American Plastic Molding Corp. saw its sales in 2001 drop by one-third, to $8 million, as the economy stalled. The Scottsburg, Ind., injection molder pared its work force in half, to 70 employees, and boosted spending on automation and robotics to make itself more competitive.
It also took a step previously thought unlikely for the small company. Seeing more of its business head to Asia, it struck up a partnership with a Chinese molding and toolmaking company.
Dan Smith, APM general manager, said the venture is in its infancy, but the plan is for APM to send work to the Chinese firm when needed. The firms are not investing in each other, but the relationship and investment in automation is an effort to react to a changing global economy.
``The only way we can compete with China is with automation,'' he said. ``It's the only way we have a chance.''
Smith isn't alone in feeling some anxiety about the international economy and its impact at home. Trade issues seem to be on the rise.
For example, the U.S. government is investigating imports in the mold and tooling industries. Film and bag manufacturers say they, too, are feeling the pinch, and some sectors, like plastic crates and boxes and vinyl flooring and tiles, have seen imports rise sharply in the last few years.
Business trade associations, including the Society of the Plastics Industry Inc., have begun urging the U.S. government to lower the value of the dollar to make U.S. exports more competitive.
The concern is not limited to the U.S. industry - the Chinese government announced late in March that it is investigating whether U.S. PVC producers are dumping products into its market. The Chinese action came shortly after the U.S. government announced new protections for its steel industry.
If you look at the numbers, the U.S. processing industry's trade position suffered in 2001.
The trade surplus in finished plastic products dropped by more than a billion dollars, to $560 million in 2001, down from $1.6 billion in 2000.
The biggest reasons: larger trade deficits with both China and Canada and a sizable drop in the large surplus the United States traditionally enjoys with Mexico.
According to U.S. government data, the surplus with Mexico dropped from $3.8 billion to $3.3 billion, while the trade deficit with China grew from $2.7 billion to $2.9 billion. Industry trade with Canada was much more balanced, but Canadians did export $319 million more in goods than they imported last year.
``They are not buying our products for a whole host of reasons, the high dollar being one of them,'' said Lori Anderson, senior director of economic and international trade affairs with SPI in Washington. Weakness in economies around the world has also heightened trade concerns, she said.
One sector getting hit hard with imports is plastic film and bags.
Imports of polyethylene bags have jumped from $268 million in 1996 to about $512 million last year. The largest source is Canada: Its exports to the United States rose from $124 million to $240 million in that period.
The second-largest source, China, is growing faster, and has seen its exports to the United States climb from $51 million in 1996 to $132 million in 2001. Chinese exports grew 23.6 percent last year alone.
``We've seen an increase in the imported bags, which has concerned the domestic producers,'' said Vic Platta, vice president of sales and marketing for Advance Polybag Inc. in Metairie, La. ``It's typically been at the lower end of the price structure.''
To meet those changes, Advance opened a plant in Thailand six months ago, with 100 employees turning out T-shirt bags. The wholly owned subsidiary, Universal Polybag Thailand, produces bags identical to that made in its other three plants, which are all in the United States, he said.
Platta thinks the companies most affected by imports are those that have not modernized their plants, he said.
The bag industry is trying to understand the issue, said Fredy Steng, sales director for Pliant Corp. and chairman of the Film and Bag Federation, a unit of SPI. FBF plans to discuss the issue at an April 28-30 meeting in Florida.
The group is unsure what course to take: ``To simply run off half-cocked and say these guys are dumping would be unfair,'' Steng said.
While the U.S. government data shows Canadian bag exports to the U.S. rising, one major Canadian low density PE bag producer, PCL Packaging Corp. in Oakville, Ontario, said it faces similar challenges from imports as its U.S. counterparts.
PCL Chairman Bill Swinimer said imports are on the rise from developing countries. He thinks some countries are subsidizing their production because resin costs, which are priced in U.S. dollars, can account for half of manufacturing costs.
Besides economic issues, the industry may be hurt by political restrictions that other countries are putting on plastic bags, said SPI's Anderson. Bangladesh, India, Ireland, Taiwan, the Philippines and South Africa all have either enacted or considered restrictions or taxes on plastic bags, she said.
SPI plans to look at whether any of those restrictions violate trade rules, she said.
Strong dollar hurting
Some U.S. business groups say the strong dollar is the chief reason for a weakening U.S. trade position. In a late February study, the National Association of Manufacturers in Washington blamed the strong dollar for 400,000 lost U.S. manufacturing jobs.
``The principal reason for the decline in manufacturing is that the dollar has risen 30 percent against other currencies since 1997,'' said NAM President Jerry Jasinowski.
That scenario seems to be playing out with Canada, the largest trading partner for the U.S. plastics industry.
The relatively weak Canadian dollar is the biggest factor in more Canadian exports to the United States, said Faris Shammas, chief economist with the Canadian Plastics Industry Association in Mississauga, Ontario.
In 2001, according to U.S. data, Canadian companies enjoyed a US$319 million surplus with the United States, up from US$144 million the year before. Just two years earlier the U.S. had enjoyed a surplus of US$80 million.
But the weak Canadian dollar has a downside for manufacturers north of the border.
``When you have a strong currency like the U.S. has, the U.S. is very productive,'' Shammas said. ``The gap between the U.S. and Canada in productivity is growing.
``We benefit from the lower exchange rate but it's not something that will be there for the long term,'' he said.
Some of the largest plastic industry trade sectors reported varying degrees of increases in their imports.
* In household and toilet articles, imports rose 13.5 percent in 2001, to $541.8 million. Imports from China jumped 18 percent last year, and have risen from $132.7 million in 1996 to $320.1 million last year. China accounts for more than half of the imports in the sector. Imports from Canada in the sector rose 23.7 percent, to $36.8 million.
* The box and crate market saw imports rise 4.4 percent overall, to $406.8 million. Canada, the largest source, saw its exports to the United States drop 6.6 percent, while China, Taiwan and Mexico, the next-largest competitors, saw their exports rise 11.6 percent, 12.4 percent and 41.2 percent, respectively.
* The tableware industry saw its imports rise only 2.6 percent, to $460.8 million. The top exporter, China, rose 8.3 percent, to $238.9 million.