The U.S. plastics processing industry's trade deficit doubled in 2003 to $2.1 billion, led by worsening trade relationships with its largest trading partners - Canada, China and Mexico.
Whatever the cause - global competition, currency pegs, energy prices or sputtering manufacturing economies around the globe - the U.S. industry generally didn't fare well in international trade in 2003, according to new government data.
China accounted for almost 40 percent of the slide for the U.S. processing industry, as China's trade surplus with the United States grew by $400 million. Even the U.S. industry's historic surplus with Mexico, which has tended to offset the deficit with China, shrank by $115 million in 2003.
The picture for the rest of the industry was mixed: Mold makers and machinery companies also saw their trade deficits increase, but resin producers actually saw their trade surplus rise 3 percent, to $7.3 billion.
Plastics industry economist Bill Wood said that while the trade deficit in plastic products grew more than 100 percent last year, it remains relatively small compared with the overall size of the processing industry, estimated at $143 billion in 2002.
Still, it's a sharp swing from a trade surplus of $1.1 billion in 2000. Wood said it's that rapid move into deficits that bears close watching.
``You can't take your eyes off it before it becomes a larger problem,'' said Wood, president of Mountaintop Economics & Research in Greenfield, Mass.
Plastics News analyzed government data to find both the countries and individual market sectors with the biggest changes in trade.
Beyond the $400 million increase in the U.S. deficit with China's plastics products industry, deficits with Canada grew $130 million and Germany $120 million. Adding to the problem: the United States traditionally has sizable surpluses with Mexico and Brazil, but those surpluses shrank by $115 million and $70 million, respectively.
Together, those five countries accounted for $835 million of the $1.1 billion increase in the deficit.
Among product categories for those five nations, China stood out, accounting for seven of the 10 largest increases in deficits, in commodity product areas like household articles, tableware, plastic bags, clothing and crates. The trade picture worsened with Canada in building products and plastic crates.
Lori Anderson, planning and industry relations officer with the Society of the Plastics Industry Inc. in Washington, said anecdotal evidence from the industry indicates the deficit will continue to worsen.
``I can't see anything going on in the industry to suggest that is changing,'' she said. ``There has not been a full recovery.''
Robert Fry, senior associate economist with DuPont Co., said the trade balance with other developed countries like Canada and Germany should improve, as the U.S. dollar weakens against their currencies. Traditionally, there is a lag of 12-18 months between when currencies fall and trade balances improve, he said.
However, he said the trade picture with Asia may not change much.
``You have to look at China and other parts of East Asia differently than you look at Canada, Western Europe and Japan,'' Fry said.
China clearly is a sore spot with U.S. industry.
Jon McClure, president of extruder ISO Poly Films Inc. in Gray Court, S.C., testified before a government committee earlier this year that he sees China's policy of pegging its currency to the dollar as a major problem. He took issue with recent comments from Federal Reserve Chairman Alan Greenspan that China should not float its currency because its economy is too unstable.
``George Bush, John Kerry and Alan Greenspan and all the economists you talk to, they've been beating this drum that free trade is going to benefit the U.S.,'' said McClure. ``I don't believe that's what we're getting with the so-called free-trade agreements.''
He also said the North American industry is hurt by resin prices that are higher than in Asia.
For mold makers and machinery companies, 2003 trade data was similar to the results for processors.
The trade deficit for molds went from $360 million in 2001 to $660 million last year, fueled by increases in the deficits with Germany, Portugal, China and the United Kingdom. While the $660 million deficit is high by historic standards, it remains below the $750 million figure for 1996.
For machinery, the figures tell a similar tale. The deficit in plastics equipment nearly has doubled since 2001, growing from $420 million to $820 million last year.
The biggest swings were with Germany, France and Canada, where deficits increased by $76 million, $63 million and $37 million, respectively, in 2003.
For resin producers, the picture was different.
The industry saw its trade surplus rise a bit, to $7.3 billion. Analysts said resins like polypropylene remain a strong U.S. export, even as others, like polyethylene, suffer from rising natural gas and energy prices.
Kevin Swift, an economist with the American Chemistry Council in Arlington, Va., said plastics is faring much better on the global stage than some other segments of the chemical industry, possibly because plastics are less energy-intensive and more value-added than areas such as inorganic chemicals.
