The U.S. plastics processing industry's overall trade deficit grew to $20.2 billion in 2003, as the domestic industry continued to lose market share to imports, according to a new study.
The high value of the dollar, high natural gas costs and the movement of manufacturing to Asia, particularly China, fuels the increase, according to an Aug. 4 study from the Washington-based Society of the Plastics Industry Inc.
The $20.2 billion deficit means that about 13.3 percent of overall plastic product shipments were displaced by imports in 2003. That has been growing rapidly: In 1997, imports were just 4.4 percent of shipments, and in 2000, they were 8.5 percent.
``Thirteen percent is a significant figure,'' said Lori Anderson, SPI's trade, economic and policy issues officer. ``I don't know if it's a surprise but it's more confirmation of what I hear from the industry.''
The figures come from a new calculation SPI did of industry trade, and is much higher than previously estimated.
Previously, industry officials put the figure at only 1 or 2 percent of domestic consumption, because they were measuring trade only in categories specifically identified by the government as plastic products. The 13 percent figure, however, more fully captures the industry because it includes trade in plastic used in other manufactured goods, like automobiles or electronics, SPI said.
Anderson said SPI hears from its members that the economy is picking up, but she said the report could be read two ways: that the growing share of imports is business that can be captured back, or that it represents markets that have left permanently.
The report does not indicate if the rise in imports is from U.S.-based firms with foreign subsidiaries shipping products back to the United States, or if it comes from imports from foreign firms.
``The U.S. plastics market is growing, but it appears that overseas production locations are required to fully participate in it,'' the report said.
Echoing comments that landed Bush economic adviser Greg Mankiw in hot water, the report said the migration to lower-wage countries is at one level normal, as industries mature and the U.S. develops high-tech and service-oriented industries.
But the report also said that rising natural gas prices and the overvalued dollar exacerbate the trend.
Anderson said the report points out the need to address issues that raise the cost of U.S. manufacturing, like rising health-care costs and ``burdensome'' regulations.
The report also argued that addressing one of the causes, the high value of the dollar, could take a while. The dollar is high in part because export-based countries, particularly in Asia, work to keep the dollar high by keeping their trade surpluses in dollar-denominated assets, SPI said.
As those countries develop economically, the report said they will have less reason to support the dollar, and it will fall. But SPI said that process could take a decade or more: ``The dollar needs to fall a lot further before the U.S. merchandise trade deficit gets anywhere near to being in balance.''
The report for the first time looked at trade in resin contained in manufactured products, instead of just resin imports and exports as reported to the government.
The industry had a surplus of $7.1 billion in resin trade, but when resin contained in other products is factored in, it shows a total deficit of $1.1 billion.
The trade picture for the resin manufacturers has changed as well. In 1997, SPI said, the U.S. resin industry ran surpluses with six of the eight major trading regions of the world. By 2003, it ran surpluses with only Mexico and the rest of Latin America.
* The trade deficit for machinery went from $600 million in 2002 to $900 million in 2003.
* The deficit for molds went from $600 million in 2002 to $700 million in 2003.
* China had the largest share of plastic product imports, 28.2 percent, followed by Canada with 28 percent.
* The fastest-growing category of U.S. exports was PET waste, which grew 66 percent a year between 1998 and 2003.