Beyond the Fiscal Cliff: 2012 Successes; Hopes for 2013
By Jamie Girard, senior director, North America Public Policy
The highly-anticipated November elections are over, and we now know that the biggest winner is the status quo, which will remain in Washington for at least the next two years. With the “fiscal cliff” and much of the rest of the work of the 112th Congress left to be done in a “lame duck” session of Congress, now is a good time to look back at what public policy issues SEMI has been working on for the past year, and what the industry can expect from Washington in 2013. While many of the issues will be the same, there is reason to be optimistic that some positive results will occur in these areas:
Federal R&D Funding
High-skilled Immigration Reform
SEMI continues to work closely with like-minded government and industry representatives on the Export Control Reform Initiative (ECRI), a process that saw substantial progress over the last year. SEMI worked with its member companies to draft a formal comment letter on the “specially designed” definition in August which had significant impact on the Commerce Department’s interpretation of the phrase. Although the Obama Administration had hoped to wrap up this process in 2012, it now hopes to conclude the ECRI by the end of 2013.
In July, the industry celebrated a big win on the decontrol of MOCVD and PECVD equipment, among other significant items for which we advocated, and our focus now shifts to decontrolling etch equipment. SEMI also maintains an Export Control Working Group comprised of industry representatives with trade and customs expertise. In 2013, we plan to expand the group’s breadth and influence within the export control arena and provide an open channel between government and industry on these issues. Anyone wishing to participate in the working group should contact Taylor Sholler, manager, public policy at email@example.com for more information.
Federal R&D Funding
SEMI works to encourage the federal government to invest in basic research at the National Science Foundation (NSF), the National Institute for Standards and Technology (NIST), and the Department of Energy (DoE) Office of Science. Federal investment in funding basic research through these agencies benefits SEMI members as we work to push forward on everything from shrinking nodes to increasing wafer sizes and providing breakthroughs in Solar PV.
While the federal government is increasingly looking at ways to cut spending, these basic R&D accounts have fared relatively well as they were mostly flat-funded for FY2012. Prior to the November elections, Congress passed a short-term funding bill that will fund these programs at their current level through March of 2013. While this level of investment falls short of the proposed doubling of basic R&D research that was part of the highly-touted America Competes Act of 2007, flat-funding in the current fiscal environment should be considered a win.
Like all discretionary spending, these research programs are subject to the sequestration of federal funds at the beginning of 2013 if Congress doesn’t implement a fix as part of the “fiscal cliff” debate. As you may recall, Congress implemented a planned reduction of over $100 billion a year in federal funding if they couldn’t come to agreement on how to reduce spending. Because no detailed spending plan could be agreed to, these automatic cuts will go into effect at the beginning of 2013 if nothing is done to stop them. While $57 billion in cuts will come from the Department of Defense, the remainder of the cuts will have to come out of the rest of the federal budget as determined by the White House Office of Management and Budget (OMB), which most certainly have to make cuts into these research programs.
In addition to advocating for increases to these general research accounts, SEMI has also been working to educate policymakers on the 450mm wafer transition, and secure federal funding to help offset some of the cost to industry. Specifically, SEMI has been working to engage the federal government on the creation of the President’s National Network of Manufacturing Innovation (NNMI). Under the NNMI, the government would provide up to $1 billion to work with private industry and academia to set up as many as 15 centers to concentrate on bringing forward new innovations to the market and helping to cement the manufacturing of these new products in the U.S. SEMI will continue to work with our members to ensure the federal government is aware of the unique place that we occupy in the high-tech manufacturing supply chain.
It’s been a challenging year for PV, and its relationship to public policy has been no different. The combination of failed DoE loan guarantees and an election have provided no shortage of attacks on the industry as global oversupply of cells and modules drive down prices and create extraordinary pressure on manufacturers. As such, SEMI has continued to advocate for policies that support both the manufacturing of PV, but also the installation of panels as well.
A key driver for domestic growth of the Solar PV has been the Sec. 1603 Treasury Grant Program that was originally passed in 2009 as part of the President’s stimulus package. This program allowed companies to take the 30 percent Investment Tax Credit (ITC) upfront, as a cash grant, instead of as a tax credit. Unfortunately this program expired on December 31, 2011 and doesn’t look as if it will be continued any further.
The emergence of global trade disputes continue to proliferate around the globe with the U.S., the European Union, China, Korea, India, and Canada now all involved in one dispute or another. With the U.S. handing down a ruling of 24-36 percent cumulative tariffs on Chinese cell and modules, the dispute only looks to get worse. That’s why SEMI is advocating for a global trade cooperation to help resolve some of these issues prior to them becoming damaging to the industry.
The 112th Congress has been the most pro-trade legislature in a decade and with little change in the makeup of either body, the 113th session stands to be a similarly positive time for trade promotion. With his re-election, the President is expected to move forward with an aggressive trade agenda including completion of the Trans-Pacific Partnership (TPP), the start of negotiations with the European Union on a bilateral trade pact, and securing Permanent Normal Trade Relations (PNTR) for Russia. The Administration will also continue its work on expanding the Information Technology Agreement (ITA).
