REPORT: New Biden FDA rules would hurt NC farmers, consumers

Two new regulatory changes are being considered by the Food and Drug Administration (FDA) — banning menthol cigarettes and mandating Very Low Nicotine (VLN) products — could drastically change the market for combustible tobacco products in North Carolina and around the country.

According to a study commissioned by the John Locke Foundation, Regulatory Smoke: The Economic Impacts of Proposed FDA Tobacco Regulations, the new rules could upend markets and harm tobacco farmers and consumers in North Carolina, the top producing state in the nation.

“With its proposed very low nicotine (VLN) standard, the agency would require manufacturers to reduce the amount of nicotine in cigarettes and cigars sold in the U.S. to minimally addictive or non-addictive levels,” reads the report. “The FDA has also proposed to ban the sale of menthol cigarettes. Both of these regulations, if adopted, would have far-reaching impacts on the entire supply-chain of the tobacco industry in North Carolina, from farms to retail outlets.”

As highlighted in the report, the Tar Heel State is home to 822 tobacco farms with combined revenues of $557 million and adding approximately $197 million to the state’s gross domestic product (GDP). Yet, that’s just the beginning of North Carolina’s extensive tobacco products supply chain, which reaches into the tens of billions of dollars in economic impact.

“Tobacco manufacturers in the state produce $36 billion of output and add $31 billion to state GDP, employing about 5,000 workers and paying them $370 million to do so,” the report continues. “Tobacco wholesaling in the state brings in $15.3 billion in revenue, adding $9 billion to state GDP and creating 4,500 jobs. Retailers garnered about $5 billion from sales of tobacco products, adding $3 billion to GDP and supporting 11,000 jobs.”

That’s not to mention the transportation of tobacco products, from farm to wholesalers, to manufacturers, and retailers. What’s more, the total sales and excise taxes, settlement payments, corporate income and franchise taxes represent about $845 million every year.

Clearly, North Carolina is a tobacco powerhouse, the cash crop being a critical node in the state’s agricultural economy. That being the case, the onerous regulations being considered by the Biden administration stand to have an especially negative impact in the Old North State.

Carolina Journal reached out to the report author, Professor James Prieger of Pepperdine University’s School of Public Policy, to discuss just how extensive an impact these proposed regulations could have on producers and consumers alike.

Prieger estimates the menthol ban would kill about 31,000- 93,000 jobs, depending on the scenario. But he was especially concerned about the impact from a VLN regulatory mandate.

“The VLNC regulation would be even more disruptive, taking away over 100,000 jobs,” Prieger told Carolina Journal. “These job losses are so large not only because there is a lot of tobacco farming, manufacturing, and sales in the state, but because of the ripple effects throughout other areas of the economy.”

Smaller production levels would mean less demand for inputs, for processing and packaging jobs, and on down the line. Because North Carolina has such a mature tobacco industry, the correlated economic activity ripples out widely.

“The ripples get smaller as you move away from the directly impacted farmers and companies, but there are so many directions in which they spread that the total number of job losses is really large,” warned Prieger.

That’s concerning to Sen. Benton Sawrey, R-Johnston, whose district is second in tobacco production in the state.

“Johnston County has seen rapid suburban growth, but agriculture remains the most important part of our local economy,” Sawrey told Carolina Journal in an email. “We’re proud of our farming heritage and regulatory attacks like this are just going to do more to make it harder for Johnston County farmers to grow diverse crops that support their families and our communities.”

Sawrey said small-business owners — farmers, especially — have suffered too long under the weight of onerous regulations emanating from Washington, D.C.

“We’re lucky in North Carolina to have a legislature that looks for ways to get government out of the way and let people make a living,” he concluded.

The heaviest production centers will, naturally, face the highest negative impact from the proposed regulations. The top five tobacco-growing counties in North Carolina are Wilson, Johnston, Nash, Sampson, and Harnett counties. 

For a more detailed analysis of the impacts these proposed regulations could have on North Carolina, check out the full report from the John Locke Foundation: Regulatory Smoke: The Economic Impacts of Proposed FDA Tobacco Regulations.