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The 51�Թ���’s Competing to Win Tour in Europe moved on to London early this week, highlighting the imperative to shore up the U.S.–U.K. relationship—and to urgently address other barriers, like permitting reform and workforce shortages, to enable the U.S. to help allies in the face of Russian aggression and other geopolitical threats.

The issue: Russia’s unprovoked war in Ukraine, the aftermath of the worldwide pandemic and China’s quest for global leadership create a new urgency for expanded trade opportunities between democratic countries.

• The U.S. and the U.K. must work together to shore up supply chains, enhance energy security, boost resiliency and create growth, as 51�Թ��� President and CEO Jay Timmons emphasized.

The details: Timmons crisscrossed London on Monday and Tuesday, promoting the manufacturing industry and reinforcing its priorities with senior government ministers and officials, including:

• Nigel Huddleston MP, the U.K. minister of state for international trade
• Jonathan Reynolds, Labour Party shadow business secretary (one of the architects of the Labour Party’s industrial plan)
• Jane Hartley, U.S. Ambassador to the Court of St. James’s

Support at home: During his visit, Timmons did an with CNN International to discuss the 51�Թ���’s new Outlook survey, which found that 77% of manufacturers want to see more trade agreements with Europe.

Making industry connections: At the 51�Թ���’s sister organization Make UK, Timmons joined a roundtable with CEO Stephen Phipson and addressed some of Britain’s leading manufacturing companies.

• He spoke about how the U.S. and the U.K. can unlock new trading opportunities going forward and bolster democracy by strengthening commerce.
• The two groups also reaffirmed their commitment to share market intelligence, data and policy work, as well as to facilitate visits for economic delegations promoting trade, investment and commercial opportunities.
• They also voiced their continued and mutual support of the Ukrainian people and of the democratic institutions in their own countries.

What they said: “The ties between the UK and United States go back a long way and we have significant political, economic and trade connections,” said Phipson. “Relations with the US are vital and its market is the second most important for UK goods. In a post-Brexit world, it is likely to assume ever greater importance as part of our efforts to boost global trade.”

• “As world events have made abundantly clear, strengthening democracy, the free enterprise system and strategic alliances in our countries and around the world is essential to our future and the fight against tyranny,” said Timmons. “As the U.S. and the U.K. take steps to build a stronger, more open and secure economic relationship, the 51�Թ��� urges our leaders to move toward a new U.S.–U.K. market-opening trade agreement that includes strong, clear and enforceable outcomes.”

Meeting manufacturers: In addition, Timmons met with manufacturers that have operations or pending operations in both the U.K. and the U.S. Energy security and regulatory certainty, as well as the worker shortage in the industry, also took center stage in these discussions.

Bottom line: “The tour’s time in London matters to manufacturers in the United States because it strengthens the ‘special relationship’ between the U.S. and the U.K. and boosts the prospects for enhanced cross-Atlantic trade, supporting manufacturing jobs in both countries,” said Ken Monahan, 51�Թ��� Vice President of International

The 51�Թ���’s Competing to Win Tour in Europe continued with stops at Merck KGaA in Darmstadt and VDMA, the association of Germany’s engineering industry, in Frankfurt. The visit to Merck KGaA provided a firsthand look at the leadership, culture and operations that are producing about 300,000 products ���Ի���that played an instrumental role in saving the world from the pandemic.

Living its values: Merck KGaA and its science and technology entities have 60,000 employees around the globe, with approximately 26,000 employees in 66 countries outside of Germany, including the U.S. Its products appear not only in healthcare settings, but in grocery stores where they ensure food and beverages are safe and in transportation where they monitor the air we breathe.

• Matthias Heinzel, CEO of the Merck KGaA Life Science business, and Thaddeus Burns, head of government and public affairs, welcomed the tour and provided insights into the company’s operations.
• The tour of the Merck Innovation Center showcased the company’s state-of-the-art design and technology, while the visit to the growing Membrane operations gave the tour group an opportunity to explore the latest developments.
• A brief stop in the company’s museum provided a historical perspective on the origins of the company, which was founded by the Merck family and began with a small pharmacy named Angel that is still in business today.

VDMA: The tour group also visited VDMA, the association of Germany’s engineering industry, which represents more than 3,300 companies in the sector and focuses on the advancement of trade opportunities.

