Top Federal Issues

There are a wide range of public policy issues, including legislation on Capitol Hill and a variety of regulations, which have a very significant impact on MWV’s domestic and international operations, as well as U.S. manufacturing, in general. Government Affairs lobbyists are involved in these concerns on a regular basis, but we depend on the interest and involvement of our employees to help identify issues that are important to the company and to register our concerns with policymakers at all levels of government. MWV and other U.S.-based manufacturers face these challenges within a highly charged political environment. In the area of trade policy, as one example, public concerns have grown over globalization, off-shoring, foreign ownership in the U.S., market access in new and emerging markets and market - import challenges. For U.S. manufacturers, the heart of the problem is that structural, government - induced costs are rising steadily while growth and exports remain largely stalled. U.S. manufacturers lead the world in innovation and efficiency and represent the heart of our vibrant economy. Manufacturing generates two-thirds of industrial R&D and three - fourths of all exports, while supporting more than 20 million jobs. Our government’s poor record in recent years to help bring these costs under control is serving to impede economic growth and job creation. In recent years, while total manufacturing output, efficiency and productivity ran at record levels, problems associated with non-production costs continued to grow. Policymakers in Washington, D.C. have been slow to respond to these challenges on several policy fronts, including corporate taxation, health care, litigation, regulation and energy costs.

Economic Growth, Taxation and Spending
MWV supports changes to U.S. tax laws to restore pro-growth incentives, especially for U.S. manufacturing. Numerous provisions in the U.S. tax code serve, in aggregate, to place an enormous burden on U.S. manufacturers, with an effective tax rate that stifles investment. The effective tax rate in the U.S. on corporate forestry and paper manufacturers, which includes the overall corporate rate, capital gains, estate tax policy, etc., places our sector at a disadvantage in comparison to other competing countries, and discourages investment as opposed to fostering industrial economic growth. In recent years, the tax laws have been modified to reduce the international competitive disadvantage faced by the U.S. paper and forest products industry, but the effective tax rate is still relatively high. The U.S. tax code should be as simple and fair as possible, and should also encourage savings and investment. Fair and sound tax policies are fundamental to economic growth going forward. In reviewing legislative proposals before Congress, MWV advocates proposals that will improve tax competitiveness.

  • MWV urges our elected officials to stay focused on helping the economy to re-gain its footing, with the objective of supporting policies to encourage economic growth.
  • Over the past several years, Capitol Hill legislation and new federal regulations have been hurting/not helping in the form of: more expensive mandates (health care law), wasteful “stimulus” measures, future cost obligations, etc. The costs keep mounting up and the problems don’t go away.
  • Congress is now grappling with major budget deficit decisions, affecting discretionary spending for government programs, entitlement spending, as well as tax rates. Federal spending is out of control and worsens dramatically in the years ahead, with major implications for the U.S. economy, affecting all Americans personally as well as U.S. businesses.
  • Corporate tax rates are too high, hurting the competitiveness of American manufacturing. Tax reform proposals before Congress may offer opportunities to simplify the tax code while offering lower rates for businesses. Tax policies must encourage continued economic growth.

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Environment – EPA Regulatory Agenda
The U.S. paper and forest products sector has a long and consistent record of commitment to environmental stewardship. This industry, which is one of the most capital-intensive sectors in the U.S., allocates approximately 15 percent of total capital investment toward environmental protection, compliance and enforcement. Companies also incur considerable additional costs associated with compliance and enforcement, including reporting requirements. The American Forest & Paper Association analyzes these costs in the context of industry global competitiveness: capital expenditures for environmental protection in the U.S., and in North America and Western Europe more generally, are much higher than in the developing countries examined, including Brazil and China. MWV is engaged in a wide range of legislative and regulatory issues in the environment and natural resources areas.

  • The EPA is considering a conflicting series of Clean Air Act - job killing regulations that, combined, could be devastating for U.S. manufacturers, including MWV’s mills and other facilities. Air regulations in the years ahead include: Boiler MACT, Greenhouse Gases, Ozone NAAQS, Particulate matter, Regional Haze, and Nitrogen Oxide/Sulfur Dioxide emissions, among others.
  • EPA Air regulations, in their worst form as proposed (least effective and most expensive) could add billions in additional capital costs for manufacturing plants. Meeting important the environmental objectives established in these initiatives is fundamentally important and not in question. Policymakers need to make sure such regulations are effective and balanced.
  • The Boiler MACT Regulation is now being finalized by the EPA, and will require stricter limits of certain Hazardous air pollutants, with major consequences for industrial, commercial and other boilers. The EPA in December 2010 admitted its Boiler MACT proposal had major flaws. The Capital cost for all manufacturing could reach $14 billion, with billions more in annual operating costs.
  • The Boiler MACT rule has major consequences for MWV’s paper mills, with the prospect of major additional technology controls. The EPA is calling for limits on specific pollutants that in “real world” examples, for specific boilers now operating or others to be built in the future, may not be achievable.
  • MWV is engaged with a coalition of manufacturing trade groups to push for more reasonable and achievable requirements. Major changes are needed: MWV is pressing Congress in 2011 to pass legislation to require the EPA to re-do the regulation.

