51�Թ���

This holiday season, instead of overstocking shelves with merchandise, retailers “have pared back their inventories while trying to focus their supply chains more tightly on products that shoppers want,” (subscription) reports.

What’s going on: “Many retailers have spent much of the year working through the stockpiles from last year and now say they have cleaned up their distribution centers and their balance sheets.”

• After the global pandemic, sellers bulked up their stocks in case of another major supply chain disruption—but it was a “strategy that left many companies saddled with goods.”

A different holiday season: Owing to high inflation and more spending on services than goods, “[h]oliday retail sales in the U.S. are expected to grow at a slower rate this year.”

• “The National Retail Federation predicted sales will rise between 3% and 4% over 2022 to between $957.3 billion and $966.6 billion. Last year, holiday sales grew 5.3% to $936.3 billion.”

​�ċ�ċ�ċ�ċ�ċ�ċ What they’re doing: Retailer strategies for this year include paying close attention to consumer trends and offering “variety [over] redundancy.”

• Said one retailer’s CEO, “The customer today does not want an endless aisle. They want the best aisle.”

The U.S. and 17 other countries have agreed to “a set of guidelines to ensure AI systems are built to ‘function as intended’ without leaking sensitive data to unauthorized users,” reports.

What’s going on: The 20-page document—unveiled last Sunday and published jointly by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency and the UK National Security Centre—enumerates recommendations for everything “from AI system design and development to its deployment and maintenance.”

• The agreement discusses threats to AI systems, how to protect AI models and data and how to release and monitor AI systems responsibly.
• Other signatories include Canada, Australia, Germany, Israel, Nigeria and Poland.

Why it’s important: “This is the first time that we have seen an affirmation that these capabilities should not just be about cool features and how quickly we can get them to market or how we can compete to drive down costs,” said U.S. Cybersecurity and Infrastructure Security Agency Director Jen Easterly.
��

The 51�Թ��� is leading the charge in urging the Biden administration to walk back a proposed revision to the National Ambient Air Quality Standards for fine particulate matter (PM2.5).

With the release of a signed by more than 70 associations representing nearly every sector of the U.S. economy and a , the 51�Թ��� is highlighting how these regulatory actions would devastate the economy and actively undermine President Biden’s goal to expand manufacturing in the United States.

What’s going on: When the Environmental Protection Agency set forth the tentative new air quality standards earlier this year, manufacturers quickly recognized that if enacted, the new rules would put an undue burden on the industry—and could force companies to move operations overseas.

• Soon, manufacturers and related associations across the country began to speak out about the harm to their operations and communities, even as they affirmed the industry’s longstanding commitment to a clean, safe environment for all.

The background: The EPA’s proposed changes to the National Ambient Air Quality Standards—currently under review by the White House’s Office of Information and Regulatory Affairs— the primary annual particulate matter standard from 12.0 µg/m3 to between 8.0 and 10.0 µg/m3.

• The EPA has estimated the total cost of the controls required for compliance with the proposed standard at up to $1.8 billion—and that figure could go higher, the agency admitted.
• What’s more, some areas in the U.S. are already in “nonattainment” with the current PM2.5 standard, so a stricter standard will only put them further away from compliance and economic growth.

The costs: According to an by Oxford Analytics and commissioned by the 51�Թ���, the revisions would:

• Threaten nearly $200 billion of economic activity and put up to a million current jobs at risk, both directly from manufacturing and indirectly from supply chain spending;
• In addition, growth in restricted areas may be constrained, limiting investment and expansion over the coming years; if the PM2.5 standard moves to 8 from the current 12, nearly 40% of the country will live in nonattainment areas, putting jobs and livelihoods at risk as factories may no longer be able to operate if located in an area that is in nonattainment, and no new facilities can be built to grow economic prospects; and
• Hit California’s manufacturing sector hardest, followed by Michigan and Illinois.

