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Shopfloor Policy

Senate Taxwriters Advance Nomination of Top Treasury Tax Official

By | Shopfloor Policy, Taxation | No Comments

The Senate Finance Committee today approved the nomination of tax expert David Kautter to be Assistant Treasury Secretary for Tax Policy, clearing the way for Senate confirmation of the nominee to a post where he will play a key role the tax reform debate.

Over the past months, tax reform meetings between the House, Senate and Administration have heated up and having Kautter in place at Treasury will bring additional technical expertise to these discussions and hopefully help speed up the process. As a liaison to the IRS, he also will major role in the current effort underway to repeal or rewrite a number of tax rules issued during the last administration.

Kautter, whose nomination was put forth by President Trump in May, is extremely well qualified for the job. He currently serves as partner-in-charge of RSM’s Washington National Tax practice. Earlier in his career, he was managing director of the Kogod Tax Center and executive-in-residence at the Kogod School of Business at American University. Before holding this position, he spent more than 30 years at Ernst and Young, serving as director of national tax for more than 13 years.

Advancing pro-growth tax reform and rolling back anti-manufacturing tax regulation are two top priorities for the NAM and time is running out on both. Having Dave Kautter in place as the Assistant Treasury Secretary for Tax Policy will be key to advancing these two initiatives. We strongly urge the Senate to confirm his nomination ASAP.

Manufacturers Work to Improve Climate for International Commerce

By | Economy, Shopfloor Policy, Trade | No Comments

Improving the international climate for trade and commerce is an immediate focus for world leaders, with major discussions at the recent Hamburg-hosted G20 summit and within the Trump Administration. The National Association of Manufacturers and its members strongly agree: with more than half of the U.S. manufacturing workforce dependent on customers outside the United States, boosting the global economy (and addressing market barriers) is a vital focal point for manufacturers big and small across the United States.

Given the outsized role of international commerce for U.S. manufacturing, I traveled to Europe last week to press both U.S. and international stakeholders for action on international commercial issues that make a difference for manufacturing growth and competitiveness. My meetings included senior U.S. government officials on the frontlines of the global economy, leaders of important global institutions such as the World Trade Organization (WTO) and Organization for Economic Cooperation and Development (OECD) and international business partners.

In Paris, I met with OECD Secretary-General Angel Gurria and his senior leadership to discuss the OECD’s work on a range of issues from international trade, investment, science and innovation, labor and health. I introduced the OECD to our new Engaging America’s Global Leadership (EAGL) coalition that seeks to ensure that the OECD and other global institutions operate within their mandate, are transparent and accountable to their members and follow best practices in consultations with the private sector and other stakeholders and in  the development of analyses and recommendations. Those productive discussions have already spurred follow-up opportunities to engage OECD officials on these issues in both Paris and Washington.

10 July 2017
Ms. Linda Menghetti Dempsey, Vice President of International Economic Affairs at the US National
Association of Manufacturers.
OECD Headquarters, Paris.
Photo : Julien DANIEL / OECD

In Geneva, Dempsey met with senior WTO officials, introducing the new EAGL coalition and also discussing a number of other key manufacturing trade priorities in advance of the upcoming WTO Ministerial Conference in Buenos Aires.

In both cities, I met with senior officials at the U.S. Missions to the OECD, the United Nations and WTO that work tirelessly with these institutions to move forward American priorities and defend American interests. We discussed the important role these institutions can and should play in creating a more fair and open international economy in which manufacturing can thrive. I also had the opportunity to meet with NAM members and international business leaders to discuss common challenges and new opportunities to band together to improve the international commercial climate to grow manufacturing and good-paying jobs.

Since its founding, the NAM has been committed to open and fair trade and constructive engagement with global institutions that are pillars of the international trading system. That commitment has never been stronger. From our work here at hope seeking a strong and pro-growth outcome to North American trade negotiations to our work across the globe, the NAM is at the frontlines on the core international issues that are critical to support a strong, growing and competitive manufacturing sector in the United States.

Treasury Opts to Revisit Tax Regulations Causing Problems for Manufacturers

By | Regulations, Shopfloor Policy, Taxation | No Comments

The Treasury Department in a notice issued today said it plans to propose reforms, including possible repeal, of eight sets of regulations issued in 2016 by the Obama Administration. Included on the list are four regulation projects of specific concern to manufacturers: Sec. 385 debt-equity rules, proposed rules on valuing minority interests in family-owned businesses, rules for calculating gains and losses on currency exchanges and regulations allowing contractors hired by the Internal Revenue Service (IRS) to fully participate in summons interviews and receive summoned documents.

