In this episode of the Food For Thought podcast, Andy Hanacek, senior editor of Food Processing, joins the editors of several brands in the Endeavor Business Media family, of which Food Processing is a member, to discuss what the outcome of the upcoming presidential election could mean for the various segments of the manufacturing industry they cover.
The video was hosted by Industry Week and published as a part of its “Production Pulse” series, and Hanacek represented Food Processing to shed some light on how the political landscape is affecting the food and beverage industry. Laura Putre, senior editor of Industry Week, moderated the panel and led the discussion. Thanks to our friends at Industry Week for allowing us to share this content directly with you, our listeners. I hope you enjoy the episode.
You can also visit Industry Week’s site to view the video of this panel discussion.
Transcript
Laura Putre: Hello and welcome to this week’s edition of Production Pulse. I’m your host, Laura Putre, senior editor of Industry Week. This week we’ll delve into the 2024 election’s impact on manufacturing with the presidential field. Editors from Industry Week, Machine Design, Pharma Manufacturing and Food Processing discuss the political landscape in which both parties are taking hard stances on foreign trade and regulations. First, we’re going to take a look at a short video from Jay Timmons, head of the National Association of Manufacturers, and then I’ll introduce our guests. Here is Timmons speaking at a recent NAM meeting about how Washington is failing manufacturing.
Jay Timmons: Washington, D.C. They’ve made a few good decisions, but leaders there have also made some major unforced errors. Leaders in both parties are on the verge, quite frankly, of making a lot more of those unforced errors. And that’s part of the reason why 66% of manufacturers right now have a positive outlook for their country, for their companies — only 66%. So that economic war that we’re winning. But we can see that tide turning. We could easily head in the wrong direction. We could head in the wrong direction if Congress lets taxes go up on small businesses when rates expire next year, or if they hit you with even more regulations — regulations that are even harsher than the ones that they have in Europe or in China — or if or if they fail to solve the immigration crisis because they put politics over good policy, or if they choose trade barriers rather than trade agreements, or if they abandon our allies overseas and put our national security at risk.
Putre: So stern words, there. We’ll talk a little bit about those comments today. I have with me here Bob Vavra, senior content director at Machine Design; Karen Langhauser, chief content director at Pharma Manufacturing; and Andy Hanacek, senior editor of plant operations at Food Processing. If any of the audience members have a question for our panelists during our live broadcast, feel free to post on LinkedIn comments and we’ll get to them as time permits. First, let’s talk about regulations. Karen, do you want to start and maybe talk a little bit about some new legislation that would make it harder for drug companies to import certain chemicals from China? I know there’s a couple of issues going on.
Karen Langhauser: Yeah, actually I’m going to back up a little bit. So both candidates have really taken their swing at Big Pharma. You know, it’s a popular target. Drug pricing, in particular, is in the political crosshairs. So the candidates are mostly looking at taking on drug pricing by reducing government spending on Medicare. The Inflation Reduction Act, the IRA, it’s really the centerpiece of Biden’s economic strategy, and it’s also one of the most aggressive drug pricing laws the pharma industry has seen in a long time. Even though the IRA is mostly focused on domestic energy production and clean energy, there’s a tenet of the law that looks to lower prescription drug costs by allowing Medicare to negotiate prices with drug companies by putting an inflationary cap on prices.
So the first 10 drugs up for negotiations were identified last year, and Medicare is aiming to select, I think, 60 more drugs over the next four years. So not surprisingly, the pharma industry is not happy. Several pharma companies, as well as the industry’s largest trade groups, have challenged the constitutionality of the law in court so far without success. So it appears as though it’s here to stay.
While Trump has repeatedly attacked the IRA’s climate and energy provisions — he’s not a fan of electric vehicles, as you might have heard — it’s not clear if he would push for legislative changes to the drug negotiations portion. During his presidency, he had put an executive order in place known as the Most Favored Nations proposal, where Medicare would be able to buy drugs at the lowest price that a drug manufacturer sells them in a country of comparable GDP, with the idea that Americans should be paying more for drugs than other developed nations.
He put that in place right at the end of his term, the pharma industry trade group sued to stop it, it got tied up in court, and it never survived the next administration. But Trump has promised that if he’s elected, he’s going to reinstate that order. So either way, no matter who’s in the White House, it’s like drug pricing is the first thing that’s going to be addressed.
Putre: Andy, let’s take it over to you. What regulations are you focusing on coming down the pipeline in the food industry?
