Black & Decker Corp.'s work used to account for about 35 percent of the business for mold maker Xcel Mold and Machine Inc. in North Canton, Ohio.
But three years ago the power tool manufacturer shifted that work to China, Portugal and Latvia. Xcel's share dwindled to almost nothing.
Bruce Cain, Xcel's vice president of manufacturing, blamed U.S. trade policies, which he says have hurt his business and the mold-making industry in general. Other toolmakers cite their own anecdotes of lost business, especially of business lost to China.
``We keep having this thrown in our faces [by our customers], how much cheaper they can buy tools in China,'' said Dan Jepson, president of Jepson Precision Tool Inc. in Meadville, Pa. ``China has become the lightning rod.''
U.S. mold makers are hurting, and many, including Cain and Jepson, direct a lot of their anger at China. Some, including bands of executives in Erie, Pa., northeast Ohio and Illinois, are lobbying the government for a remedy, even as they work to make themselves more competitive. Others in the mold-making industry, however, say the problem is not unfair trade - it's broader economic change without easy solutions.
One member of Congress, Rep. Phil English, R-Pa., from Erie, is surveying local mold makers and wants the U.S. International Trade Commission to launch a Section 332 unfair trade investigation into mold imports.
What can, or should, the U.S. government do?
One trade expert who has looked at the mold-making debate said there's not enough evidence now to say whether the United States is a victim of unfair trade.
``In and of itself, competition isn't a problem,'' said Kenneth Louie, an associate professor of economics at Penn State University's Erie campus.
But if Chinese toolmakers ``are able to bring in the latest equipment because of a government subsidy, then it becomes a matter of greater concern,'' said Louie, who addressed a tool and die summit in Erie in August. ``Then it becomes an issue of fair or unfair trade.''
U.S. trade laws can address both dumping, where a product is sold below cost from another country, and a foreign government subsidizing exports. For dumping, U.S. industry has to show it was harmed, Louie said.
To win a subsidy case, however, the burden of proof is not as high. ``You just have to show evidence of a subsidy,'' then U.S. authorities can impose special tariffs to offset the price of imports, Louie said.
But defining a subsidy can be tricky and can make the decision very political. It's difficult to get data that specific about levels of subsidies, and often subsidies are not given directly but in more subtle ways, he said.
``Even after the investigation, it's unlikely the answer would be black and white,'' Louie said.
The U.S. government also subsidizes industry, said Ralph Pontillo, president of the Manufacturers Association of Northwest Pennsylvania, an Erie trade group. MANP represents many other industries but has hosted several forums on the topic for mold-making companies this summer. A mid-August meeting drew 250 people.
For example, the World Trade Organization recently ruled that the United States gives billions of dollars in illegal subsidies by letting U.S. firms set up foreign sales corporations that exempt some export profit from taxes.
``The information we have does not suggest heavy subsidies for tool and die in China,'' Pontillo said.
Congressman English plans to ask the House Committee on Ways and Means to investigate.
``We've heard a lot of blaming China,'' said English spokeswoman Jennifer Hall. ``Unfortunately, we need to prove that. ... We believe them; we'd love to act. Very bluntly, going on beliefs is not enough.''
English was successful in getting a U.S. International Trade Commission investigation for the foundry coke industry that found Chinese companies were ``illegally undercutting'' U.S. manufacturers on price, Hall said.
But Louie urged caution: ``Because they have been found guilty in one area, the finger gets pointed at them in something else.''
Like the coke industry, the mold-making industry is not large, which makes it easier for the government to initiate an investigation, Hall said.
Some mold makers want the U.S. government to raise the tariff on tools imported from China. They complain that the United States assesses only a 3.1 percent tariff on imported molds - the exceptions are Canada and Mexico, which pay no tariff because they are covered by the North American Free Trade Agreement. China, on the other hand, puts a 12 percent tariff plus a 17 percent value-added tax on U.S. molds.
Others in the mold-making community say unfair trade is not the issue, and import restrictions are not the solution.
The manufacturing economy is weak, original equipment manufacturers always are looking for low-cost manufacturing locations and the strong U.S. dollar makes exports expensive, they argue. One mold-component importer said mold makers sometimes sound like ``loyal, American flag wavers who are getting bypassed by the global economy.''
U.S. mold-making groups involved in the issue are focusing part of their efforts on making their members more competitive.
``If there is a trade issue at all, it is dollar-exchange-rate driven, not tariff- and tax-driven,'' said Matt Coffey, president of the National Tooling and Machining Association in Fort Washington, Md. ``Unless there's been a radical shift in trade patterns, the numbers don't support the conclusions that a lot of people are making.''
Coffey said he is more than willing to pursue trade complaints, if evidence points that way. He said English's survey may yield some new information, but recent trade data does not show a significant amount of mold making migrating to China.
Canada accounted for more than 60 percent of injection mold imports in 2000, shipping US$552 million in tools into the United States. Japan was second, with $145 million.
China ranked sixth, with just $16 million. That's less than 2 percent of the $902 million in imported tools in 2000.
``The amount of information we are assembling does not indicate that we need to develop a protectionist mentality with China,'' Pontillo said.
