It takes up to 500 very special chemicals to make a semiconductor chip. Some of these will soon be subject to flawed new environmental rules that will raise costs and effectively ban the production of these chemicals for US producers. This will shut down local production and give our overseas competitors an advantage in the world market.
For himself and the country, President Joe Biden would be wise to change course. This regressive regulatory approach works against its environmental and economic goals by pushing manufacturers to outsource production to other countries with lax environmental standards and increasing prices for everyday products that we need to improve.
Almost all household and commercial goods—everything from computer chips and drugs to the materials that build your home to the energy that fuels your life—start with chemical production. The innovation in this sector in the last century has fueled the creation of new industries, helping our country become a dominant force in the world. But we are now approaching a dangerous tipping point where sweeping new restrictions threaten to overwhelm what is already one of the best-regulated industries.
After decades of success and reducing chemical-related incidents by 80%, the Environmental Protection Agency (EPA) recently introduced new regulations for chemical plants, saddling companies with unenforceable mandates that affect our nation's ability to deliver safe food, clean water, and reliable energy. The rule reinstates and expands restrictions introduced by the Obama Administration a decade ago, which were rolled back by the Trump Administration due to significant economic and national security risks. The scope and cost of these orders to chemical companies is enormous. They more than triple from the EPA's initial proposal by 2022 and will create serious compliance challenges for many facilities.
Restricting America's ability to produce these chemicals at home will not eliminate the need for them. It just pushes companies to come from countries that don't share our commitment to environmental and health standards, and it forces American companies to go offshore. This is a huge drag on innovation, redirecting capital that could be spent on research and development towards setting up new supply chains overseas and importing finished goods. thing.
Warning signs for this chilling effect of innovation can be seen in a new one survey in chemical companies. Two-thirds say that the current regulatory environment threatens their efforts to achieve clean energy goals, for example by restricting the production of lithium-ion batteries for electric cars and grids. About half are discouraged from investing in medical equipment needed to diagnose and treat disease, as well as making hospitals sterile and safe. And most companies are lamenting the domestic impact semiconductor manufacturing– a compulsion national security concerns.
China is already the world's leading manufacturer and exporter of chemicals, and many of the rules proposed by federal agencies seem designed to keep it that way. They threatened over a million jobs and $110 million on the wages of hard-working Americans.
Before implementing additional rules, President Biden should consider creating an Interagency Policy Committee chaired by the director of the White House National Economic Council to coordinate an economic impact analysis. He should require all cabinet departments to evaluate the impact of these regulatory proposals on American jobs, domestic manufacturing, and especially the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act.
The committee should also consult with industry leaders who bear these regulatory burdens. There is precedent for such a move from presidents of both parties. The Obama Administration is working with industry groups to implement some of his climate goals. And early in his term, former president Trump established a Strategic and policy forum which includes some of the most prominent business leaders, including Blackstone's Stephen Schwarzman, Disney's Bob Iger, and JP Morgan's Jamie Dimon.
President Biden can do it too. A rigorous, balanced analysis of the costs and benefits of sweeping new environmental rules will help him avoid raising the cost of living for our already struggling families and sending high wages American jobs abroad. With one of the most consequential elections in a generation looming, he can't afford any unforced errors.
Chris Jahn is the president and CEO of the American Chemistry Council.
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