Hanacek: Under Donald Trump, regulations were lax. It was more of a deregulatory world back then, and that’s become evident only because in the last few years, it seems like regulatory efforts have been stepped up.
Now, it’s an interesting point because the states are actually probably doing — depending on which side of the coin you’re on — a better or more annoying job of going after some of these regulations, not waiting for the federal government to make moves, if you will. A good example is the recent rush to ban things like certain food additives. The state of California has already banned things like Red Dye No. 3 and other additives, and other states have followed suit with proposed bans. Not all of them have gone through the legislative system yet, but there’s all these states jumping up and kind of running ahead of the federal government to regulate these things, if not ban them outright in food products.
One of the more interesting regulatory moves in the last year that we’ve been watching was the EPA has come out — and I guess, again, depending on which side of the coin you’re on — finally worked to reword and update the wastewater effluent guidelines for meat and poultry plants. And this was the big concern most of last year. What are they going to do? How are they going to regulate things? And, you know, is it going to affect these smaller processors? Because, you know, putting in new wastewater systems and ways to treat your wastewater, that’s not pocket change, and if you’re going to regulate this more thoroughly and put in more stringent rules, you’ve got to take into account the size of the processors.
So moving forward, I fully expect that if President Biden continues and wins another term, the regulatory environment will stay enhanced. The FDA has improved its Human Foods Program as well under Biden, which for a long time the FDA kind of talked about it but never really did much around it.
Whereas under a President Trump, if it happens, I think you’re going to see some of that regulatory environment ease off on food again. The one last thing I would point out is, you know, I’ve heard people joke about how we have two grumpy old men who are going to be concerned about shrinkflation and their snacks, and who knows, you know, one day they might have a bag of snacks and get angry that there’s too many snacks. In the State of the Union. President Biden mentioned potato chips and Snickers bars and things like that. I know I don’t want an emptier bag of snacks, but I’m not as grumpy of an old man as maybe those two are. So you never know when that ‘get off my lawn’ moment around their bag of snacks might come around. So that’s kind of a wild card with both of them, in my opinion.
Putre: With the water regulations, are there any you know, are there any stipulations, or are they taking into consideration at all the smaller manufacturers?
Hanacek: The proposal that EPA put out, it took into account some of what the industry had suggested when they were going through developing the proposal. The industry’s biggest concern was that it seemed a little secretive in some ways when they were putting things together. They weren’t sure if EPA was going to listen to what they had to say. When the proposal came out, it seemed to address the size issue of the processors. But I know that, the American Association of Meat Processors was making a big push to have its members, who are the mid- to small processors, making sure that they comment on the proposed rule and all of that as well. And I think that comment period is still open. I don’t have the date in front of me, but there’s still working through it. But fortunately, it did seem as though they took that into account. One of the big complaints, originally was the data that they were using came from something like half a dozen gigantic mega processing plants. And, you know, trying to extrapolate that down to a smaller plant just didn’t make a lot of sense to some of those in the industry.
Putre: Thanks. Bob, let’s bring you into the conversation. Is there anything you want to say about regulations?
Bob Vavra: There are a couple of things on regulation. Two things to remember: One, 90% of your manufacturers in this country are considered small to mid-size manufacturers, so the onus of regulation weighs more heavily on them. But we’re talking about standards and compliance. Regulation is what happens when you don’t meet standards, and it’s a reaction to what happens when you don’t meet standards.
So I think generally if you look at, not just the past two administrations, but going back into the 1970s and ’80s, generally Democratic administrations have been in favor of enforcement, particularly when it comes to occupational health and safety, and Republican administrations have been based on compliance. That pendulum has been swinging back and forth for 20 years. So obviously, there’s a lot of confusion for a lot of manufacturers on that front.
I think the issue that NAM is trying to talk about is, can we streamline some of the more onerous regulations on small businesses that create a disproportionate amount of cost to them without generating any value? That’s a legitimate concern. But at the same time, NAM has to be in charge of pushing standards to all of their members, including the small and mid-size companies, so that the need for regulation is diminished rather than increased.
Putre: When you talk about the difference between regulation and compliance, what do you mean there?
Vavra: Regulation is a reaction to a situation that is perceived to be a problem. In other words, if you say we have to have five parts per million, and manufacturers are putting out nine parts per million, we create a regulation that pushes people to comply to five parts per million. That’s how regulation works.
