This IMM International Molding Report is prepared for IMM by Agostino von Hassell of The Repton Group, who provides IMMâs monthly Molders Economic Index.
Exports are of increasing importance to molders, while at the same time many molders again feel strong pressures on their own domestic markets from imports. This special report looks at some key developments in international trade that molders should consider in their business planning.
One key factor to keep in mind is that late 2000 saw the first measurable decline in one year in the average price of imported goods, including automotive and medical parts and molded components for electrical and electronic applications. Such prices had increased for most of the first nine months of 2000, bringing some relief to U.S. molders.
Complicated Import Taxes Threaten Maquiladora
Some importsâincluding some resins and semifinished partsâused in northern Mexico assembly and molding plants are now subject to Mexican import taxes, creating a significant change. While the specifics of these import dutiesâaffecting imports from all countries other than the U.S. and Canadaâhave still to be determined, these measures have already caused some grumbling.
The tax rules announced in October 2000 by the Mexican Ministry of Commerce call for tariffs ranging from 2 to 25 percent starting Jan. 1, 2001. They would affect, for instance, import of in-jection molded computer parts from countries such as Malaysia, Singapore, Brazil, and South Korea.
One of the forces that led to the massive growth of maquiladora plants was the total lack of import duties. The new rules will change the cost structure for many operations in Mexico. With most of the exports destined for the U.S., the cost structure for completed products will change. Just how much, nobody seems to know.
Confusion about these tax duties abounds. While the Commerce Ministry claims that just 20 percent of all imports will be affected, no details are known yet about what will be taxed and how these taxes will be assessed or collected. Approximately 4000 maquiladora plants account for 46 percent of Mexicoâs exports.
Asian Trade: Easing
Southeast Asia is not only a major market for U.S. molders but also a key competitor. Significant changes are taking place in that area that will boost the competitive stance of molders operating there.
Many speculate that within the next 10 years key Southeast Asian nations will set up the equivalent of a free trade union. This will make movement of goods in that market easier, but will also help with the emergence of a very strong trading bloc that could rival both North America and the European Union.
The first step in this direction came in late November when leaders of the Assn. of Southeast Asian Nations (ASEAN) signed a free-trade pact that aims to eliminate duties on information technology goods and services by 2010. The âe-ASEANââ accord also urged members to pass legislation making digital signatures as legally binding as pen and paper.
One effect of this move is that computer components will be shipped within that region free of duties. This will make it easier, for instance, to mold keyboard parts in Vietnamâtwo European-owned plants for molding such parts were set up in 2000âand ship the assembly to Malaysia for incorporation into a PC.
Thai Tariffs Cut
Several U.S. molders have already moved molding operations to Thailand and more are poised to do so. European molders have done the same, with British and German presence very strong. In November the Thai government cut import tariffs on more than 70 materials used to manufacture electronics, chemicals, and electronic components.
This move will cut tariffs by as much as 90 percent for molders importing raw materials into Thailand. The Thai government, eager to boost somewhat slowed foreign investment, also set aside in November $1.18 billion in subsidized loans for manufacturers in Thailand.
The growing U.S. trade deficit is emerging as an issue requiring attention. A prominent Congressional commission in November concluded that the trade deficit, which has grown from $30 billion in 1991 to more than $450 billion in 2000, has become âunsustainably large and dangerous to the economy.â
Solutions are not clear. Republican members of the Congressional commission want market forces to take care of the problem, while Democrats favor direct government action.
In several product areas the trade deficit is starting to impact U.S. molders directly, including those that have shifted manufacturing operations to Mexico.
For instance, over the past 12 months, imports of injection molded plastic parts for automobiles and trucks from China have doubled. While imports of such parts from Japan have actually declined, the growing prominence of China in this marketâboth among OEMs and in the aftermarketâhas curtailed growth for U.S. molders. And while China has made all kinds of promises to open its markets, little real action has been seen as of yet.
Another example is sharply higher imports of components for appliances assembled in the United States. From August 1999 to August 2000 import of plastic appliance components from Asia (primarily China, Thailand, and Malaysia) increased 48 percent. With a declining U.S. market for appliances, this import pressure represents a direct business loss for U.S. molders.
Table 1 shows imports and exports of other selected molded products for the first eight months of 2000. These data are based on information supplied by U.S. Customs. They show that the U.S. has a $280 million trade deficit in electronic calculators. China alone accounted for $191 million in U.S. imports, substantially more than all U.S. exports in this category.
|Table 1. Trade in plastics parts|
|Table 2. Major exports|
Molded tube, pipe, and hose fittings are really not a trade deficit for U.S. moldersâimports and exports are about equal, and almost 50 percent of the imports come from the two NAFTA partners, Canada and Mexico.
In the still lucrative market for stoppers, lids, caps, and closures, U.S. molders have a $67 million trade surplus. This is one market where automation and rapid cycling injection machines can give a molder the winning edge. Labor costs are of relatively little importance.
The Repton Group
New York, NY
Agostino von Hassell
Phone: (212) 750-0824
Fax: (212) 752-5378
E-mail: [email protected]