Notice 2017-38 was issued under an executive order issued by President Trump in April that asked Treasury to identify tax regulations issued in 2016 that impose an undue financial burden on taxpayers, add unnecessary complexity to the tax code or exceed the statutory authority of the Internal Revenue Service. Under the executive order, Treasury has until September 18, 2017, to recommend specific changes to regulations to address these issues.

The Sec. 385 debt/equity regulations were proposed in April 2016 and finalized six months later. As originally proposed, the rules, which would treat intercompany debt as equity, would have imposed new taxes on manufacturers and threatened legitimate and well-established business practices. While the NAM’s aggressive, large-scale, advocacy effort was successful in obtaining some favorable changes to the proposed rules, the final regulations still impose a significant and unnecessary administrative and cost burden on manufacturers. We continue to advocate for total repeal of these rules.

Also on the list are proposed regulations under Sec. 2704 on valuing minority interests in family owned businesses, which were issued in the fall of 2016. NAM members believe that the proposed regulations—which incorporate some of the most sweeping changes to estate tax policies in the last 25 years—would unnecessarily increase estate and gift taxes on family-owned manufacturing companies by an estimated 30 percent or more, severely impacting the ability of owners of these family businesses to transfer their companies to the next generations. If finalized in their current form, these regulations would harm their ability to invest and grow their businesses and reduce their competitiveness versus non-family-owned firms. Consequently, we have urged both the Trump and Obama Administrations to withdraw this proposal.

Treasury also included the final and temporary Section 987 regulations on the review list. These regulations, which would change the way companies calculate certain currency exchange gains and losses, would require businesses to change their tax and accounting systems and dedicate significant time and resources to comply with regulations. Moreover, in many cases companies would not be able to get new technology systems developed and installed by the January 1, 2018, effective date for the final regulations, forcing these companies to spend additional resources on temporary systems.

The Sec. 987 regulations, represent a significant change from the long-standing proposed regulations and impose new and additional compliance burdens on companies. Given the negative impact on jobs, investment and economic growth, we support withdrawal of these regulations.

Finally, Treasury indicated that it will revisit final regulations under Section 7602 that allow contractors hired by the IRS, i.e., outside economists, engineers, consultants, or attorneys) access to books, papers, records, or other data summoned by the IRS. In addition, under the regulations contractors may, in the presence of an IRS officer or employee, participate fully in the interview of a person the IRS has summoned as a witness to provide testimony under oath.

The NAM believes that these regulations also should be repealed. The final regulations fall short on both policy and procedural grounds. Moreover, by allowing contractors to fully participate in summons interviews and receive summoned documents the regulations will lead to longer and less efficient examinations.

Manufacturers applaud Treasury for acting decisively to begin to address the onerous, costly and unnecessary burden these tax regulations impose on manufacturers. We strongly urge Treasury recommend the withdrawal or repeal of these regulations in its final recommendations in September.

Price Controls Harm Innovation and Interfere with Competitive Markets

By | Innovation, intellectual property, Shopfloor Policy | No Comments

Some members of the Oregon legislature continue to propose unwieldy requirements and burdensome rebates on manufacturers of pharmaceuticals in an effort to cap drug prices. These efforts will not “control” the price of drugs for consumers, but will instead create scenarios that will likely limit choice, restrict supply and increase costs. Moreover, price controls discourage innovation and act as a disincentive for robust research and development efforts.

While rising health care costs are a significant concern for Americans, there are very few examples in history where price controls have worked for a full segment of the population. Artificially setting prices does not take into account all of the costs and factors that go into creating a new product, such as numerous failed clinical trials or drugs whose revenue fail to cover development costs. Price controls distort incentives in the market and result in product shortages, which could ultimately increase future health care costs.

Lawmakers must carefully consider the negative impacts of imposing price controls and diminishing any intellectual property protections. Attempts to jeopardize all of the investment and years of work associated with the creation of new medicines and products will discourage R&D and innovation – all at the expense of manufacturers’ competitiveness and the future wellbeing of patients. As the legislative session winds down in Salem, we urge elected officials to be mindful of these adverse impacts.