The last word: The visit to Merck KGaA in Darmstadt underscored the importance of interconnectedness between the U.S. and Europe. It highlighted the vital role alliances play in strengthening enterprises that are essential to our democratic way of life and its protection worldwide.

• “Merck KGaA is a company that lives its values and is a strong champion of free enterprise, competitiveness, individual liberty and equal opportunity, putting its aspirations into action,” said 51�Թ��� President and CEO Jay Timmons.

A bipartisan Senate duo introduced legislation on Thursday that would both allow businesses to once again fully deduct R&D expenses in the year they are made and expand the refundable R&D tax credit.

What’s going on: The American Innovation and Jobs Act, sponsored by Sens. Maggie Hassan (D-NH) and Todd Young (R-IN), would restore the immediate deductibility of R&D expenses. Last year, a tax change went into effect requiring companies to amortize or deduct their R&D investments over a period of years, making R&D more costly.

Why it’s important: According to a recent 51�Թ��� analysis, the sector would lose nearly 60,000 jobs and face an output decline of more than $31 billion this year alone if the change is not reversed.

• The U.S. has now become a global outlier, joining Belgium as the only other developed country requiring the amortization of R&D expenses.
• Meanwhile, China provides a 200% “super deduction”—20 times the amount allowed in the U.S. tax code—for its manufacturers’ research.

The 51�Թ��� says: “Manufacturers applaud the introduction of the American Innovation and Jobs Act, which will help the U.S. out-compete China,” said 51�Թ��� Managing Vice President of Tax and Domestic Economic Policy Chris Netram.

• “Across the country, manufacturers are hiring workers, investing in communities and creating the products, materials and processes that drive us forward. Congress should approve the American Innovation and Jobs Act quickly to support critical research that allows manufacturers to improve lives in America and for people around the world.”

Learn more: Read our stories on how the 2022 expensing requirement is impacting , , , ���Ի��� (whose story was also covered today by , subscription).

The Environmental Protection Agency has proposed the first federal limits on two chemical compounds that were used widely in everyday products for decades, (subscription) reports.

What’s going on: “The agency is proposing maximum allowable levels in the nation’s public drinking-water systems for two compounds in a class of chemicals known as perfluoroalkyl and polyfluoroalkyl substances, or PFAS, which were used for decades in carpeting, clothing, food packaging, firefighting foam and other consumer and industrial products. The EPA also said it would regulate four other PFAS chemicals by requiring treatment if the combined level reaches a certain concentration.”

• The suggested limits under the Safe Drinking Water Act are part of a larger move by the EPA to tighten rules around “forever chemicals”—so known because they take years to break down—owing to “a growing number of studies [that] have shown links to a variety of cancers, thyroid disease, high cholesterol and other issues.”
• The two individual chemicals under discussion are known as PFOA and PFOS, which various industries began using in the 1940s for their ability to resist grease, corrosion, water and stains, as well as to douse fires.

Why it’s important: While the EPA says the change would prevent numerous deaths and illnesses, not everyone is assured of the soundness of the science behind it—and others say it would cost companies unnecessarily.

• Critics of the new proposed standard say the chemicals are still necessary components of numerous products, from cell phones to medical devices, and there are no viable alternatives. Moreover, when used correctly, PFAS compounds do not pose a significant health risk to humans or the environment, they say.
• One source told the Journal the new limits “would cost water systems $40 billion” in compliance-related spending.

 Our take: “Everyone deserves access to clean drinking water, and manufacturers continue to do their part to ensure we achieve the highest levels of environmental stewardship,” said 51�Թ��� Director of Energy and Resources Policy Chris Morris.

• “Manufacturers in America are committed to the communities in which they live and serve and are dedicated to protecting the health, safety and vibrancy of those communities. The EPA’s proposal leaves many questions unanswered on the feasibility of meeting these new standards and the economic impacts this will have on communities, especially rural communities and consumers. The 51�Թ��� looks forward to continuing to work with the EPA to ensure everyone has access to clean drinking water.”

Manufacturers across the United States have long been leading the way on sustainability. From outpacing international competitors on emission reductions to making investments in clean technologies, the industry has implemented best practices for others to use and blazed a trail for them to follow.