A growing trend
But what has mold makers worried is China's growth. Imports of molds from China have grown an average of 37.7 percent annually between 1997 and 2000, making it the United States' fastest-growing competitor. Also, there appeared to be a surge in mold imports from most of Asia in the first half of 2001, compared with the same period in 2000. Among the top 15 countries, imports from China were up 19 percent, Taiwan up 54 percent, South Korea up 52 percent and Hong Kong up 39 percent.
By comparison, Canadian imports dropped 31 percent, and Japanese imports fell 8 percent. Overall, injection mold imports were down 21 percent through June.
Mold makers say they have plenty of anecdotal evidence of business lost to China. Most of them said they started seeing it three years ago.
Olav Bradley, chief executive officer of PM Mold Co. Inc. in Schaumburg, Ill., said the firm that used to be his largest customer, a client for 25 years, is moving most of its work to China. He declined to name the company but said he's now doing 10 percent of the work he once did for that firm.
In Cain's case, Black & Decker officials confirm that Xcel was an ``excellent supplier'' but say moving their mold work overseas saved them 25 percent on the total cost and sped up delivery. Black & Decker spokeswoman Barbara Lucas said when they moved the work overseas, they made the mold design ``somewhat less demanding.''
Some of those molds come back to the United States. But others do not, and Black & Decker noted that manufacturing for its household power tools is shifting to Mexico.
That illustrates what most people interviewed acknowledged is a difficult problem: If the mold making is leaving the United States because the part production is going to other countries, there is not much the U.S. government can do, short of telling companies they cannot move.
Toolmaking groups are taking a two-pronged approach to dealing with competition: working to make their members more competitive and pursuing government remedies.
Jepson, who also acts as spokesman for MANP's government affairs committee investigating the issue, said U.S. mold makers would like reciprocal tariffs added equal to the higher tariffs charged by China and other countries.
That's a point echoed by Bradley, who is also president of the American Mold Builders Association in Medinah, Ill. But beyond higher tariffs, Bradley argues that the U.S. government should change its own tax laws to let the capital-intensive mold-making industry depreciate equipment faster and provide more tax incentives to help pay for training. The AMBA, which is the country's largest mold making association, has been very vocal on the trade issue.
Several mold makers also said they feel disadvantaged because they believe U.S. environmental and safety regulations are more costly than those in China. It is impossible to compete with much of Asia on cost, they argue.
Jack Lemkin, president of mold-component importer Sinitron in Columbus, Ohio, said a hypothetical mold for vacuum cleaner parts could be 30 percent cheaper coming from the Orient, even with shipping and commissions to importers. He assumed a $55 per-hour cost for U.S. factories, for labor and operating expenses, and an $18 per-hour tab in Asia.
North American firms are naive to think they can stop that trend, he said. The better avenue, he believes, is to partner with an Asian firm. Tooling design can be done in North America, and the mold can be largely built in Asia. The North American firm can offer local service as a strong selling point and still charge a markup that allows it to make money on the order, Lemkin said.
Lemkin acknowledged that path can be very difficult. He said mold makers need to use agents familiar with Asia, rather than rooting around themselves. Lemkin imports extensively from China.
Mold makers who are leading the efforts acknowledge their problems are complex, and they do not expect the government to solve them single-handedly.
A complex situation
Steve Schler, president of ProMold Inc. in Cuyahoga Falls, Ohio, said there is no simple solution.
``The Canadian impact on the U.S. is part of the equation,'' said Schler, who is president of the Akron chapter of the NTMA. ``Training, our tax structure, our import/export duties have been part of that equation.
``When you take all that and add to it the Chinese factor, and it is a substantial part of the equation, then the discussion all goes that way,'' he said. ``Having said that, I don't know what other force we can apply to make up for the discrepancy or to correct the imbalance that the Chinese have. ... I'm for free trade, but there is also something called fair trade.''
Several mold makers said they believe business lost overseas is having a bigger impact on them than the slowing economy.
While mold makers themselves may disagree on the best solution, it also is clear that the plastics industry overall does not speak with one voice on the issue. For example, the Washington-based Society of the Plastics Industry Inc. has mold-maker members and is looking at programs to help them be more efficient, but it is staying out of the tariff debate because many of its member companies are processors that want to buy offshore molds.
``We are kind of handcuffed as an association in how involved we get,'' said Walt Bishop, executive director of SPI's Moldmakers Division.
Schler said it will take a lot of organization for mold makers to overcome the U.S. government's basic policy of trying to build closer ties to China: ``Unfortunately for our trade, this is part of building closer ties with China.''
The issue clearly provokes strong emotions among mold makers.
``We're getting the shaft, and I feel terrible about it,'' said Cain. ``I see guys closing their shops every day. It's like we're a sacrificial lamb.''
While Jepson said he favors some U.S. government response, he said he is a little uncomfortable with that. About a decade ago, the suppliers to his industry - people who make things like grinders and lathes - started seeing a lot more foreign competition. Now, there aren't many U.S. manufacturers of those products remaining.
``It kind of bothers me that we are seeking protection for the same thing we didn't protect American machine toolmakers from,'' he said. ``To now ask our customers to not buy a less-expensive product from China when we didn't protect our own is a little hypocritical.''