Manufacturers Cheer Decision of Canada’s Highest Court to Fell Invalid Patent Criteria Harming Innovation

By | Shopfloor Policy, Trade | No Comments

Innovative manufacturers in the United States welcomed positive news out of Canada on the eve of national holidays in both countries: the Supreme Court of Canada struck down an intellectual property approach that had stymied innovation and investment. Such inventiveness, secured by intellectual property, remains fundamental to the competitiveness of modern manufacturing in the United States and the millions of American jobs it supports.

Canada’s troubling “promise doctrine” originated from the fallacy that patents that do not fulfill their “promise”—as arbitrarily construed by the courts, often years after the patent was filed—are invalid, even if they meet internationally accepted criteria for patentability. Canadian courts began freely applying the rule in 2005 and have since revoked 26 patents, intended to help millions suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions.

In a unanimous decision, Canada’s highest court concluded that the “application of the promise doctrine” fails to determine the utility of patents and is “incongruent” with both the words and the approach of Canada’s Patent Act. This decision affirms the need for Canada and other countries to align their intellectual property policies and practices with global norms.

At a time when Canada and the United States are preparing for modernizing negotiations within the North American Free Trade Agreement, developments like this resolve remaining barriers that encumber North American manufacturers.  The Supreme Court of Canada’s decision supports stronger bilateral ties, investment and innovation in Canada and good, high-paying jobs for innovative American manufacturers.

New State Department “Investment Climate Statements” Serve as Important Resource for Businesses and Roadmap for Governments to Grow

By | Shopfloor Policy, Trade | No Comments

The U.S. State Department just released its annual “investment climate statements” that examine trade, investment, rule of law and related issues for more than 170 foreign markets. As I explained at an event organized by the Center for Strategic & International Studies (CSIS), these statements provide invaluable information for U.S. manufacturers and other businesses that seek access to foreign markets through exports, investments and other partnerships.

International commerce and investment are critical to manufacturers in the United States. Exports support the jobs of more than half of America’s 12 million manufacturing workers, and foreign investment by U.S. companies spurs those exports.

Foreign investment and U.S. exports work hand-in-hand to benefit U.S. companies, consumers and workers. Indeed, U.S. companies that invest overseas are outsized participants in the U.S. economy and are stronger because of their access to foreign markets. In fact, the primary reason that companies invest abroad is to sell to foreign consumers and bolster their U.S. operations.

Based on the most recent data available from the U.S. Bureau of Economic Analysis, consider that U.S. companies that invest overseas are some of America’s:

  • Largest exporters, exporting 47 percent of all U.S.-manufactured goods sold overseas ($660 billion in 2014). More than 40 percent ($269 billion) of those manufactured exports go to the overseas operations of American companies to help promote U.S. products in foreign markets.
  • Biggest producers, accounting for nearly $1.4 trillion, or almost 65 percent, of all U.S. private-sector value-added manufacturing output in 2014.
  • Most important innovators, expending nearly $269 billion on research and development in the United States in 2014. Of that, 68 percent (or $183 billion) was spent by manufacturers.
  • Largest investors in capital expansion, investing $713.5 billion, or 24 percent, of all spending on new property, plants and capital equipment in the United States in 2014.
  • Most generous employers, paying U.S. manufacturing workers on average $96,030, or about 18 percent more than average U.S. manufacturing wages in 2014.

For manufacturers and other businesses seeking foreign customers, identifying the most promising foreign markets is a difficult, time-consuming process that requires extensive knowledge. The State Department “investment climate statements” provide a valuable resource to businesses, offering detailed information on many of the critical factors they need to understand, including:

  • Openness to trade and investment, market barriers and business requirements;
  • Rule of law, including transparency, impartial rulemaking, corruption and the legal system;
  • The protection of private property (foreign and domestic), including innovation and intellectual property, the sanctity of contracts and land rights;
  • Competition policy, including with respect to state-owned enterprises,
  • Political risk; and
  • Digital policy trends.

Manufacturers welcome this year’s analysis of digital issues, including regulations on cross border data flows and the localization of information and communications technology infrastructure. As manufacturers implement technology and data in overseas sales, production and product usage, these issues have become increasingly important.

These investment climate statements also aid foreign countries looking to bolster their commercial climate. Many of manufacturers’ strong concerns with barriers, distortions and weak standards that are limiting U.S. growth appear in these statements.

Given the significance of international commercial engagement to the U.S. economy, manufacturing sector and workforce, the National Association of Manufacturers advocates open markets overseas, robust standards of governance and the protection of property. This includes investment and intellectual property as well as strong enforcement mechanisms like neutral investment dispute settlement mechanisms to prevent foreign country mistreatment or theft of U.S. property.

