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Considering China

Though China, in ancient times, was able to construct the Great Wall to keep its inhabitants safe, today there is no wall to keep Chinese-produced goods out of the US marketplace to keep US manufacturing safe. What does this mean for the converting sector?

Click here to read Considering China, Part II, October 2003.

“The China trade debate has split the…Party and its traditional bases of support from [the] President….” A summary quote grabbed from yesterday's news? Actually, it's the lead sentence from a news article from Public Broadcasting Systems' OnLine NewsHour Report: OnLine Focus. It has a dateline of May 18, 2000 (pbs.org/newshour/bb/asia/china/pntr/debate_intro.html). The sentence is written exactly: “The China trade debate has split the Democratic Party and its traditional bases of support from President Clinton.” Three years and a new administration later, the debate grows.

A Splitting Issue
Those in business, especially in the manufacturing business, know trade and China, when paired in even the most polite conversation, can lead to disagreements, frustration, arrays of theories, and confrontations — but one thing it rarely leads to is dull discussion.

The issue, as illustrated in the PBS story, has the ability to split a party (though what doesn't these days?) — on both Democratic and Republican sides. It puts suppliers at odds with possible customers, as demonstrated in the Global Business Council (of the Society of the Plastics Industry [SPI]) Crossroads Forum held this summer at NPE 2003 in Chicago.

The breakfast meeting, entitled “The China Factor” — which was sold out and moved twice to accommodate attendees — provided a well-rounded venue for plastics industry entities: on one side, US-based small- to medium-sized manufacturing operations with market erosion woes, and on the other, supplying-vendor companies that have established growth-market operations in China or elsewhere in Asia.

If the trade show were held in Vegas, panelist introductions could have been announced: “In the left corner, with a legacy of weighty innovation by US manufacturers, is the National Association of Manufacturers (NAM). And in the right corner, weighing in with substantial investment in China, is General Electric Co. (GE Plastics).” Well, it wasn't that much of a fight. Or was it?

Though the meeting wasn't so contentious as to result in any split or swelled eyes, SPI's GBC China Factor Crossroads Forum did have its share of inflammation. Small- and medium-sized manufacturers protested practices — affecting employment, living, and environmental standards — that China (and other economies new to free market competition) reportedly exploit, yielding lower selling-price advantages and ultimately costing US-based manufacturing jobs. (According to NAM, the US manufacturing industry lost 56,000 jobs in June 2003 alone: “a 15.1 percent reduction of America's manufacturing employment — a loss of one out of every seven US factory jobs.”)

Companies like GE Plastics (also a manufacturer) and others on the panel with investment in Asia defended their right to operate in China and in Asia, pointing to the free market rationale, and reporting that much of the product being manufactured there also is being consumed there.

Jobs in Jeopardy
Without numbers to back that up, manufacturers losing business to China (or to Asia) may not believe the part about consumption. (See PFFC's upcoming October issue feature on China BOPP expansion by Simon King, PCI Films Consulting.) But they don't require proof for the free market part, says Steve Young, president of the Association of Independent Corrugated Converters (AICC). “I think most of our members [are] not in favor of trade barriers. They're in favor of a free market. We can't put a wall up around the country. But, by the same token, what's wrong with another ‘Buy America’ campaign, as the labor unions and other industries did back in the 1980s? It was a very effective method.”

Nothing wrong at all with employing such a campaign, most — on both sides — probably would agree. But would it be enough? Not likely, as Young also points out, because most of the damage is done already.

“We have pretty much ceded all the manufacturing of small consumer items or consumer goods to China because of its low-cost manufacturing. That horse is out of the barn; I don't know if we'll ever get it back. That's the unfortunate part,” says Young.

According to Boston Globe columnist Charles Stein, “The United States has for years run a substantial trade deficit [with China]…. More recently, however, both the scale and the breadth of what we import has escalated,” he reports in a July 27 article, “A New Red Menace Imperils Trade, Jobs,” adding, “The US trade deficit with China is now running at about $110 billion a year, double what it was five years ago, and 28 percent more than it was a year ago.”

Industry Action

But US manufacturers are far from throwing in the towel, as evidenced by the overwhelming interest in SPI's China Factor Forum. All types of manufacturers, converters included, are looking for answers — solutions to stop, or at least diminish, market erosion due to trade inequities. Some industry groups are providing the necessary coordination to get policymakers to take notice.

At NPE last June, SPI promoted heavily its own petition, “The Future of Plastics Manufacturing in the United States,” which “appeals to the nation's leaders to institute and support…measures to ensure the future of an integral American industry and to circumvent the loss of technology and capability that is critical to the future of our nation's economic vitality, military strength, and quality of life.”

SPI's petition explicitly asks government decisionmakers to institute and support: “Continuous and aggressive negotiations to promote free and fair trade worldwide and to ensure that our trading partners, including China, live up to their obligations under the World Trade Organization….” (The SPI petition is available at plasticsindustry.org/feedback/pmmsurvey.htm.)

AICC's Young also reports of recent currency-related efforts among various industry associations. “I [am talking] with a group working through the National Association of Manufacturers to bring what's called a Section 301 action against China, Taiwan, Japan, and South Korea for currency manipulation,” he explains. “These countries are pegging their currencies [as artificially cheap], keeping the dollar artificially high, thereby making our exports to them much more expensive — and imports from those countries much less expensive.”

On a smaller scale, converters like Solon, OH-based Card Pak Inc. owner Rick Thomas have established membership in more niche-oriented industry representation, like that of the Assn. of Visual Packaging Manufacturers, formed “to address growing concerns over plant closings and lost jobs to overseas competition.”

The group — which will host its next meeting October 14 (during Pack Expo in Las Vegas) and will feature lean manufacturing speaker Jerry Duff [more information available at 888/334-9123 or This email address is being protected from spambots. You need JavaScript enabled to view it.] — is comprised “of leaders and decisionmakers assembled from industries serving the carded packaging market, including printers, thermoformers, equipment manufacturers, and materials suppliers.”

Thomas, a founding and board member, says the group first met this past February. “We went around the room and sample polled those 25 companies [in attendance]. In my estimation, they represented about two-thirds to three-quarters of the blister card market [card converters] and probably an equal amount of the blister [thermoformers].”

After the informal poll, explains Thomas, “our number was just over $26 million lost to China. It's a seat-of-the-pants question,” he says, “probably one you wouldn't fully understand the answer to, because you don't know if you are or aren't getting all the business; your customer may not be telling you the stuff that's gone to China.”


This is part one of a two-part series considering China, overseas trade, and the implications for the North American manufacturing industry. Part two will discuss history's contribution to the current trade situation and manufacturing's status here in the US; how converters can employ quality and efficiency programs to help their positions; and why and how US-based manufacturers of various sizes are continuing to invest in China and in Asia.

PFFC encourages open discussion on this topic in order to provide fair coverage of this controversial, increasingly complex issue. Please e-mail feedback to me at This email address is being protected from spambots. You need JavaScript enabled to view it..


 

Martin Automatic at Labelexpo Europe 2017

 

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