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James Heintz has written on a wide range of economic policy issues, including job creation, global labor standards, egalitarian macroeconomic strategies, and investment behavior. He has worked as an international consultant on projects in Ghana and South Africa, sponsored by the International Labor Organization and the United Nations Development Program, that focus on employment-oriented development policy. He is co-author, with Nancy Folbre, of The Ultimate Field Guide to the U.S. Economy. From 1996 to 1998, he worked as an economist at the National Labour and Economic Development Institute in Johannesburg , a policy think tank affiliated with the South African labor movement. His current work focuses on global labor standards, employment income, and poverty; employment policies for low- and middle-income countries; and the links between macroeconomic policies and distributive outcomes.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. According to a new report, even low-end estimates of health costs of exposure to hazardous industrial chemicals amount to thousands of deaths and billions of dollars. In terms of children's health outcomes, 100 percent of cases of lead poisoning are a result of chemical exposure, 10 to 35 percent of asthma cases, 2 to 10 percent of certain cancers, and 5 to 20 percent of neurological problems. In California, in regard to deaths specifically linked to occupational health and safety factors, 80 to 90 percent of cancer deaths, 100 percent of occupational lung disease deaths, 40 to 50 percent of deaths associated with neurological disorders, and 40 to 50 percent of deaths associated with renal disorders [are] attributable to industrial chemical exposures. As a result of these kinds of statistics, many people are calling for a reform of the Toxic Substance Control Act of 1976. But chemical industry associations and defenders say any reform, any more regulation, will lead to less jobs, more outsourcing of production. Well, a new study by James Heinz and Robert Pollin of the PERI institute, sponsored by the Blue Green Alliance, has actually come to the conclusion that more regulation would lead to more jobs, not less. Now joining us from Amherst, Massachusetts, is one of the authors of that study, James Heinz. Thanks for joining us, James.JAMES HEINZ, ASSISTANT DIRECTOR, PERI: Thank you.JAY: So how does more regulation lead to more jobs?HEINZ: Well, let's take the industry's arguments. Their arguments are that more regulation will create a big bureaucracy that's going to raise their costs. By raising their costs, it's going to hurt their global competitiveness and they're going to shed jobs. They also argue that regulation's going to damage their incentives for innovation. But if we look at the nonpharmaceutical chemical industry in the United States over the past 20 years, it's been shedding jobs: it's been shedding around 300,000 jobs over the past 20 years. And this is a major manufacturing sector in the US economy. So it's already destroying jobs. It's already engaged in largescale offshoring of its production. If we look at the question of innovation, the industry, the chemical industry, excluding pharmaceuticals again, spends about 1.5 percent of its sales revenues on research and development. And if we look at manufacturing in the US as a whole, it's 3.4 percent. And so we have the industry arguing that it's not going to be innovating at the same rate that it's currently innovating, and that it's going to cut jobs if you do something about regulatory reform. But it hasn't been creating jobs and it hasn't been spending resources on innovation anyhow. If we look at some of the major growth areas for the chemical industry in the near future, there's a significant possibility for creating new jobs in areas such as coming up with alternative nontoxic building materials; investing in bioplastics, so making plastics out of biomass as opposed to petroleum products; safer personal care products; improving the safety and lowering the toxicity of chemicals that go into medical equipment. All of these areas are high-growth areas that have the potential to create a large number of jobs.JAY: One of the arguments that you make in the report is that the current legislation grandfathered thousands--I think it's 62,000 chemicals that are not really regulated at all. And your argument is this is what's preventing innovation. There's no need to, 'cause you can keep using these old chemicals.HEINZ: That's right. If you look, the law was passed. It's the Toxic Substance Control Act, passed in 1976. And in 1979, as part of the implementation of the act, there was a inventory of all the existing chemicals at that time made, and those chemicals were grandfathered in under this act. And so it amounts to over 62,000 chemicals. And those chemicals are virtually unregulated, meaning that the EPA, the Environmental Protection Agency, does not require testing on those chemicals. And the amount of information that we have on the properties of those chemicals is very, very sparse, insufficient for making any types of reasonable decisions about. If we look at new chemicals, a lot of the testing requirements on those, even though they do exist, they're not enough for the EPA to be able to make any kind of a safety determination around these chemicals. Where the old existing chemicals are virtually unregulated in the US, the new chemicals are insufficiently regulated, and in particular, there's no incentives to actually develop safer or more sustainable alternatives. So we have a regulatory environment that creates all these perverse incentives. It encourages the continued production of older chemicals, many of which have been linked to the types of diseases you mentioned in the introduction, and that new chemicals are actually subject to slightly higher regulatory requirements.JAY: In your recommendations there are several. One of the important ones is that new, reformed legislation would make chemical companies give more data to the EPA about what's actually in these chemicals, which seems like a no-brainer. How are you going to regulate something if you don't know what's in it? But, at any rate, the industry objection is that these increased data points will increase competitiveness, because not only will other American competitors, but global competitors