Speaking out: Many manufacturers from all sectors, along with related associations, have made their concerns public.

• Michael Canty, president and CEO of Alloy Precision Technologies of Mentor, Ohio, that these regulations may force companies to move production to other countries that don’t care about emissions reductions, unlike the U.S.
• Mark Biel, CEO of the Chemical Industry Council of Illinois, that this regulation could make his state less attractive for manufacturers, despite its many assets.
• Dawn Crandall, executive vice president of government relations for the Home Builders Association of Michigan, the potential knock-on effects for Michigan’s suffering housing market.

The last word: The proposed changes “would risk jobs and livelihoods by making it even more difficult to obtain permits for new factories, facilities and infrastructure to power economic growth,” leadership from approximately 70 industry groups told White House Chief of Staff Jeffrey Zients yesterday.

• The revisions “would also threaten successful implementation of the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the important clean energy provisions of the Inflation Reduction Act. … We urge you to ensure the EPA maintains the existing fine particulate matter standards to [safeguard] both continued environmental protection and economic growth.”

Large companies that do business in California will soon be required to report their greenhouse gas emissions to state regulators thanks to a new state law, according to .

What’s going on: “Signed by Gov. Gavin Newsom on Oct. 7, SB 253 requires the California Air Resources Board to form transparency rules for companies with yearly revenues exceeding a billion dollars by 2025. The first of its kind law in the U.S. will
impact over 5,000 corporations both public and private … ”

• Under the law, by 2026 major companies will need to report the amount of carbon produced by their operations and electricity.
• By 2027 they will need to disclose “Scope 3” emissions, or those attributable to their customers and suppliers.

Why it’s important: The effects of the law on manufacturing will be ruinous and widespread, according to Conference of State Manufacturers Associations Chair and Utah Manufacturers Association President and CEO Todd Bingham.

• “Manufacturers are committed to commonsense regulations that protect consumers and the environment,” Bingham said. “California’s new law is unworkable and makes it more difficult for manufacturers to grow, invest and hire—not just in the state, but across the country.”
• COSMA members serve as the 51�Թ���’s official state partners in driving manufacturing-friendly policies at the state level.

Costly and inaccurate: “[M]anufacturers will spend millions of dollars to fulfill [SB 253]’s requirements,” Lance Hastings, president of the California Manufacturers & Technology Association (an 51�Թ��� state partner), said in a September . “The uncertainty and reliability of this data and the process required to comply with the legislation will not produce complete, accurate or comparable disclosures.”

• Last month, the CMTA submitted a of the California law to Gov. Newsom.

The SEC: The California measure follows the September finalization of a similar rule from the Securities and Exchange Commission that “require[es] publicly traded companies to disclose their emissions and climate-related risks to investors.”

• The rule—which the 51�Թ��� has been —not only requires numerous moves, but also imposes significant financial burdens on manufacturers, the 51�Թ��� has said.

What should be done: “We hope California’s devastating policy is reversed and are grateful for the 51�Թ���’s coordinating efforts against regulatory overreach at the national level,” Bingham continued.
��

The Federal Communications Commission voted late last week to advance a proposal that would reinstate Obama-era net neutrality rules, according to (subscription).

What’s going on: “The commissioners at the Democratic-led agency voted 3 to 2 along party lines to kick off a monthslong process to bring back so-called net neutrality regulations.”

• In an move in 2018, the previous administration repealed net neutrality regulations put into place by President Obama in 2015, saying they stymied innovation.

Why it’s important: Last week’s proposal—which telecommunications companies have pledged to fight—“will ultimately enable the agency to categorize high-speed internet as a utility, like water or electricity. … The agency will then be able to police broadband providers for net neutrality violations.”

