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September 1, 2003

6 Min Read
Trade imbalance gets the once-over at NPE

Plastics processors are mad as hell and are not going to take it anymore. Disgusted with the U.S. government's failure to address the trade imbalance between the United States and China, American processors vented their frustration during a forum on this hot-button issue at NPE 2003.

Caught in the line of fire was a panel of industry experts who offered suggestions on how to deal with this emotionally charged issue.

"I'm concerned that a lot of the emotion and energy [displayed here] is because of the state of the economy and that's wrong," said Randall Ash, manager, molding engineering, at Delphi Packard Electric Systems. "In your own business, don't let someone take your lunch. You have to figure out how to do it [business] better, faster, and cheaper."

Most attendees and panelists at the Crossroads Forum, held June 25 during NPE at McCormick Place in Chicago, called for policy changes that will help the plastics industry remain viable in an increasingly competitive global market. At issue are U.S. trade agreements that industry members contend have led to a dramatic increase in Chinese imports and the loss of U.S. manufacturing jobs. Processors say they are having a difficult time competing against companies that sell products made in China, where manufacturing and raw material costs are significantly lower.

Lori Anderson, strategic planning and industry relations officer at The Society of the Plastics Industry (SPI), announced that SPI is spearheading a petition it hopes will unify the industry's voice and bring federal lawmakers and policymakers up to speed on the situation. The grassroots effort is aimed at collecting thousands of signatures from industry members and presenting the petition-which calls for six specific measures to ensure the future of plastics in the United States-to national leaders during SPI's September board meeting. The petition was circulated at NPE.

"We are at a crossroads and it is time to unite," Anderson said, a proclamation that drew cheers from the estimated 350 people in attendance. SPI and Injection Molding Magazine sponsored the Crossroads Forum in Chicago.

Plastics processors in attendance voiced concerns over China's increasing role in the global plastics market. One by one, molders provided examples of how domestic and international trade policies have negatively impacted their businesses. Others referenced competitors who have either suspended operations or moved offshore.

Statistics presented by keynote speaker David Friedman, an attorney and senior fellow at the New America Foundation, appear to support these observations. Since the late 1970s, Friedman said the U.S. manufacturing sector went from representing 25 percent of the U.S. job base to 11 percent today. Many of these jobs were replaced by positions in government, education, and retail. "This has led to a massive change of how people view manufacturing," Friedman said.

During this time, manufacturing's share of total GDP plummeted as well, to about 10 percent. Friedman attributed this, in part, to increased foreign investment in manufacturing in Asia, and increasing domestic skepticism that manufacturing is crucial to national welfare and a strong military base.

"Nobody really cares if factories shut down in their area and move to another location," Friedman said.

Some industry members called for a shakeup of the World Trade Organization (WTO) to improve U.S. trade relations. But motivating government officials to make big changes in foreign trade policy is unrealistic, Friedman said. Instead, the industry requires a new approach to get its point across.

"Why does agriculture get enormous media and political concern when we can import [agricultural products] much cheaper from abroad?" Friedman asked the audience. "The reason is agriculture has a simple and consistent message [directed to] local politicians and developed an institutional relationship with government that really can't be beat. By comparison, the injection molding industry is fragmented, with different points of view from large and small companies."

Trade associations, for the most part, recommend continuous and aggressive negotiations to promote free and fair trade worldwide and ensure that U.S. trading partners, including China, live up to their obligations under the WTO. They urge the Bush administration to enforce policies under the WTO to correct the manipulation, as well as under-valuation, of China's currency; enforce China's commitments to the WTO on such issues as subsidies, intellectual property rights, and market access; and enact legislation that renews and grows the U.S. manufacturing base.

"Now that China is part of this, we want to make sure they play by the rules, eliminate subsidies, and dumping," said Scott Otteman, director, international trade policy, National Assn. of Manufacturers (NAM). "It's time to use the free trade agreement to bring down foreign barriers." Otteman served on the panel with Larry Sippy, president of Sipco Molding Technologies and chairman of the National Tooling and Mfg. Assn.; Jay Woerner, vice president, global manufacturing and sourcing, Milacron Inc.; Mark Wall, president, GE Plastics Greater China; and Delphi's Ash.

Whether China should be viewed as a threat or opportunity depends largely on a company's competitive position. In recent years, China has become Asia's primary manufacturing center and the top nation for foreign investment. "The opportunity is the potential market for products," Sippy pointed out. "The threat is an underdeveloped structure making a global manufacturing base."

Woerner compared the situation to when Japanese auto producers successfully entered the U.S. market. "Many of us have the same aspirations and goals as we approach China," he said.

GE Plastics, Milacron, and Nypro all report doing business with customers in China. "From a manufacturing point of view, the objective is fulfillment," said Wall, noting the company operates three manufacturing facilities in China and plans to build more. "As customers come over, they need products and they need them fast."

"China is the sixth-largest market for automotive-that's why we go there," Ash said, indicating Delphi Packard Electric Systems maintains most of its manufacturing activity in Shanghai. "If our customers are building vehicles and want a local source, we will be there."

Attendees questioned whether companies doing business in China receive lower prices on raw materials such as resins. Not so, according to Wall, adding that price levels worldwide are close, regardless of market served. "Some markets in Europe have prices that are less than in China," he said.

But the multimillion-dollar question is how can molders and suppliers maintain a healthy manufacturing base when current U.S. trade policy appears to stack the deck against domestic companies. Trade association representatives suggested that member companies get more involved on the political front. "Our members touch the grass roots level," NAM's Otteman said. "They lobby their local members of Congress."

Panel moderator James Buonomo, who serves as vice president of Nypro's China and India regions, suggested that plastics firms take a hard look at doing business on a global basis. He noted that Nypro began "following its customers" worldwide in 1977 and subsequently grew into an $800-million business. "We have ventures all around the world," he said. "We had a leader with the vision to do it. The world turns every 24 hours and I don't think we are going to stop the turning."

Industry watchers say it is not impossible for U.S. manufacturing to rebound. "There were periods of growth from 1983 to 1993 when the sector added jobs, so things can turn around in the U.S.," Friedman said. "You need to isolate precise measures to make that happen." Greg Valero [email protected]

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