I used to live in Chicago and trade commodities at the Chicago Mercantile Exchange. I remember telling a fellow trader that I didn’t know anybody who actually manufactured anything. Then I moved to Cleveland, OH, and met all these people who make stuff.
A couple of months ago, though, Ford announced that it was closing one of its Cleveland casting plants (in Brook Park) and furloughing one of the two famous Cleveland engine plants for a year.1A few weeks later, I noticed a news story highlighting a Chinese automaker, Zhongxing Automobile, that planned to begin exporting pickup trucks and sport utility vehicles (the Zhongxing Admiral) to Mexico this year as part of a strategy to sell its low-cost vehicles in the U.S.2The article noted that the company plans to build a plant in Tijuana, Mexico, so that it can export its vehicles to the U.S. duty-free under the North American Free Trade Agreement.
An Alarming ProblemIt would be easy to make this column one of those “China bashing” rants calling for trade bans and all sorts of protectionist measures. It’s bad business to ignore the great potential of China. But it’s equally bad business to do nothing about the plight of U.S. manufacturing - at least for a guy living in Cleveland. Instead, I am an advocate of enforcing our laws and demanding a reasonably even playing field for U.S. manufacturers.
For example, consistent currency rate manipulation of the Yuan by China to artificially boost U.S. imports of Chinese products has only recently drawn attention. In April, members of Congress introduced a bill designed to bring relief to U.S. manufacturers faced with competing against “injurious imports subsidized by China’s undervalued currency,” according to a U.S. coalition that was formed last year to bring attention to the issue.
The U.S. Immigration and Customs Enforcement branch of the Department of Homeland Security recently noted, “In recent years, counterfeiting, piracy, and other intellectual property rights (IPR) violations have grown in magnitude and complexity, costing U.S. businesses billions of dollars in lost revenue and often posing health and safety risks to U.S. consumers. Industry and trade associations estimate that counterfeiting and piracy cost the U.S. economy between $200 and $250 billion per year, a total of 750,000 American jobs.”3
According to the U.S.-China Business Council, The Office of the U.S. Trade Representative (USTR) placed China on its intellectual property rights (IPR) priority watch list on April 29, 2005. USTR released a report that found that China had not fulfilled commitments made last year to reduce property rights infringement, saying that China’s steps to improve enforcement have been “seriously inadequate.”
Additionally, the health, worker safety, wage, energy and pollution problems that plague a country developing as rapidly as China are understandable. (The country’s annual growth rate is estimated at more than 8%.) But the numbers are alarming. According to aBusiness Weekreport, China spent more than $85 billion on environmental cleanup between 2000 and 2005, and it could spend as much as $380 billion on this problem by 2010.4The report also noted that China consumes nearly five times as much energy as the U.S., and almost 12 times as much as Japan, to produce each dollar of its gross domestic product.
UV Technology and Wal-MartSo what does all this have to do with UV curing? Well, closing the Cleveland Engine plant is a bad thing for UV. Ford was looking into novel uses for UV for its engines, and those projects are now dead. So are the projects at scores of other industrial manufacturing facilities in the U.S. We held a great cellular telephone coating symposium a few years ago in Chicago. The attendees all felt it was an informative event - except for the minor problem that virtually no cell phones are still coated in the U.S.
From tier-one automotive to appliances, giant chunks of manufacturing are disappearing. Once again, as industries embrace UV technology, the technology is threatened. Those of us excited about the growing interest in UV by the aerospace community might have been alarmed to see a news story a few weeks ago about China’s plans to develop its own large civilian jet airliners.5The project is intended to directly challenge Boeing and Airbus.
On March 14, 1985, Sam Walton, the famed founder, chairman and CEO of Wal-Mart, wrote a letter to Wal-Mart suppliers, saying:
Our country’s international trade deficit is a serious problem. I strongly believe the future of Wal-Mart, US manufacturing and our nation depends upon our ability to jointly correct this problem…. Something can and must be done to reverse this very serious threat to our free enterprise system and our great country. Our Wal-Mart Company is firmly committed to the philosophy of buying everything possible from suppliers who manufacture their products in the United States…”6
What would Sam Walton say now? Today, Wal-Mart purchases $18 billion of goods from China. According to Bloomberg, in 2005 Wal-Mart alone made up one-tenth of the entire U.S. trade deficit with China. And according to China Business Weekly, if Wal-Mart were a country, it would rank as China’s eighth largest trading partner, outpacing Russia, Canada and Australia.
I am certain Sam Walton must have considered that without a sound economy, based in large measure on local manufacturing jobs in many Wal-Mart markets, the company would not succeed long-term. Clearly the Wal-Mart store on Brookpark Road, less than three miles from the Ford casting plant, will see a drop in sales as nearly 1800 local workers struggle to tighten their budgets due to losing their jobs.
I used to pass by Wal-Mart’s corporate headquarters in Bentonville, AR, when we were working on the first UV powder system with Baldor Electric Motor in nearby Fort Smith, AR. Baldor, a leader in American motor manufacturing and a strong advocate for UV technology, now faces the same pressures in their business. According to a recent article on trends in motor manufacturing, many compressors and motors are now manufactured in Brazil and China, primarily due to the low labor costs in these countries.7
Hey, selling this UV stuff is a hard enough job, but it’s impossible when nobody is coating their products in the U.S. anymore. I can only add to Sam Walton’s concern that UV coating in the U.S., along with manufacturing in general, is at risk of annihilation.
Ways to Take ActionThe problem being faced by U.S. manufacturers isn’t new, but it’s easy to feel helpless. Is there anything you can do to support U.S. manufacturing? Here are my recommendations:
- Urge your representatives in Congress to support legislation that promotes a fair currency rate exchange between the U.S. and all of its trading partners.
- Urge your representatives in Congress to support the investigation of any World Trade Organization member country that is not vigilant about protecting the intellectual property rights of U.S. companies.
- Support global efforts to bring pollution standards, energy efficiency and worker rights into line. Pollution control is a friend of UV.
- If the first three sound hard, visit the National Association of Manufacturers website at www.nam.org – this group makes it easy to do something.
- Sign up on www.wakeupwalmart.com and revive Sam Walton’s vision for keeping his customers employed.
- Buy goods produced in the U.S., both at home and for your business.
- Buy a Ford Explorer and not a Zhongxing Admiral.
What do you think? E-mail your opinion on this column to email@example.com.