If we set a standard that says everybody has to meet five parts per million and the companies have the ability to bring that into compliance themselves, then we don’t have a problem, then we don’t have regulation. We’re simply following the accepted standards. Getting people to agree on an accepted standard — as we’ve seen with EVs and 50 other issues — is a challenge. But that’s where the difference between regulation and compliance comes in. We need to be able to set attainable goals and then create a mechanism for those people who can’t meet those goals and give them an opportunity to do so. And then finally get to regulation where we say, ‘We’ve given you an opportunity, we’ve set the standard, you’re still not in compliance, something needs to be done.’
Putre: Moving on to immigration, Andy, could you talk a little bit about how what’s happening at the border relates or doesn’t relate to employers keeping their production lines running?
Hanacek: Yeah sure. I mean, you know, the immigration policy or lack thereof has always been something that the food industry has always watched very closely, especially over the last 10 to 20 years. You know, we go back 15, 20 years, and there were the raids in the meat plants and things like that and whatnot.
I think the meat industry and the food industry overall has done a good job of trying to develop ways to ensure that the people working in their plants are legal, as much as they can. But there’s still, every now and then, we hear news of issues, right? I think the food industry as a whole would applaud some sort of hard-and-fast policy that gets this out of the headlines, gets them out of the headlines and allows them to employ legal people in their plants, where they’re having a really hard time finding folks.
Again, in the news right now, Tyson Foods is closing a giant pork plant in Iowa, and the Internet conspiracy theorists are then also tying to the fact that Tyson hires a lot of refugees and legal immigrants to work in their plants. They’re tying it to this news that Tyson mentioned somewhere that they’re interested in trying to find all of these migrants in New York and in Chicago a place to work. And the conspiracy theorists are talking about how they’re laying off American workers in Iowa and they’re going to replace them with these immigrants. And that’s not true. It’s just not true.
So I think the food industry, more than anybody, would be happy to see a solution here. And whether that comes under a President Biden or a President Trump or a President X, Y, or Z down the road — or if it would have come under President Obama, I’m sure they would have been thrilled.
As far as whether they’re worried about it or not, I think it’s gotten to the point, to be honest with you, where it’s just another challenge for them that they have to overcome. And the day that it happens, if it happens where we have some sort of good formal policy, they’ll be happy. Or maybe if it’s a bad policy in their minds, they won’t be, but, you know, I think they’ll just kind of be like, ‘All right, finally.’
Putre: Is there any indication that they’re working on that with Washington, some of the food processors, expanding work permits and visas and things like that?
Hanacek: I think they’re constantly working with Washington to make sure they’re doing the right thing and following the laws and the rules that are in place. I know that a lot of the associations that we deal with that represent the processors in the industry will occasionally mention, ‘Hey, we’re going to Washington to talk to the labor shortage.’ They don’t usually mention immigration specifically, right? They mention the labor shortage and the inability to get qualified, skilled labor and unskilled, on-the-floor labor as well. So I think it’s always something on their ‘D.C. docket’ as it were. But I don’t think there’s a huge push as a top priority right now, and that’s just kind of based off of what I’ve heard, not anything I’ve been told.
Putre: Bob and Karen, did either of you want to address immigration at all?"
Vavra: Yeah, I got a couple of things. You know, Andy’s absolutely correct, and NAM makes a lot of unforced errors of its own, as Jay pointed out at the outset. But this is an area where they are in pretty much alignment with the needs of manufacturing. I think this idea of immigration as a boogeyman seems like it’s a new idea. We’ve been talking about this throughout my lifetime. In the 1960s, CBS broadcast ‘Harvest of Shame,’ talking about the migrant workers coming to pick lettuce in California and the problems. We’ve known about this problem forever and ever.
Where I think the immigration issue comes up is going back to what Andy said. How do we identify, first of all, migrants coming in who want to work in the U.S., who want to contribute, to be able to funnel them to areas where they have existing skills or where we have existing needs for labor, and then get them legal, get them on the books, get them paying Social Security taxes, get them wages, get them into the mainstream of the country?
The problem right now is that we have all of these people in holding areas and we don’t have an ability to use them for what they wanted to come here for, which is the American dream, the American opportunity. It’s still a great story. To Andy’s point, we’re not losing people in one area and bringing in lower paid people in another. We need both. We need highly skilled and in the technology area, highly sophisticated folks.