51�Թ��� Director of Energy and Resources Policy Chris Morris emphasized manufacturers’ track record during a hearing before the Environmental Protection Agency last week, where he explained to policymakers that their proposed air quality rules would stifle rather than enhance manufacturers’ efforts. Here’s what he had to say.

A record of leadership: “Our industry has championed environmental stewardship at every turn, and our members have invested heavily in new processes and technologies that have made manufacturing in the U.S. cleaner and more sustainable than ever,” said Morris.

• “This innovation in the manufacturing sector has played a key role in the reduction of air pollution we have seen over the last 50 years.”

Manufacturers’ impact: “Across the board, levels of major pollutants have declined dramatically, and we are outpacing our global competitors in air quality improvements,” said Morris.

• “According to the EPA, the U.S. has reduced six common NAAQS pollutants, including PM2.5, by 78% between 1970 and 2020.”
• “Additionally, EPA data shows that PM2.5 air quality has improved 44% since 2000. Manufacturers are committed to ensuring that progress continues.”

The challenge: New proposed regulations from the EPA would have a number of negative effects, Morris noted.

• Tighter air quality standards would make permitting more difficult, raise compliance costs and make it harder for manufacturers in the United States to compete with companies abroad—especially at a time when manufacturers are concerned about the country’s economic outlook.

The path forward: Morris urged policymakers to ensure that current regulations are fully implemented before they propose new ones, and to work together with innovative manufacturers on smart solutions.

• “The U.S. has some of the best environmental standards in the world, and American manufacturers are consistently reducing emissions, conserving critical resources, protecting biodiversity, limiting waste and providing safe products and solutions so others in our country can do the same,” said Morris.
• “But in order to maintain our environmental leadership, we need better regulations.”

The last word: “In our view, environmental protection and a thriving economy are not mutually exclusive,” said Morris. “We can have both—but it requires working together toward a constructive solution. Manufacturers are committed to smart, strong environmental safeguards and improving the lives of all Americans so that no one—and no community—is left behind.”

Presented by Jay Timmons, President and CEO of the 51�Թ���, the 2023 State of Manufacturing Address was given from Husco International in Waukesha, Wisconsin. Special remarks were given by Kurt Bauer, President and CEO, Wisconsin Manufacturers & Commerce. Special thanks to Husco President and CEO Austin Ramirez and his team for hosting this year’s address.

Read the official remarks here.

We’re hitting the road. This year’s 51�Թ��� State of Manufacturing Address officially kicked off the 2023 leg of the 51�Թ���’s Competing to Win Tour. The tour will continue to spotlight the industry’s rapid transformation, while also focusing on manufacturing’s well-paying careers, diverse workforce and real-world solutions for the industry’s continued growth.

Upcoming stops: Waukesha and Pewaukee, Wisconsin (Tue, Feb 21); Fishers, Indiana (Wed, Feb 22); Harahan and Avery Island, Louisiana (Thurs, Feb 23)

VISIT THE COMPETING TO WIN AGENDA

Marlin Steel Wire Products spent its first 30 years making bagel baskets. When Drew Greenblatt bought the custom wire and metal fabrication company in 1998, he thought it would be making bagel baskets for the next 30 years as well—but soon, international competition changed the math.

“Suddenly, China started manufacturing bagel baskets and shipping them to New York City for cheaper than I could get the steel,” said Greenblatt, Marlin’s president and owner. “But then, we got a phone call from an engineer at Boeing who needed an innovative, customizable basket. And that was the eureka moment.”

The shift: Greenblatt recognized that innovation would help him outcompete foreign companies that could manufacture products more cheaply.

• “We realized we couldn’t thrive in a commodities market,” said Greenblatt. “We had to come up with novel ways to make a basket so that it would make no financial sense to buy from China or Mexico.”
• “We wanted to be able to say to buyers, you must buy from the American innovative company, because we’re coming up with such slick ideas that our product blows the competition away.”

The growth: Today, Marlin Steel is nearly 30 times larger than it was when Greenblatt bought it and heavily invested in research and development.

• “Today, Marlin is 15% degreed mechanical engineers,” said Greenblatt. “We have chemical engineers. We’re coming up with the most innovative racks and systems out there.”
• “People are showing us their operations and asking us to reverse-engineer solutions that will work for them. And we’re doing it.”