will know how they're making their chemicals, and it's a copyright issue. Is that a legitimate objection?HEINZ: The answer is yes and no, in that there are certain types of information that you could say are what are called confidential business information, that it's about the processes or the structures of these chemical substances that should be treated somewhat as proprietary information in order to encourage ongoing innovation in the chemical industry. So to some extent there are cases where you could say those type of arguments are important and should be taken seriously. But a lot of the information on the health and safety profiles of these chemicals, or types of information that currently are given confidential business protection, such as the name of the chemical or the company producing the chemical, those types of information aren't confidential business information. They don't contain any types of secrets. And so the chemical industry is trying to claim confidential business information type protections for a broad range of information, very little of which really constitutes confidential business information.JAY: One of the arguments that's been given on this is that you can build into such a legislation that it's illegal for anyone from the EPA to divulge anything. Make it a criminal offense. Is that enough of a mechanism?HEINZ: Absolutely. But you also have to have the chemical companies go through an application process and a careful review process for confidential business information protections. Right now they're extended to chemical companies without adequate review, and they're automatically renewed now, so you don't actually have to go through a renewal process. So what you also need to have in place is a system where, yes, you get some confidential business information protections, one, when you can demonstrate that it is indeed confidential business information, that there is a commercial reason for it that doesn't threaten public health or public safety. It expires after a certain point in time, and then you reapply for it. So, yes, you design the legislation in such a way that where there's a bona fide confidential business information concern that does not affect public safety, you give those protections.JAY: Right. Now--and another part of your recommendations is to shift the burden of proof. Right now it's up to the EPA to prove that a chemical's not safe, which, again, seems a little hard to do when you're not sure what's in it. But, at any rate, you want to shift the burden so that chemical companies have to prove to the EPA that it's safe. But the industry objection is that especially medium and smaller size companies, this becomes so cost-prohibitive that it only favors the bigger monopolies.HEINZ: The philosophy of chemical regulation, what we're proposing is to actually turn it on its head. Right now the EPA doesn't--it's not that the EPA has to prove that a chemical is safe; it has to prove beyond a shadow of a doubt that a chemical causes harm before it can even begin to regulate a chemical. And so the burden of proof falls on the regulator, not the industry. And it's a very, very high burden of proof that the EPA currently faces. What we're proposing is you turn that around so the burden of proof is on the industry, and instead of proving harm, you need to prove that the chemicals that you're producing and introducing in the marketplace can be used safely or that they are indeed safe to use. Now, does this create an unreasonable burden on the industry? The European Union introduced in 2007 a similar set of regulations. It's called the REACH regulation. And the estimated cost of testing the chemicals amounted to about 1 percent of total sales of the chemical industry. And you have to remember that these aren't permanent changes in the cost of production. Once you test a chemical, you incur that cost, but you never incur that cost again. And so it's a once-off cost. It's about 1 percent of total sales. And there are ways in which you can pool resources across firms. Firms that are producing similar chemicals can pool resources, 'cause all you need is the information, the testing to be done once. And by doing so, you cut the cost even further. And you can do this in ways that help out small- or medium-size enterprises. You can also lengthen the time for compliance with the regulation. So, for very small firms, give them some more time, a few more years, to do the testing and comply with the regulations.JAY: It's kind of ironic that apparently China is moving towards the European standards. And part of the big industry, American industry argument is how can we compete with China when they have such low standards. And it may not be long before China has higher standards than the United States.HEINZ: The American chemical industry exports a lot, and exports are becoming more and more important for the industry. And so, increasingly, the industry has to respond to regulations that are being developed elsewhere. The US is no longer a leader in environmental regulations like it was in the 1970s. Now it's following and it's kind of playing catch-up--to the extent that it's even catching up at all. The irony now is that, you know, firms in other countries are seeing the US market as kind of a dumping ground for the products that they can't sell due to higher regulations in their own countries. And yes, even China's catching up with that. A second point is that the US chemical industry is making a big noise about, you know, having to compete with countries like China, even though, as I said earlier on, it's aggressively engaged in offshoring production, and offshoring production to countries like China. So it's--and it's doing so in order to make higher profits link to cutting costs as opposed to innovating new products. So it's actually benefiting from the existence of low-cost labor and kind of the competitive dynamics around China, even though it complains a lot that it's facing enormous competition.JAY: Well, in the next segment of our interview, let's talk a little bit about a piece of legislation that is being proposed to address some of these concerns, and also let's dig into some of your model and just how this leads to more jobs. Please join us for the next segment of our interview with James Heinz on The Real News Network.
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