To learn more, read about or listen to the discussion at the launch of these statements at the CSIS event.

House Energy and Commerce Committee to Hold Markup on NAM-Supported Ozone Bill

By | Energy, Shopfloor Policy | No Comments

On June 28, the House Energy and Commerce Committee will mark up H.R. 806, the Ozone Standards Implementation Act of 2017. This bill would create a more flexible glide path for manufacturers to comply with the 2015 ozone standard, harmonizing the compliance process for the 2015 standard with the behind-schedule process for the 2008 standard. In doing so, it would allow real ozone reductions to continue through 2025 without the unnecessary economic pain of ozone nonattainment. H.R. 806 would change the five-year review cycle for new standards to a more reasonable 10-year cycle, which is the typical time the Environmental Protection Agency (EPA) needs to complete these reviews. The bill also takes positive steps to address manufacturers’ permitting challenges as they pertain to ozone standards and requires real examination of the impact of international air pollution on domestic ozone levels.

The Clean Air Act has successfully improved air quality across the United States over the past four decades, leading to major reductions of virtually every single air pollutant. Ozone levels have declined roughly one-third since 1980, and the precursors that contribute to ozone—nitrogen oxides and volatile organic compounds—have been cut in half. In fact, the Obama EPA projected that the United States would achieve nearly the same air quality by 2025 even if the 2015 ozone standard was never implemented.

However, incremental improvements in ozone are now coming at an exponential cost. Even though most states can meet the 2015 standard by 2025, they would be unnecessarily thrown into “nonattainment,” a sort of economic penalty box, if the 2015 standard’s deadlines were to stay in place. H.R. 806 solves this problem by phasing the 2015 ozone standard implementation to align with air quality improvements that the Obama EPA found will occur anyway by 2025.

The NAM supports H.R. 806 and looks forward to working with the committee to get this important legislation to the president’s desk.

NAM Testifies on How to Grow Jobs and Manufacturing in North America Through a Renegotiated NAFTA

By | Shopfloor Policy | No Comments

Earlier today, Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers (NAM), testified at a public hearing on the modernization of the North American Free Trade Agreement (NAFTA), underscoring key areas to improve and modernize NAFTA in ways that will grow manufacturing and jobs in the United States.

For manufacturers throughout the United States, the North American commercial market is the most important market in the world, with Canada and Mexico alone purchasing one-fifth of all  U.S.-manufactured goods productionmore than the next 10 U.S. trading partners combined.

U.S. manufacturing output has nearly doubled since 1993, with U.S.-manufactured goods exports to Canada and Mexico alone supporting more than 2 million jobs in the United States and more than 43,000 manufacturing firms across the country. Partnerships among North American businesses have helped support this growth and the improved competitiveness of manufacturing in the United States.

NAFTA was negotiated before major technological and energy innovations helped transform what and how we manufacture in the United States. And furthermore, while U.S. negotiators sought to level the playing field fully in the original NAFTA negotiation, barriers and weaker standards remain in both Canada and Mexico.

In her comments today, Dempsey emphasized key points raised in the NAM’s June 12 public comments. Specifically, she focused on the need for a stronger NAFTA that grows American manufacturing, exports and jobs by:

  • Eliminating remaining distortions and barriers in Canada and Mexico, including with respect to remanufactured goods and barriers on food product exports, particularly Canadian dairy tariffs and nontariff barriers;
  • Raising standards to U.S. levels, including with respect to science-based regulatory practices, transparency, competition and state-owned enterprises, the protection of private property and investment overseas and intellectual property;
  • Updating the agreement to include new digital trade provisions important to small manufacturers and those creating and relying on new technologies;
  • Removing unnecessary red tape and duplicative regulations that are holding manufacturers back;
  • Seeking greater collaboration by the United States, Canada and Mexico to take action to stop trade cheating from third countries; and
  • Maintaining and improving neutral dispute settlement provisions.

The NAM and manufacturers embrace the opportunity to modernize NAFTA, and we are rolling up our sleeves to press for changes that further incentivize manufacturing in the United States and North America more broadly.

Manufacturers Applaud Move to Clarify Water Protections

By | Energy, Regulations, Shopfloor Policy | No Comments

The Earth is often called the “blue planet” because water covers nearly three-quarters of its surface area. And even more water resources are stored beneath the crust. Consequently, it is easy to take water for granted, but manufacturers understand the importance of responsibly managing water resources and have been working to protect clean water for decades. That’s why we have been asking for a clear rule from the Environmental Protection Agency (EPA) that empowers everyone to join in protecting our waters. Today’s proposal is a critical step toward fixing our nation’s water policy.