However . . . A recent tax change threatens to throttle the company’s progress. Until about a year ago, businesses could deduct 100% of their R&D costs in the same year they incurred those expenses.

• But since last year, a tax policy change now requires businesses to spread their R&D deductions out over a period of five years, making it much more expensive to invest in innovation.

The impact: “Our taxes will be $600,000 higher than they should have been this year—we’ll pay four and a half times more on taxes,” said Greenblatt.

• “What that means is that it makes sense for us not to hire six more engineers. Not to buy three more press brakes [machines for bending metal parts] or hire people to work them. It’s incredibly shortsighted, a horrible policy screwup, and the ripple effects are massive.”

The scope: Greenblatt also emphasizes that the tax change will harm many small businesses.

• “People tend to focus on the bigger companies and how it will hurt them—and it will hurt them—but it will also hurt the little guy,” said Greenblatt. “And the little guy is the job creator in America.”

The last word: “American innovation—that’s our secret sauce,” said Greenblatt. “That’s how we’re going to grow jobs and pay people well and give good benefits and steady employment without layoffs. That’s how we’re going to beat a recession. We need to have the coolest, most innovative products in the world. For us, innovation is key.”

The Environmental Protection Agency’s recently issued rule governing regulation of “navigable waters” is unnecessary, confusing and inconsistent—and the 51�Թ��� stands ready to work with Congress to overturn it.

The background: In December, the EPA and the U.S. Army Corps of Engineers announced the new regulation, which repealed the Navigable Waters Protection Rule and altered the definition of “Waters of the United States.”

• This month, House Transportation and Infrastructure Committee Chairman Sam Graves (R-MO) introduced a of disapproval of the rule under the Congressional Review Act. An identical measure was introduced in the Senate.
• The 51�Թ��� this week hailed the congressional moves. “Manufacturers welcome action from Congress to challenge the EPA’s proposed WOTUS Rule,” 51�Թ��� President and CEO Jay Timmons.

What’s going on now: Ahead of a Transportation and Infrastructure Committee hearing Wednesday, 51�Թ��� Senior Director of Energy and Resources Policy Nile Elam urged the “educat[ion of] the public and policy stakeholders regarding the immense permitting regulatory efforts necessary under local and state jurisdictions, and the need for a complementary WOTUS rule that advances permitting protections at the federal level while providing certainty for the regulated community.”

• Though many Supreme Court decisions have “touched on” the definition of navigable waters, neither the court nor the EPA has clarified sufficiently, Elam told Water Resources and Environment Subcommittee Chairman David Rouzer (R-NC) and Ranking Member Grace Napolitano (D-CA).
• The new rule also “expands federal jurisdiction beyond traditional navigable waters,” Elam said. “Because of these expansions and ambiguous terms, the careful balance between local and state regulators is unpredictable and can leave permit seekers with little guidance, aside from the need for more time and money to achieve their permitting requests.”

What should come next: Congress must work with stakeholders, the EPA and the Corps on creating clear, predictable and common-sense WOTUS regulations, Elam told the committee. Doing so will “enhanc[e] manufacturers’ ability to deliver their goods, expand their operations and grow their workforce.”

Manufacturers have long led the way in efforts to reduce air pollution and improve air quality. Yet, new proposed regulations from the federal government will work against these efforts instead of bolstering them, stymying critical progress and destabilizing economic growth at a time when both are more important than ever.

The challenge: The Environmental Protection Agency is considering a new rule that would impose stricter air standards on particulate matter known as PM2.5 (i.e., particles that measure two and a half micrometers or less in diameter). This rule would enact significant top-down restrictions, forcing manufacturers to change their operations abruptly and without any support.

The reality: For years, manufacturers across all sectors have been developing smart, innovative ways to use energy, water and other resources more sustainably—all while boosting economic growth and creating good jobs at the same time.

• Today, manufacturing in the U.S. is cleaner and greener than at any other time in history, largely due to a revolution in how manufacturers produce, use and recycle energy and resources.
• Across the board, levels of major pollutants have declined dramatically over the past few decades. Thanks to existing regulations and a culture of innovation, the U.S. is far outpacing global competitors in environmental stewardship.

