “The Regulatory Flexibility Improvements Act of 2011”) in 2012. Currently pending in Congress, these three bills would provide our industry with regulatory relief and improve the rule-making process in the future.

Energy Policy: Development of New Resources and Fair Access

SPI has a unique voice in the national energy discussion because our industry relies on energy resources for both its raw materials and the power to create its products. Our advocacy team will be working hard in 2012 to caution Congress about the unintended consequences of arbitrary restrictions on access to natural resources or market-skewing subsidies that favor one technology over another.

The plastics industry is particularly concerned with a House legislative proposal called the “New Alternative Transportation to Give Americans Solutions Act of 2011” (H.R. 1380/S. 1863). Also referred to as the “Nat Gas Act,” this bill would grant $5 billion in unfunded subsidies for the use of natural gas in vehicles and the attendant infrastructure through 2016. Skewing the marketplace for industrial natural gas users such as the plastics industry, the bill would cause natural gas demand to increase by seven percent. This would be a profound threat to our industry, which relies on natural gas to power our plants and create our product, and which depends on stable natural gas supply and pricing. We will certainly oppose the “Nat Gas Act” in 2012, as well as any similar subsidies that would artificially increase natural gas demand and suppress the market-driven emergence of other energy technologies.

Tax Reform: Fair, Comprehensive and Growth-Friendly

Many on Capitol Hill continue to keep up the drumbeat for fundamental tax reform – an issue that I believe will play into the Presidential elections. Our organization will only support tax reform that promotes growth, is comprehensive rather than piecemeal and includes transition rules to give businesses sufficient time to plan and adjust.

SPI supports the “last-in/first-out” (LIFO) inventory accounting method. LIFO is used heavily by companies in the manufacturing sector to match their current sales revenues with current inventory replacement costs. By taking into account the cost of replacing inventory, LIFO results in a more accurate measure of the financial condition of a business and the amount of income that can be taxed. Unfortunately, the Obama Administration proposes to abolish LIFO – which would amount to a tax increase for our industry. We worked diligently to keep this measure out of debt limit extension legislation in 2011, but it will be back in 2012 as the White House will once again propose it to Congress in its 2013 budget recommendations. Because preservation of LIFO is critical to the plastics industry – to the tune of $72 billion saved over five years – we will be pressing for it in 2012.

Since I became president of SPI in 2006, I have spoken and written about the need to preserve and extend the R&D credit. I should not have to do this annually. Originally enacted in 1981, the R&D tax credit has been extended 15 times. It continues to be critical to US plastics manufacturers because it helps boost industry investment in research done in the United States and is essential for sparking innovation of new products and competitiveness in world markets. The credit is a sure way to stimulate both growth and jobs. At the end of 2010, Congress extended the credit through 2011. The President’s mid-February Fiscal Year 2012 budget proposal to Congress calls for making the R&D tax credit permanent and expanding it by nearly 20 percent. In March 2011, Representative Kevin Brady (TX-8) introduced H.R. 942 which would extend the credit through December 31, 2012. A similar measure has recently been introduced by Senator Max Baucus (MT). We will continue our advocacy efforts aimed at making this tax credit permanent, and we are confident that Congress will once again extend the credit (though perhaps retroactively).

The final tax proposal that we will oppose in 2012 is the Superfund tax – a monster we thought had died for good in the mid-90s. The Obama Administration hopes to reintroduce the Superfund tax. SPI opposes the reintroduction of Superfund taxes, elements of which include a per barrel tax on crude oil and petroleum products, as well as an excise tax on feedstock chemicals and a general corporate tax rate increase.

Growing Markets Overseas

Following up on a legislative victory we experienced in October, I am looking forward to implementation of Free Trade Agreements (FTAs) with South Korea, Panama and Colombia in 2012. We are constantly lobbying Congress to remove obstacles that prevent plastics industry export. By voting to pass these three trade agreements, Congress has helped to create jobs and provide new market opportunities for plastics industry manufacturers and suppliers.

These FTAs will create billions of dollars in new exports within a few short years. The US Trade Representative’s office has estimated that together these three agreements will generate 250,000 jobs. South Korea is the 10th largest export market for US plastics. Since 2000, plastics exports to South Korea have increased by 44 percent. Colombia is the 16th largest export market for U.S. plastics. Since 2000, plastics exports to Colombia have increased by 163 percent. Although not presently a top market for the US plastics industry, Panama has shown tremendous growth potential as well. Since 2000, plastics exports to Panama have increased by 107 percent.

In 2012, we will continue to support pro-growth measures that increase opportunities for US plastics manufacturers overseas. The Trans-Pacific Partnership (TPP) Agreement, which involves 10 countries (Australia, Brunei Darussalam, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, the US and Vietnam), may be in play this year. In addition, a US- European Union FTA also is being explored in an effort to deepen bilateral trade, investment ties, economic growth and jobs. Europe is a key market for the US plastics industry, so the possible impacts of a US-EU FTA would be significant. For 2011, industry exports to the 27 member states of the EU total $6.2 billion and are up 9.2 percent over this time last year.

As you see, federal legislative challenges to the plastics industry will not rest just because it is a presidential election year. Our advocacy team, therefore, will not rest either. Our advocacy efforts in 2012 (SPI’s 75th anniversary year!) will implement all of our organization’s resources – staff and member expertise, grass roots networks and coalitions – to successfully lobby on these critical issues. We will not wait to see how the elections pan out.

William (Bill) Carteaux is president and CEO of SPI: The Plastics Industry Trade Association (www.plasticsindustry.org). Celebrating its 75th anniversary in 2012, SPI’s member companies represent the entire plastics industry supply chain, including processors, machinery and equipment manufacturers and raw materials suppliers. Visit the SPI blog at www.inthehopper.org.