... But Is Undecided on Protecting Machine-Tool Builders (cf. White House Seeks Global Steel Accord ... )
IN coming weeks, the Bush administration will consider whether America's machine-tool industry should continue to get special protection from foreign competition.Five years ago, the Reagan administration moved to protect the industry, negotiating deals with Japan and Taiwan to cut imports of certain classes of machine tools deemed important to national security. Manufacturers use these precision machines to shape metal parts used in automobiles, aircraft, and other products. Now, with the Voluntary Restraint Agreements (VRAs) due to expire Dec. 31, President Bush has yet to make a decision on whether to try to extend the deals. National security is still at stake, argues the Association for Manufacturing Technology. The industry group wants a three- to five-year extension of the VRAs, which would have to be renegotiated. "You need a [protected] market for the commodity-type machines, ... so that you're around to make the specialty-type machines" that the military requires, says James Mack, the association's vice president for government relations. But David Bourne, a manufacturing specialist at Carnegie Mellon University in Pittsburgh, says the issue does not revolve simply around the defense sector's needs. "We have to be considered to be fighting an economic war at this point," he says. American companies, which once dominated the industry, tend to be smaller than Japanese ones, and limited capital for investment is seen as a critical problem. "Let's assure [US companies] ... at least a portion of the US market" while they are restructuring to become more competitive, Mr. Mack says. Even with the VRAs, import penetration in certain classes of metal-forming tools remains as high as 75 percent, he notes. In the 1986 agreements, Japan and Taiwan agreed to bring their market share down to 1981 levels for specific types of machines. Despite the strong lobbying by the industry association, US companies are far from united on the issue. Brian McLaughlin, president of Hurco Companies in Indianapolis, complains that VRAs place undue emphasis on domestic hardware content, as opposed to the software and control technology that is a major part of a machine tool's value. Hurco specializes in adding its controls to standard hardware, which it can buy cheaper abroad than from US sources. But this strategy runs up against the VRA, which guarantees that Japan will not lose its US market share to other foreign hardware manufacturers. "It's a chaot ic situation for a manufacturer that's thinking globally," Mr. McLaughlin says. The current VRAs use a point system to decide whether a given machine is domestic, and a machine cannot get the needed 12 points based only on "intellectual" content of the controls. The industry association wants new VRAs to expand the number of points granted for domestic controlling systems, but it would still be impossible for a machine to qualify based on controls alone. Mr. Bourne says extending the VRAs would help the domestic industry in the short run. "In the long term," he continues, "one has to view this as lack of vitality.... If you don't compete with the best on their terms, you're going to lose."