Processors and mold makers in the United States and Canada probably don't feel too bad for their counterparts in Guadalajara, Mexico. Our correspondent Roger Renstrom visited the region in March and reported on how local firms were dealing with excess capacity and slow growth.
Renstrom's report, which ran April 29, hammered home a point that we've been making for years: Original equipment manufacturers looking for the lowest-cost locations aren't going to be satisfied with Mexico. When they factor in all of the costs, Mexican labor isn't really that much cheaper than what they can find in rural, nonunion areas north of the border. If their goal is simply to find the cheapest possible labor, they'll soon discover that wages in some other parts of the world are much less expensive than those in Mexico.
In the 1980s we saw OEMs in search of lower costs moving more production to the southern United States. In the 1990s some went to Mexico, encouraged by the North American Free Trade Agreement. Now they're going to China or elsewhere in Southeast Asia.
All the movement has frustrated U.S. and Canadian processors and mold makers. The economic slowdown and an unusually strong dollar have exacerbated the problem. In recent months our editorial page has been packed with letters from industry folk complaining about lost work and urging their brethren to stick with local suppliers, or to buy only American-made products.
A few of the letter writers have taken Plastics News to task for its historical support of free trade. Now is the time, they argue, to take a stand in favor of North American industry.
We understand their frustration, especially when they feel like they are victims of unfair trade practices. The U.S. government has a mechanism in place for dealing with protectionism-related complaints, but the process is much too slow, and small manufacturers aren't in a good position to spend the time and money needed to get involved. The process needs to be reformed.
U.S. mold makers are working through the complaint procedure now, and just organizing toolmakers and getting the ball rolling was a bit like trying to herd a swarm of mosquitoes. The fact that they've come this far, even if the government doesn't end up taking any concrete action, is still admirable. At least they've drawn the attention of processors and OEMs to the situation, and perhaps convinced a few to stick with — or try out — local suppliers.
Publicly airing toolmakers' problems also has helped the surviving companies better focus their efforts on what they need to do to stay in business.
Still, competition and unfair trade are not synonymous, and we know from experience that protectionism doesn't work. (In a strange bit of irony, toolmakers soon may find that out first hand, as they suffer from the impact of tariffs on some imported steel, which are the result of a politicized effort to protect domestic steelmakers.)
As we've already stated in our annual agenda for the industry: The free market is the best mechanism for raising the standard of living, encouraging democracy and rewarding hard work. Free trade is an important part of the equation, since it inspires stability around the world. Sometimes free trade will cause sporadic damage to market segments, specific companies and individual workers. The government should minimize that harm, within the spirit of encouraging efficiency rather than sustaining unproductive enterprises.