Trade Politics Hurting Tool Makers
Matthew Coffey said he has the impression that about the only hope for American molders and tool and die makers is for each to discover a product innovation and make a lot of money off it quickly — before mainland China pirates it.
Coffey told the Business Journal the problem is two-fold.
He explained that though the U.S. economy is improving, American-Chinese trade and Washington, D.C.'s indifference to small businesses have molders and tool and die makers in a bind.
"What's happening," says Coffey, "is that the government of the United States has created a hostile tax and regulatory climate for modest-sized tooling firms and the Chinese government is taking full advantage of the situation."
Coffey was speaking with the Business Journal while making preparations for the biennial International Manufacturing Technology Show running Sept. 4 to 11 at Chicago's McCormick Place.
Ten West Michigan regions firms are among well over 1,300 firms registered to exhibit during the five-day event.
And though Coffey said the show is coming near the end of a quarter in which exhibitors were expecting orders to begin picking up, they find themselves facing a progressively steeper competitive disadvantage.
According to Coffey, the Chinese government is inviting major American firms to set up shop in China with Chinese labor. "And they're letting them produce and bring the product back here below the cost that an American company pays for materials," he said.
"And the OEMs (original equipment manufacturers) are going for it hook, line and sinker," he added.
He said OEMs are investing in China in part because it enables them to pay lower wages and completely skirt the huge cost of employee health benefits.
"The Chinese firms don't give their people raises," he said, "and the OEMs don't have to provide health insurance for them."
It isn't helping domestic producers, Coffey added, that Bush Administration policies are boosting the price of materials.
The Bush White House this spring erected a tariff barrier to foreign steel, thus leading to an increase in the prices which American tooling and machining firms must pay for that commodity.
"The Chinese also are subsidizing raw materials," Coffey added, "and at the same time they're slapping a 17 per cent value added tax on any American product that's exported to them."
The result, he said, is that Beijing and Washington between them have totally distorted the market.
"There's no way an American company can get an edge," Coffey said, "except to be very flexible and to find some way, some innovation, to make a superior product and then exploit it during a brief window before the Chinese get it and start doing the same thing."
He said that as far as the show is concerned, the overriding theme among exhibitors seems to stress making gains in productivity by pushing technology to manufacture things faster, with better quality at lower unit prices.
He said the show will include demonstrations of the ways information technology-based manufacturing can be united with machine tool technology.
The association's first tool show occurred in Cleveland in 1927. It featured 184 exhibitors and 12,000 people attended.
Next month's show will have almost seven times as many exhibitors and about 100,000 visitors, both from all over the globe.