More than any other sector, manufacturers bear the highest share of the cost of regulatory compliance. Many regulations have positive benefits for the economy and society; for example, workplace safety and air quality have improved steadily for the past three decades. Yet few understand the cost of these regulations and their impact on companies facing intense global competition with overseas firms that often do not have similar costs.
The expense of complying with federal regulations is steep. Manufacturers spend an estimated $192 billion annually to abide by economic, environmental, and workplace safety regulations and ensure tax compliance—equivalent to an 11 percent “regulatory compliance tax.” As an example, U.S. industry is faced with the highest pollution abatement costs compared with its major trading partners—even higher than the so-called “green economies” of Western Europe. In 2007, U.S. manufacturers spent an estimated 6.2 percent of value-added complying with air and water emissions standards (which are among the strictest in the world), compared with 6 percent in France and Germany, 5.5 percent in Canada, and 3.5 percent in the UK. Regulatory costs impact the global competitiveness of manufacturers, constrain the demand for employees in U.S. facilities, and further encourage firms to locate production abroad.