By the numbers: According to the EPA, the U.S. reduced six common pollutants covered by National Ambient Air Quality Standards, including PM2.5, by 78% between 1970 and 2020. In fact, PM2.5 levels alone have dropped a full 44% since 2000.

The impact: These new regulations could be devastating for manufacturers and for the climate. Here are just a few of the negative repercussions:

• An additional regulatory burden on businesses will drain resources from innovative manufacturers, posing additional hurdles to the investment in research and development that fuels progress in energy efficiency and climate action.
• Making permitting harder could also jeopardize new clean energy projects that America needs to address climate change.
• The standards will hinder onshoring, resulting in continued manufacturing abroad—which is less clean than manufacturing in the U.S. The EPA’s proposal undercuts U.S. competitiveness and will not further the goal of global emissions reduction.
• New regulations could damage an already-slowing economy, increasing costs and constraining job growth at a time when Americans are grappling with record inflation.

Our view: Rather than imposing new and unnecessary obligations on manufacturers, the federal government should focus on enforcing the strong regulations that are already in place and give manufacturers the space to find better solutions.

• “The EPA’s announcement . . . [about reconsidering] the PM 2.5 standard will only further weaken an already slowing economy,” said 51�Թ��� President and CEO Jay Timmons. “Let manufacturers do what they do best: innovate and deploy modern technologies to protect the environment, while creating jobs and strengthening the economy.”

51�Թ��� in action: The 51�Թ��� is rallying manufacturers to speak out against the EPA’s proposal and calling on Congress to oppose these harmful regulations.

• Manufacturers can show their support by sending an email to decision makers in Washington, explaining the real impact of this damaging proposal and urging them to stand up against unnecessary regulations.

Join in: There is an  to discuss the proposal on Feb. 21. To participate, be sure to sign up soon—the registration deadline is Feb. 16.

About people in the United States have a rare disease, according to the National Institutes of Health, which equates to about one in every 10 individuals. Approximately 95% of these rare diseases have no treatment at all—and Ultragenyx, a biopharmaceutical company focused on new and effective therapies for patients with rare and ultra-rare diseases, is working to change that.

• “In the aggregate, rare is not that rare,” said Ultragenyx Executive Director of Public Policy and Public Affairs Lisa Kahlman. “Half of those 30 million people are children. It’s a huge unmet medical need.”

Founded in 2010, Ultragenyx has four commercial products, with about 20 more in pre-clinical and clinical development. But a new change in tax policy poses a very real threat to Ultragenyx’s ability to develop as many treatments for rare diseases as possible.

The issue: Until a year ago, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. Starting in 2022, however, a tax policy change requires businesses to spread their R&D deductions out over a period of five years, making it more expensive to invest in growth and innovation. For research-heavy companies like Ultragenyx, that change could divert funds intended for the development of therapies toward tax obligations.

• “Ultragenyx is different,” said Kahlman. “There are a lot of companies that do some work in rare diseases, but usually that’s only a fraction of what they do. We’re exclusively built to focus on rare and ultra-rare diseases, and that requires research.”

The impact: As a small, largely precommercial start-up company that focuses on research, Ultragenyx spends about 70% of its total operating expenses on R&D. In 2021, Ultragenyx spent approximately $497 million on R&D—nearly $150 million more than it earned in revenue.

• If the tax change stands, the company’s financial statement losses, which approximate decreases in the company’s cash reserves, will be adjusted for tax purposes to reflect significant taxable income, resulting in very large tax liabilities over a short period of years.
• This will occur during late stages of the company’s development programs just when costs escalate quickly. Altogether, money will be diverted to taxes and away from critical development programs at precisely the wrong time.

The human cost: If Ultragenyx and other research-heavy biotech companies that are focused on developing treatments for rare diseases must divert funds away from development and toward covering tax obligations, patients living with rare diseases will have even more limited options.

The bottom line: “The therapies we’re developing are really transformational, but in some cases, there might be only about 200 patients in the developed world with one of these diseases—so if we don’t have the money for R&D, there won’t be any incentive for anyone else to develop treatments,” said Kahlman. “For these patients, there is no alternative.”

Our move: At the 51�Թ���, we’re pushing Congress to reverse this change and allow manufacturers to invest in jobs, communities and innovation. Learn more and take action at www.nam.org/protect-innovation.