Feature

Regulations, Unfair Competition: A Double-Edged Sword


Bert J. Sherwood, M.S. in Ch.E., Management Consultant

This column examines how regulatory agencies are hurting our country’s manufacturing prospects.

The national and federal regulatory agencies—under the guise of preventing damage to the environment—are promulgating and enforcing an overwhelming number of regulations that increase the cost of producing products. Tragically, a preponderance of these regulations is unnecessary and expensive, and reduces the ability of our producers to compete against countries that have minimal regulations.
In too many cases, the motivation and justification for the regulations is to keep the regulator’s employees at work. Let’s name the regulatory agencies, reports, and rules in California and United States:

  1. Air Quality (Southern California Air Management District)
  2. Publicly Owned Treatment Works.
  3. Fire Dept.
  4. Water Board – Regional Control
  5. Permit By Rule
  6. Storm Water Regional Control Board (SWRCB)
  7. Cal/OSHA –Employee Notification of Exposure and Medical Records. Emission Reports. Hazard Communications Training.
  8. Dept. of Toxic Substances and Control. Closure Plans. Biannual and Annual Reports.
  9. EPA – California Regional – Form R
  10. California Dept. of Transportation-Reg. Form
  11. Underground Storage Tanks
  12. Dept. of Health

The list of agencies and sub-agencies could go on, but the aforementioned list more than proves the point: Too many regulations and too many agencies demanding reports. What’s more, much of it is unnecessary and redundant. Further, compliance is both time consuming and expensive. Finally, it reduces the ability of our country to compete in the worldwide manufacturing competition.

Trade associations. Instead of focusing on being more competitive in world manufacturing, too much time and money is being spent on compliance. Compare the U.S. effort in this area to the miniscule amount spent in China, India, and South Korea.

Lobbying government to reduce the number of environmental regulations governing industry has become a major part of trade association work and, consequently, cost. Comparatively very little time is spent on being competitive with foreign companies by improving technology and efficiency.

Using a sports analogy, we have built a strong defense (against regulations), but lack the offense (innovation) needed to compete on a worldwide scale. Once the world leader in advanced technology and operating efficiency, we are falling behind.

Government Agencies
Environmental-related agencies have created a life of their own and have now grown beyond their initially needed protection of the people through controlling the environment. They are now preventing the growth of the companies under their regulatory umbrellas.

The Politicians
Pity the politician who attempts to reduce the regulatory requirements for manufacturing. He, or she, would be immediately branded by their opponents as anti-clean environment—not an easy obstacle to overcome in the political arena.

Moratoriums
What should be done about moratoriums? All of the related agencies and their subordinate organizations should be brought back to political ground zero by being forced to:

1) evaluate the necessity of existing regulations from a functional standpoint. Any regulations and administrative requirements that are found to be unnecessary should be eliminated.

2) halt any further introduction of new regulations.

Owner/Managers
This group should get technical assistance to assist in challenging regulations that cannot be proven to damage personnel, the public and/or the environment. Laboratory and computer extrapolation should not be allowed to restrict appropriate manufacturing procedures.

CHINESE COMPETITION—Part I

When you are competing in horse races and find that a horse that usually lags way behind has a new trainer, enhanced food and help from other trainers, and consequently, is moving up in recent races, it’s time to keep track of its progress.

So, getting back from the analogy to the real world of plating and manufacturing…China has passed Japan as the world’s second-largest gross domestic producer after the U.S. (No. 1). Since they are now second, and gaining on us, we must, as a good consultant, monitor their actions and progress.

Let’s start by looking at the trade volume (in 2009) of China with their international partners¹:

Volume (billions of dollars)

1. U.S. $298.3
2. Japan $228.9
3. Hong Kong $174.9
4. South Korea $156.2
5. Taiwan $106.2
6. Germany $105.7

In essence, the U.S.-China trading volume is greater than the China-Japan volume.

Surprise #1–The Chinese are unfair. They have refused to let their currency float, keeping their prices low and more competitive. Consequently, U.S. manufactured products remain at significantly and artificially higher prices. On the other hand, China has forced other countries to devalue their currencies.

Surprise #2–The Chinese violate trade secrets and patents. The list is tragically endless.

Surprise #3–The continuing conflicts, resulting from incidents such as the Japanese capture and retention of a Chinese fishing boat captain, are heightening the tension between the two countries. The U.S. is attempting to mediate these conflicts and concurrently, building stronger ties with the Japanese military.

In my next column, I would provide a “do-it-yourself” guide for those companies that managed to survive The Great Recession.

REFERENCES

  1. Los Angeles Times, Pierson and Stack, pp A1 and A7, Friday, Sept. 24, 2010

BIO
Bert J. Sherwood, M.S. in Ch.E., is a consultant who has provided business and technical advice to surface finishing and manufacturing companies for 35 years. He can be reached via e-mail at:
sherwoodbj@aol.com.
 

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Environmental & Regulatory Compliance  •  Industry Trends & Happenings

 

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