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October 2001: Volume 43, Number 10

Viewpoint2: A Sluggish Economy & Prop. 65 Relief
by Carlos David Mogoll√≥n, WC&P Executive Editor

The following was intended to run as the "Viewpoint" in WC&P's October issue, but was displaced by the tragic events of Sept. 11:

Wither goes the stock market these days may spell dire consequences for the world economy over the next couple of years. Granted that Wall Street isn't the only crystal ball in town, but—as a direct measurement of consumers' willingness to invest in the possibility of a growing economy—it's the most immediate gauge around. And the fact is almost no one sees much opportunity and, because of the global domino effect of recessionary economics, that's a worldwide problem. This is synergism's evil twin.

So, how does that affect water treatment markets?

Well, glad you asked. In that interconnected web of life in which we live in (but rarely see the strands vibrate as they're touched), a slower economy means reduced spending. Companies in one industry that spend less may impact another industry, which slows its spending affecting another industry (dot.coms, software, computers, optical networking, cable and wireless telecommunications, for instance). As companies slow spending, quit hiring and/or lay off employees, affected are sales and income taxes and other government revenues. As government surpluses shrink, this slows things like infrastructure spending—which affects water. At the same time, a Republican presidential administration often may mean less emphasis on regulatory and environmental enforcement—if only from a more pro-business, free-trade, laissez faire perspective, historically. And the pace of growth in the POU/POE industry has been traditionally regulatory or incident-driven—long-term demographic affects of a graying U.S. population notwithstanding. Unfortunately, consumer spending in our industry is often viewed as discretionary as well and investing in a countertop or undercounter system may be delayed in tougher times.

With globalization, these causes and effects are amplified worldwide. Witness the "Asian flu" economic crisis of a few years ago. A number of U.S. companies that had bet big on Asia (particularly China) being the next big market for water treatment found their bottom lines severely tested as financial problems in Indonesia and Korea spread in 1997 (not to mention Japan's ongoing economic malaise). Some of them were only recently beginning to show signs of recovery. Still, as Osmonics' Dean Spatz lamented its absence in an interview for an article in WC&P's December 1998 issue, there has been some return to "value" by investors. And that shift has benefited many water treatment industry stocks as investors look for safer bets rather than risk. With broader financial markets seesawing, though, stability has been difficult to maintain.

Needless to say, it all bears close watching.

In other news, the California Attorney General's office is considering possible reforms for Proposition 65—the Safe Drinking Water and Toxic Enforcement Act of 1986—to "'fix' nagging problems with the law in order to head-off potential Congressional preemption aimed at curbing opportunities for abuse by private enforcers," according to Prop65 News.

One measure, reported the WQA NewsFax, would require "certificates of merit" showing private plaintiffs had consulted an expert before initiating action under the law: "If the case goes to settlement and the court finds no credible basis for the 'certificate,' it could impose sanctions against the plaintiff for bringing a frivolous suit."

This could do much to help avoid the manner in which an environmental group believed to be fronting for class action lawyers was allowed to "extort" supplier lists and hundreds of thousands of dollars in settlements a couple of years ago from this industry. At issue—questionable testing protocols of lead-bearing brass faucets that may have met federal drinking water standards but exceeded Prop. 65's zero-tolerance limits. It's time to bring a bit of practicality to these rules.