Manufacturers have demonstrated leadership by not only minimizing the environmental impacts to water supplies but also helping to ensure adequate water supplies through conservation efforts. But at the same time, the management of water resources has been fraught with conflict. U.S. federal government regulators have abused their power to regulate navigable waters and usurped the role of local communities and individual property owners. While these abusive policies have often been stopped by federal courts, the lack of fair rules creates even more uncertainty for manufacturers. Although Congress intended the Clean Water Act to protect “the primary responsibilities and rights of states to prevent, reduce and eliminate pollution,” the federal government has disrupted this local-first approach and exceeded constitutional limits.

Since manufacturers rely on water for everything from growing agricultural inputs to engineering green chemistry and providing renewable power—smart water policy is critical. Conflicts over the allocation of water resources leaves manufacturers caught between contentious federal versus state or state versus state battles. This makes it difficult and at times impossible for manufacturers to plan for day-to-day activities and make long-term investment decisions.

Furthermore, regulatory uncertainty and prolonged conflicts undermine access to justice, weaken individual property rights and fail to protect critical water resources. Given the importance of water resources, manufacturers need local, state and federal water policies of cooperation rather than conflict to achieve greater transparency, adaptation and continued ecological restoration. Policies that respect individual property rights take a multisectoral approach and drive technology solutions and innovation work to strengthen our stewardship of water resources.

Manufacturers have asked the EPA for a clear rule protecting our nation’s waterways for decades. Our country can’t protect its waters without a clear rule that gives everyone a fair chance. So today’s action is welcome news. It is an important step in process of creating commonsense policy, but there’s more work to do. Manufacturers will continue to advocate a new rule that conforms to the Clean Water Act, protects our nation’s waters and provides clarity for manufacturers and landowners around the country. This will take time and cooperation, but our blue planet deserves nothing less.

“Energy Week” to Highlight U.S. Energy Dominance and Benefits to Manufacturing

By | Energy, Shopfloor Policy | No Comments

The White House is making this week “Energy Week” and is putting the focus on America’s diverse energy mix and benefits it provides. Manufacturers are seeing this firsthand, as U.S. energy dominance is making manufacturers more competitive.

A recent study sponsored by the National Association of Manufacturers found that as a result of the increase in domestic shale gas production, we saw real GDP increase by $190 billion and 1.4 million more jobs. Just the construction of new natural gas pipelines to transport all this new energy meant more than 347,000 jobs in 2015, with almost 60,000 in manufacturing. Downstream, the benefits are even more striking: our friends at the American Chemistry Council estimate that abundant natural gas and natural gas liquids from shale resources have driven the chemical industry to invest in 294 new projects representing $294 billion in new economic output and 462,000 new jobs.

The energy renaissance is not limited to oil and gas. More than 100,000 workers contribute to the energy production at the nation’s 99 nuclear power plants, including manufacturers providing on-site repair, operations and maintenance as well as replacement components, modifications and upgrades when necessary. Pending retirements are spurring the industry to hire another 25,000 employees over the next few years, and in anticipation of new nuclear plant construction, U.S. companies have created in excess of 15,000 new U.S. jobs since 2005, which include manufactured products like turbines, polar cranes, pumps, valves, piping and instrumentation and control systems. Renewable energy sources have also steadily grown—consumption from wind, solar and geothermal energy sources have increased more than 400 percent over the past decade—now accounting for about 10 percent of total U.S. energy consumption and about 13 percent of electricity generation. Overall energy intensity in manufacturing (i.e., energy consumed per each dollar of goods produced) has steadily improved as manufacturers have grown more energy efficient. And even though the coal industry has faced its share of headwinds in the electric power sector—and is receiving much-needed regulatory relief—coal use in the non-electric-generation manufacturing sector has remained relatively stable, at around 43 million short tons of coal per year.

Manufacturers use a tremendous amount of energy, accounting for roughly one-third of the energy consumed in the United States. For energy-intensive manufacturers like chemicals, paper, metals and refining, energy is one of the largest costs. Manufacturers also make up the supply chain for every single energy source and technology, from fossil fuels, to renewables, to energy efficiency. The bottom line: when the energy sector is competitive, manufacturers are competitive. And that’s certainly what we are experiencing today.

Manufacturers appreciate the Trump administration’s focus on energy and look forward to a great week.