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Energy and Climate Change
The United States is experiencing rising energy prices as demand has increased and where domestic production has failed to keep up. Congress and the federal government have failed to resolve a comprehensive national energy strategy that also sufficiently expands domestic energy supply sources. Energy represents a major cost component for the U.S. paper and forest products sector, now constituting 18 percent of the total operating costs for pulp and paper mills. Since the early 1970s the paper and forest products sector has made dramatic progress in terms of fuel efficiency, with the industry lowering its total energy use by 30 percent and the consumption of fossil fuels and purchased energy by over 50 percent. Nonetheless, paper and forest product companies that have been forced to shut down or pare back production of their manufacturing operations in recent years have often cited energy costs as a major factor.

  • Congress needs to adopt balanced energy policies that expand domestic supplies of all fossil fuels, provide reasonable incentives to promote nuclear and other renewable sources and promote improvements in energy efficiency. Market forces must be allowed to work while pursuing policies to achieve a balanced and sustainable long term energy mix.
  • MWV opposes excessive, rigid market - distorting energy mandates. We seek balanced definitions governing the use of biomass as an important renewable and carbon-neutral energy source, but which also assures its continued traditional sustainable use and availability as a feedstock and fiber source
  • The Administration continues to press ahead to regulate industrial greenhouse gas emissions, claiming authority under the Clean Air Act. MWV believes that addressing climate change through ill-suited and outdated regulatory authority is inappropriate and unworkable. Climate change policy issues are more properly addressed by Congress with respect to any consideration of future legislation in this area, i.e. elected officials and not regulators must take the lead.
  • Congress advanced disastrous “Cap and Tax” climate change legislation in 2009, with the full backing of the Administration. The so-called “Waxman - Markey” bill passed in the House of Representatives by a 5-vote margin. The measure died, however, in the Senate. MWV strongly opposed this legislation. Cap and Tax proposals to date have been designed to impose massive tax costs on fossil fuels - with U.S. manufacturers, in particular, facing the immediate prospect of potentially crippling and unfair penalties. Such policy prescriptions could put U.S.-based energy efficient paper mills and other manufacturing operations at a major disadvantage from a global perspective.
  • Climate change objectives to reduce greenhouse gases also must be accompanied by balanced policies on energy use and production, sensible technology goals and responsible approaches that recognize worldwide competitiveness challenges for U.S. manufacturing

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International Trade – Global Competitiveness
MWV strongly supports the extension of fair trade globally. The U.S. is the world’s most open major market, and our open trade policies in recent years have been a major factor in sustaining economic growth at high levels. We face competition in our own markets with subsidized imports and must attempt to compete in countries where exchange rates are not market - based and where governments do not apply comparable regulatory enforcement regimes. Our company is involved with the advocacy efforts of the business community to support enhanced market access abroad, including the reduction of tariffs and elimination of non-tariff barriers imposed by other nations.

  • Congress needs to return to advancing legislation that expands global trade by opening markets and seeking reciprocal access, especially in developing economies. Bilateral Free Trade Agreements now before Congress (Korea, Panama and Columbia) need to come before Congress for a vote, the sooner the better.
  • Export trade is fundamental to MWV’s growing global business platforms, including shipments from our mills through U.S. ports and shipped throughout the world.
  • MWV supports the application of reasonable U.S. trade remedy laws that are designed to respond to unfair foreign trade practices, applying both to products imported into the U.S. as well as U.S. exports. MWV opposes overly - protectionist policy measures that will serves to distort and impede expanding, reciprocal trade between nations.

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Health Care and Workforce Issues
Health care costs in the U.S. continue to climb, with spending now exceeding the overall growth of the U.S. economy. From a policy perspective, health care cost containment is perhaps the great challenge U.S. manufacturers now face. The U.S., however, is unique - with a strong, private market health care system. MWV works hard to manage health care costs to keep costs below the national market average for our employees. Our employees and the company share these costs: MWV now pays about 80 percent of total employee - health care costs under the company’s standard health care plan, with employees paying the other 20 percent. A majority of MWV’s health care is self-insured: the company picks up the difference, for employee - doctor visits, between what employees pay and the total cost of service.

  • In 2010, Congress passed the Administration’s major/comprehensive health care (PPACA -H.R. 3590) legislation. MWV opposed passage of this legislation, and remains concerned about the law’s significant new mandates, to be phased in over the next several years on employers and individuals. This year, MWV has supported efforts in Congress to advance bills seeking to repeal major elements of the PPACA law. Bills backed by Republican leaders have passed in the House in the early months of 2011. Senate Democrat leaders do not support most of these measures, however.
  • A key goal somehow got lost in the legislative process last year: one of the main the underlying original objectives behind health care reform was to “bend the cost curve” in recognition of the universally held view that the current health care system in the U.S. is on a fiscally unsustainable path going forward. The other common goal was to assure the continued affordability and delivery of health care in future decades for the American public. The PPACA law, MWV believes, failed to tackle the fundamentals while at the same time adding even more new programs and mandates.

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