The other two points I would make on immigration. One. This issue is going to be addressed one way or the other in the first six months of the next administration — it’s going to have to be, because there’s going to be a clearer mandate in terms of which way we’re going on this issue. The other thing I would point out is that in the new spending bill that’s before Congress right now — that will fund the rest of the federal government — they’ve got about 12,000 visas in there for Afghan citizens who helped the U.S. during the Afghan conflict for over a number of years. They want to bring those people to the U.S.
We can do immigration. We know how to do this. We can bring in Afghans who have assisted us. We can bring in Japanese baseball players. We can bring in basketball players from Europe. Let’s figure out how we can do this in a more organized way. You know, my solution has always been, create a much bigger front door where we can get people through in an organized fashion, identify folks, keep people out who don’t deserve to be here, who are coming here for other reasons, and then create a barrier to keep people out of anything but that front door.
Putre: Moving on to trade and security, Karen, I’m going to lob this one over to you to start with. There seems to be a couple of concerns around trade and they kind of dovetail into security as well.
Langhauser: Yeah, absolutely. I think on a national level, it’s worth mentioning the role of the Federal Trade Commission here. So while the FTC is technically an independent agency, the current chair of the FTC was chosen by Biden, rather controversially because of her aggressive antitrust stance. And the FTC is currently paying very close attention to pharma mergers and has filed numerous lawsuits attempting to block pharma deals.
So far, it’s mostly caused delays and headaches, but in some cases like last year with Sanofi’s proposed buyout of Maze Therapeutics, Sanofi actually opted to terminate the deal just to avoid the prolonged FTC litigation.
So heavy FTC oversight is something Trump specifically opposes. In fact, he recently brought up his plan to bring independent agencies such as the FTC under White House supervision should he be elected. While I don’t think Trump can take control of the FTC without a vote of Congress, it’s fair to assume that a Trump presidency would make an effort to decrease the power of the FTC, which could potentially take the heat off pharma companies.
On an international level, Trump historically takes a strong ‘America first’ stance, targeting China in particular. More broadly, he’s proposed phasing out Chinese imports of electronics, steel and pharmaceuticals over his next potential term, so you can definitely expect him to revive the reshoring movement in pharma, pushing the industry to cut their overreliance on APIs and essential medicines from countries like China and India.
The reshoring movement is something that the pharma industry for the most part doesn’t embrace, given the global nature of industry supply chain and the already low profit margins on a lot of the generic drugs. This anti-China movement kind of extends into the realm of national security as well, and given its bipartisan support, another Biden term likely wouldn’t be immune from anti-China legislation either in terms of the pharma industry.
There’s a bipartisan piece of legislation known as the Bio Secure Act on its way to the Senate floor now. The bill prohibits U.S. federal funding of loans and grants and contracts in connection with biotech equipment or services provided by the Chinese companies that are specifically named in the legislation. There’s four now, but the wording kind of leaves it open to add names to that list.
Essentially, the national security concern here is that genetic data or really any health data from U.S. patients could fall into the hands of foreign governments and be weaponized. The bill as it stands, doesn’t really prevent U.S. companies, per se, from working with Chinese companies. However, I think there is concern that depending on how many companies are added to this list of biotech companies of concern, that U.S. companies that contract with them if they’re buying APIs or CDMO services would then themselves become ineligible to receive any sort of U.S. federal funding. It’s something that still has to play out, but I’d imagine it wouldn’t matter which party is in the White House. The policy makers’ hesitancy around working with China is going to continue and absolutely will disrupt the way the pharma industry functions.
Putre: Do you think anything would be near-shored going forward if this legislation happens?
Langhauser: I mean, that’s the implication that it would. It’s just, that’s expensive, it’s a project and it’s going to require a lot of government funding to reshore APIs especially. So that’s not something that would happen overnight. I mean, that’s a that’s a pretty big switch for the pharmaceutical industry to have to do that.
Putre: Bob or Andy, anything you’d like to add around trade and security?
Vavra: Yeah, I’d say two quick things. Karen’s absolutely correct about reshoring and the costs involved. I mean, when you look at the chip manufacturing that was made such a big deal about going into Ohio and last week into Arizona, that’s all well and good. But those plants aren’t going to get online for three or four years. A lot of construction needs to go on there, and it’s going to be a tremendous amount of time and money to just build the facility and get the operation up and running, let alone hire and train the staff.
