America's Forgotten Manufacturing Sector
The Hartford Business Journal Jan. 28 article, “Questioning China’s Steel Industry,” highlights the challenges facing U.S. manufacturers, but unfortunately chose to highlight one of the few manufacturing sectors that has done relatively well over the past several years — the U.S. steel industry.
Since 2003, U.S. steel producers have restructured and revitalized, shedding legacy costs such as pensions while creating a leaner, stronger industry able to respond more quickly to changes in market conditions. Steel companies can now quickly increase or decrease their steel production at will to ensure price and inventory levels remain optimal for the industry.
Indeed, the U.S. steel industry is in a strong position to compete with imports of steel from all countries, including China. For the U.S. steel industry’s customers, it’s a different story. Manufacturers who use steel and other raw materials are facing rising costs and a surge in imports of inexpensive metal-containing finished products and components such as automotive parts.
American manufacturers rely on raw materials such as flat rolled steel to produce their finished products and assemblies. U.S. steel-using manufacturers employ over 9 million American workers, compared to less than 200,000 in the U.S. steel industry, a ratio of 60 to 1, including 142,191 steel-using jobs in Connecticut. These companies not only have to contend with the rising cost of steel, but also need to keep prices low in order to compete with overseas competitors.
China Is A Problem
The most significant problem for U.S. metalforming manufacturers is China. Chinese manufacturers benefit from cheap steel and an undervalued currency that keeps their costs low. In fact, a new phrase has become popular among U.S. steel-using manufacturers — “the China Price.” More and more, manufacturers are being told by their customers that their product line is being imported from China for less than the cost of raw materials alone in the United States. Imports of automotive stampings from China increased at the rate of 51 percent in 2007 compared with 2006 figures. The same is undoubtedly true in other sectors as well, but our government doesn’t even track the imports of many of our products. In contrast, the government tracks imports of more than 100 different steel products.
Compounding the pain for U.S. manufacturers are the trade policies of our own government. Trade restrictions put in place to help the U.S. steel industry years ago are still in effect even though the steel industry has consolidated, is profitable and no longer needs to be protected. Often these “restrictions” are in the form of taxes, sometimes as high as 243 percent. By placing unnecessary barriers on steel imports in the form of dumping duties (imports of hot and cold rolled steel were down 49 percent in 2007) to assist the U.S. steel industry, the government is helping drive the cost of steel sold in the U.S. above global market prices, effectively denying manufacturers reliable access to competitively-priced steel.
Adding insult to injury, steel-using manufacturers are denied a voice in decisions on steel import restrictions made by the U.S. government. Unless the law is changed to grant “standing” at little-known but crucial proceedings at the U.S. International Trade Commission, steel-using manufacturers in the U.S. cannot present data and information that the commission needs in order to make a proper decision about whether restrictions are needed on steel and other essential raw materials.
Metalforming companies are not against trade laws. Trade needs to be fair and there must be tools in place for companies to use when other countries don’t adhere to fair trade principles. However, there also needs to be a more open decision-making process on trade cases that doesn’t benefit the few while injuring millions of manufacturing workers and businesses. It is critical that penalties assessed in these cases do not result in U.S. manufacturers paying prices for steel and other raw materials that are significantly higher than those paid elsewhere in the world. Imports are critical to the competitiveness of U.S. manufacturers who need a globally competitive supply of high-quality materials to serve their customers.
Bernard Rosselli Jr. is president of Stewart EFI, based in Thomaston, Conn., and past chairman of the board of the Precision Metalforming Association, a trade association representing the $91-billion U.S. metalforming industry. PMA has more than 40 member companies in Connecticut.
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