Last fall, Congress passed free trade agreements with Korea, Panama, and Colombia, and also renewed Trade Promotion Authority and the Generalized System of Preferences by a wide margin. In a hyper-partisan era, the Administration will look to trade policy as a means of unifying an otherwise divided Congress. It is also widely speculated that current U.S. Trade Representative Ron Kirk will step down at the end of the first term. In choosing a successor, the President will look for someone with close ties to both the public and private sectors in order to push a broad agenda.
As a means of liberalizing trade in Asia, SEMI remains fully supportive of the TPP negotiation process and has joined the TPP Business Coalition’s IP and ICT task forces. Much of the groundwork on TPP was laid over the course of the last year and we expect a conclusion to this high standard agreement by the end of 2013. SEMI has also joined the Trans-Atlantic Trade Coalition in support of a strengthened commercial relationship with the EU. Negotiations with the Europeans are set to commence early next year, and will be bolstered by congressional approval of PNTR for Russia. Last summer, Russia joined the World Trade Organization but because of certain Cold War-era trade restrictions, the US has been unable to fully appreciate Russia’s commercial value. In a long overdue effort, Congress will look to grant PNTR to Russia during the current lame duck session of Congress. The final big ticket item, expansion of the ITA, is moving ahead on schedule and the ambitious goal of 2013 completion looks to be within reach. SEMI remains heavily involved in this process as many of our requests are included in USTR’s most recent expansion proposal.
While much of the discussions in the current end of the year fiscal discussions on based around the extension or expiration of the 2001/2003 Bush Tax Cuts, there are other tax provisions that have a profound effect on our industry that may be included in these talks. The research and development (R&D) tax credit (which many SEMI member companies take advantage of) has been expired since December 31, 2011. With companies investing an average of 10-15 percent of their revenues back into R&D this credit is extremely important to SEMI members. While it is widely expected that a retroactive extension will be put into place prior to the end of the year, failure for Congress to come to an agreement on a big fiscal package could negatively impact their ability to pass and R&D tax credit extension.
In addition, tax-writing committees in both chambers have spent much of 2012 preparing for an overhaul of the corporate tax code. With the U.S. now having the highest corporate tax rate in the developed world with a top rate of 35 percent, it is extremely important that Congress do something to ensure that the American tax code is more competitive with the rest of the world. That’s why SEMI sent a letter to Congress in support of corporate tax reform that would:
- Lower the top corporate tax rate from 35 percent to a more competitive number
- Retain tax policy to encourage innovation (i.e., R&D Tax Credit)
- Shift to a territorial tax system to bring the U.S. in line with the rest of the world.
Corporate tax reform has been promoted by both Democrats and Republicans, including top leaders in Congress as well as President Obama. Such agreement is a good signal that this issue may be able to move forward in 2013.
High-Skilled Immigration Reform
Comprehensive immigration reform may be the issue that has the single most to gain from the results of the 2012 elections. In particular, the availability of foreign highly skilled workers is of great concern to SEMI members, and should be a part of any larger package that is brought forth to deal with the problem of immigration in a more holistic way.
Prior to the elections Rep. Lamar Smith (R-TX) brought a high-skilled immigration reform bill, H.R. 6429, the STEM jobs bill, to the floor of the House which would guarantee a foreign born student a green card if they graduated with a doctorate from an accredited university with a degree in a Science, Technology, Engineering, or Math (STEM) field. Unfortunately, the bill failed to pass, but revived talk of a comprehensive immigration bill will be critical to making these kinds of positive changes to our immigration laws. With both parties eager to make changes, immigration will be a hot topic in 2013.
The SEMI Washington Forum
The SEMI Washington Forum, held in May, was an impressive event and continues to be the premier event for SEMI members to engage policymakers in Washington in a meaningful way. Twenty-four individuals from SEMI member companies broke into four teams to cover specific issue areas including Intellectual Property, Solar PV, and the 450mm transition. These teams then fanned out across Washington and held 24 separate meetings with Members of Congress and their staffs, White House officials, and Administration experts. Specifically, meetings were held with the Solar Technologies Program at the Department of Energy, the head of the Patent and Trademark office, David Kappos, U.S. Congressman Chris Gibson (R-NY), the White House Office of Science and Technology Policy, and many others. Plans are already underway to begin scheduling next year’s event.
For more information on SEMI Public Policy, visit http://www.semi.org/en/Issues/PublicPolicy. For information on North America Public Policy, please visit http://www.semi.org/en/issues/publicpolicy/ctr_026004
If you have any questions about SEMI’s public policy agenda, please contact me at firstname.lastname@example.org or in the SEMI Washington, D.C. office at 202.289.0440.
December 4, 2012