It's not like you can turn the ship immediately, but there is a fundamental difference between the two presidential candidates. Mr. Trump believes that it all needs to be done here in America and that our foreign trade takes a backseat to American manufacturing. That’s a perfectly reasonable theory, unless you realize that we have 350 million people in a world of almost 8 billion; we’re missing out on about seven and a half billion customers.
The more global view of that is, we can make anything anywhere and distribute it to a much wider audience. The challenge there is information, integrity, security and giving away intellectual property. There’s always been a middle ground in there, and I think businesses have found it more quickly than governments have. I think this is an area where NAM and the larger global business community needs to take a greater leadership role and say, ‘We’re better able to manage our global supply chains and our global relationships than individual governments are, and we’re going to continue to drive that kind of idea forward.’
If you look at the Siemens of the world, if you look at the Schneider Electrics of the world, if you look at the Fords and GMs of the world, these are global companies — where they manufacture, where their headquarters are, are irrelevant to what they’re able to provide on a global basis.
Putre: And is there anything around trade and security you’d like to add?
Hanacek: Just a little piece on agriculture, rather than food, which feeds into food, right? So, under President Trump’s first go at it, if you will, if you read up some of the analysis, a lot of people said that his trade wars simply were not good for agriculture, and that’s being nice compared to what some say based on the data. And these are some of the Farm Bureau-type associations and things like that.
So when Mr. Trump is walking around and talking about tariffs, tariffs, tariffs, if you’re a farmer or a rancher, that’s something that you really ought to think twice about, if he does win the presidential election.
I would also add then too, that the IPPE show, which is the International Production and Processing Expo — it’s basically the old Poultry Show, if you will, but now it’s a meat and poultry show — in January, I was lucky enough to sit down in a group with Alexis Taylor, who’s the undersecretary for trade and foreign ag affairs. She, of course, talked about the great things they were doing in the Biden Administration around trade currently, but one of the interesting things that I thought she mentioned looking forward was, she said nearly 60% of the ag exports currently are to China, Canada, Mexico and the EU, and they were working super hard to diversify that. They want more audiences.
And kind of to what Bob said, they want more customers, more places to send our products. The demand for U.S.-made goods is growing, and U.S. goods are very popular, and we need to capitalize on that is basically what she’s saying, which in a sense gives kind of a preview of what would happen if Biden wins the election.
I would anticipate further outreach, further expansion of food products and ag products to other places outside of the U.S. and trying to get our processors and producers and growers top dollar for those items.
Putre: Has that work already started? I mean, he’s been in office four years.
Hanacek: Yes, Ms. Taylor did mention that she’s been out on trade missions. I forgot the country she said now off the top of my head, but she’s been on trade missions. Trade missions happen all the time, but they’ve been working really hard to try and diversify that. And it’s interesting because some of these food processors, over the years, they get tied to one or two customers, and I always kind of bring it back to that, right? If that customer has any trouble, you’re in a lot of trouble, too, so you think about it from that perspective. The U.S. should want to have multiple customers globally because, what happens if China gets into economic trouble or something and stops buying stuff from us or whatever? So, yes, from my understanding, it was under way, and I would expect it would continue moving forward.
Putre: Well, we’ve hit the half hour mark, and we’ll just wrap it up with a topic that everybody loves, which is taxation. Are people worried about radical changes based on who wins the White House? Bob, maybe you want to take this one?
Vavra: I don’t think we’ve seen the seismic shift on the tax side in the Biden administration that we saw in the Trump administration. I think that we’re unpeeling from the unforced error of a wildly uneven tax cut, and the unfortunate follow up of that was the pandemic. So we got hit with a lot of bad economic processes and creations and events that, you know, put the economy, which had been doing very well, into a tailspin. And we’re just now starting to see our way out of it, but it has been a four-year process.
I would point out that in the first four years of the Obama administration, we had to deal with largely the same thing. So we’re at a place where the economy is improving rapidly. It’s stable, it’s not great for everybody, but it is certainly better than it was 18 months ago. I think the challenge is not so much more taxes and necessarily changing the tax rate — although I think there are some areas, the tax code is way too complicated for anybody but accountants and lawyers to deal with anyway — I think the issue is, how do we generate more revenue for the federal government? And you’re going to do that by getting more people on the payroll, expanding the payroll that you’ve got right now, lowering costs to businesses however best you do that. We look at these issues from a tax standpoint, but if we can create more revenue through government in general, it negates the need for us to do anything positively or negatively around taxes.