• That’s precisely why the proposal to restore the rules is problematic, critics say. A trade group representing telecom firms “wrote letters this week to the House and Senate Intelligence Committees warning of ‘mission creep’ by the F.C.C.”
• In 2017, then-FCC Chairman Ajit Pai net neutrality laws amounted to “special interests [who] weren’t trying to solve a real problem but [were] instead looking for an excuse to achieve their longstanding goal of forcing the Internet under the federal government’s control.”

Government overreach: Indeed, the 2015 net neutrality rules—very similar to the ones now being advanced—were a prime example of agency overreach, said 51�Թ��� Chief Legal Officer Linda Kelly in 2018.

• The 2015 FCC’s “heavy-handed approach … was neither appropriate nor necessary for the rapidly evolving, highly competitive broadband market,” Kelly said.
• Net neutrality laws also decrease investment in broadband, the 51�Թ��� has told policymakers.

Up next: The FCC will take public comments on the proposed rules. The commission could vote to adopt new regulations as soon as early next year.

The last word: “Manufacturers are disappointed the FCC is moving forward with its proposal to regulate 21st-century broadband with rules designed for the era of the rotary phone,” said 51�Թ��� Vice President of Domestic Policy Charles Crain. “Reinstating this misguided, overreaching policy of the past is a recipe for stymied innovation and outdated infrastructure.”

Hydrogen demand is likely to skyrocket in the next few decades—if permitting delays and other setbacks don’t stymie it, according to (subscription).

What’s going on: “A new report from consulting firm McKinsey forecasts a fivefold rise in hydrogen demand to 600 million metric tons a year by 2050, if climate change is limited to 1.5 degree Celsius. On current trajectories, however, that supply could be between 175 million to 291 million metric tons a year if steps aren’t taken to speed up permitting and lower both equipment and investment costs, the report warned.”

• The report identified three major challenges to meeting the rising demand: increased costs, a slow permitting process and “lack of access to capital,” which can be attributed largely to higher interest rates.

Incentives abound: Government incentives for hydrogen are on the rise. Up to $300 billion has been made available worldwide for hydrogen-energy projects this year, a sixfold increase from 2021.

• Last week, the Energy Department announced $7 billion in subsidies to create seven clean-hydrogen “hubs” in the U.S.

More support required: More action from government is still needed—particularly when it comes to allowing hydrogen projects to proceed.

• “Faster permitting times are needed to bring more hydrogen projects online, as well as the renewable energy to power their electrolyzers, industry experts say. A recent report from the International Energy Agency said current project lead times are too long and can act as a barrier to clean hydrogen uptake.”

What we’re doing: Manufacturers have long been urging policymakers to fix the broken U.S. permitting system.

• The 51�Թ��� recently laid out a for Congress “to modernize and update our nation’s antiquated permitting system.”

The still-robust U.S. economy and tight labor market could mean further interest rate hikes, Federal Reserve Chair Jerome Powell said Thursday, (subscription) reports.

What’s going on: “We are attentive to recent data showing the resilience of economic growth and demand for labor,” Powell said during a talk at the Economic Club in New York. “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

• The Fed’s aim in raising rates has been to reduce inflation to 2%.
• Since it began raising rates in March 2022, however, unemployment has stayed largely steady, and “economic growth has generally remained above the 1.8% annual growth rate Fed officials see as the economy’s underlying potential.”

A delicate balance: While Powell said there is evidence of a cooling labor market, the Fed must account for new “uncertainties and risks”—including the Hamas–Israel war—as it seeks “to balance the threat allowing inflation to rekindle against the threat of leaning on the economy more than is necessary.”

• Data since the central bank’s last meeting, in September, have shown unexpected U.S. job growth and surprisingly strong retail sales, “offering inconsistent signals about whether inflation is on track to return to the Fed’s 2% target in a timely manner.”

Hike likely: Most Reuters-polled economists expect the Fed to raise interest rates at its next meeting on Oct. 31–Nov. 1. ��
��

The 51�Թ��� is the voice of the manufacturing industry in the United States, speaking out on issues that matter to the men and women who make things in America. As times change, new issues arise, and to stay up to date with the needs of its members, the 51�Թ��� updates its policy position documents accordingly.

