WASHINGTON (Sept. 18, 2:40 p.m. EDT) — The U.S. plastics processing industry's trade position has worsened dramatically in the past five years, with U.S. manufacturers increasingly losing out to imports in areas such as automobiles, audio and video equipment and institutional furniture, according to a new study.
The report, from the Society of the Plastics Industry Inc. of Washington, said the plastics products industry had a trade deficit of $13.9 billion in 2002, compared with just $4.2 billion in 1997. It blamed the high U.S. dollar, high natural gas costs and a movement of manufacturing to low-wage locations overseas, particularly China.
“It echoes what we've been hearing,” said Lori Anderson, one of the report's authors and SPI's strategic planning and industry relations officer. “We're seeing that [original equipment manufacturer] movement offshore in these numbers.”
While the report does not indicate if the ballooning trade deficit has bottomed out, Anderson said SPI is hopeful that recent attention given to the issue in Washington will lead to policy changes that will help, such as pushing China to let its currency float freely.
“Until issues like that are addressed, you're going to continue to see these [trade] numbers go down,” she said.
While the report buttresses complaints from the processing industry that it's being hard hit by foreign competition, it also notes that the resin sector is holding its own in the international economy, in spite of big increases in natural gas feedstock costs.
Resin makers had a surplus of $7.2 billion last year, up 3.6 percent from 2001 and still at historical peak levels.
The machinery and mold-making segments, not surprisingly, each continued to run trade deficits of about $500 million.
Much of the report is given over to data detailing the processing industry's trade position, both worldwide and with China.
For the first time, the report analyzes government data to determine trade figures for plastics “contained” within manufactured goods, like cars and computers made by OEMs and shipped to the United States. Previously, SPI only analyzed government data for “per se” products made entirely of plastic, like bottles, tubes or pipe.
The difference is substantial: Looking only at “per se” plastic categories, the processing industry had a deficit of $1.4 billion in 2002. When plastic parts used in other manufactured goods are taken into consideration, the deficit shot to $14 billion, SPI said.
But what the report does not say is how much of the industry's current problems can be traced to trade, instead of a weaker economy. While the $14 billion deficit is growing, it remains a fraction of the overall $320 billion plastics economy in the United States.
The trade figures also include products made by overseas ventures set up by U.S. companies and then sent back to the United States, but it's not clear how big of a factor that is.
Still, the report takes a detailed look at how the globalization of the manufacturing industry is affecting plastics.
The largest single category of imported plastic parts worldwide was in automobiles, where the industry saw its trade deficit rise from $1.8 billion in 1997 to $2.8 billion last year. The story was similar for audio and video equipment, where the deficit went from $1 billion to $1.8 billion.
The other category that topped a $1 billion deficit in 2002 was a catchall of miscellaneous plastic products, which went from a surplus of $261 million in 1997 to a deficit of $1.05 billion.
Other categories also went from surpluses to deficits. Wireless communication, for example, went from a $41 million surplus in 1997 to a $143 million deficit last year.
For China, the report said that the trade deficit in contained plastic products jumped from $3.6 billion in 1997 to $7.6 billion last year. Both imports and exports of plastic products to China are rising, but imports are growing almost three times as quickly.
The largest deficit was in audio and video equipment, which had a deficit of $628 million in 2002, up from $241 million five years earlier.
Games, toys and children's vehicles also had a substantial deficit, of $588 million in 2002. The next largest category, institutional furniture, had a deficit of $404 million; that's up dramatically from an $83 million deficit in 1997.
The report said the types of goods coming from China are changing, from what historically had been consumer goods like plates and kitchenware, to building products like doors, windows and blinds.
While the report notes that the trade balance with China has worsened, data in the report shows that the trade picture with the rest of the world actually is getting worse at a faster pace than with China.
For example, in 1997, the $3.5 billion deficit with China for plastic products accounted for 84 percent of the total deficit in plastic products. By 2002, China was just 55 percent of the overall deficit.
In other words, the deficit with China grew, but the deficit with the rest of world grew faster. Anderson said SPI has not looked at individual country data beyond China, so it cannot say where the deficit is worsening elsewhere.
Anderson said the report also spotlights the positive role that trade with Mexico has had for plastics. Every part of the industry has a trade surplus with that country, she said.
Processors had a $3.2 billion surplus, resin makers $2.1 billion and machinery and molds each had a $161 million surplus.
“Mexico is an example where a trade agreement actually worked,” Anderson said, speaking about the North American Free Trade Agreement. “There may have been some displacement in the industry, but overall, it worked.”
But the report noted evidence that the U.S. industry's surplus with Mexico may have plateaued.