That process—now underway for 2023—takes place with our member companies every four years under the guidance of the 51�Թ��� Board of Directors. Here’s what you need to know.

The timeline: Proposed changes have been distributed from the 51�Թ��� policy teams to the respective policy committees, and members have until Oct. 31 to provide their feedback.

• Shortly after Oct. 31, 51�Թ��� policy committees will convene to consider the proposed changes and any subsequent suggested edits. If needed, working groups will be organized to consider new or revised language on specific issues.

The result: The 51�Թ��� policy committees will recommend new policy language to the 51�Թ��� Board based on their engagement with member companies.

• At the February 2024 board meeting, the 51�Թ��� Board will finalize and approve the policy positions that will guide the 51�Թ��� for the next four years.

How to participate: Member companies can choose which policy committees they serve on, so as the policy update process commences, companies should contact their membership directors to ensure they are aware of the various policies and committees that may be most important to their own businesses.

The last word: “Our member companies are at the center of this policy update process,” said 51�Թ��� Managing Vice President of Policy Chris Netram. “The 51�Թ��� fights every day for a policy agenda that supports manufacturing growth, and this is a critical opportunity for manufacturers across the country to have their say on the issues that matter to them.”

The economic impact of allowing a stricter interest deductibility limitation to remain in effect could be devastating, according to a prepared on behalf of the 51�Թ���.

What’s going on: Failure to reverse the stricter limitation that went into effect in 2022 could result in the following losses in the U.S., according to the study:

• 867,000 jobs
• $58 billion in employee compensation
• $108 billion in gross domestic product

More costly every year: Those figures have roughly doubled since the released last year.

• Last year, EY estimated that leaving the stricter limitation in place would result in 467,000 lost jobs, $23.4 billion in lost employee pay and $43.8 billion in lost GDP.

The background: Prior to 2022, companies could deduct interest of up to 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).

• However, since 2022, the deduction has been limited to 30% of earnings before interest and tax (EBIT), a significant change that disproportionately affects manufacturers, given their capital-intensive investments.

What can be done: “A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs,” said 51�Թ��� Managing Vice President of Policy Chris Netram.

• “Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy. Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”

51�Թ��� in the news: newsletter (subscription) covered the study’s release.

Further reading: Visit the 51�Թ���’s to learn more about this issue and how the 51�Թ��� is taking action.

The world must add or replace nearly 50 million miles of transmission lines in the next 17 years to allow countries to meet climate goals and achieve energy security, according to a new report by the International Energy Agency covered by .

What’s going on: The amount of transmission line needed—49.7 million miles—“is roughly equivalent to the total number of miles of electric grid that currently exists in the world, according to the IEA.”

• The undertaking “will require the annual investment in electric grids of more than $600 billion per year by 2030,” double current global investment levels in transmission lines.
• Countries must also make changes to the way they operate and regulate their grids.

Why it’s important: Investment in global transmission lines has not kept pace with the growing appetite for renewables, and without replacements and additions to transmission lines, power bottlenecks will become “ever larger.”

Growing gridlock—and demand: “There are currently 1,500 gigawatts of renewable clean energy projects in what the IEA calls ‘advanced stages of development’ that are waiting to get connected to the electric grid around the world.”

• Meanwhile, demand for electricity will only rise as more of the globe moves to electric power.
• But building new transmission lines takes time, owing to lengthy permitting processes—which is why the 51�Թ��� has speeding the process in the U.S.

Our view: “The 51�Թ��� has building additional transmission lines as a top priority for the next round of permit reform negotiations,” said 51�Թ��� Vice President of Domestic Policy Brandon Farris.

• “We will continue to fight to break down barriers to building new projects, including manufacturing facilities, energy generation, transmission lines, bridges, roads and more.”