Import Tide Floods US Business
Influx of goods from Asia contributes to slowdown of US economy, producing hardships from the farm to factory floor.
Imports from around the world are flooding into the United States as ailing Asian companies look for somewhere to sell their goods and American consumers keep buying with Fifth Avenue fervor.
The surge in foreign products - everything from New Zealand lamb to Korean computer chips - is contributing to a slowdown of the US economy and producing hardships from the farm to the factory floor. For example:
* Eileen DiFelice, who cans mushrooms in Hockessin, Del., says she's laid off 30 employees because of cheap imports from China, Indonesia, India, and Chile.
* Jin Park has let 30 percent of his work force go and filed for bankruptcy at Al Tech Specialty Steel Co. in Dunkirk, N.Y.
* Harold Harper, a feedlot operator in Eaton, Colo., says he's been financially "wrecked" because of sheep imports from Australia and New Zealand.
All these businesses have made their complaints public: They or their trade associations filed petitions with the US Commerce Department to try to halt the influx of foreign goods.
It is a trend that is accelerating. In the first six months of the year, US businesses filed 38 "anti-dumping" lawsuits at the Commerce Department against foreign companies. This compares with 22 for all of last year. Trade lawyers say more complaints are coming.
"It's been somewhat surprising to us that there has been so much activity during a time of prosperity in the domestic economy," says David Hartquist, a partner with Collier, Shannon, Rill & Scott, a Washington law firm that has filed some of the petitions.
But the turmoil in Asia has led companies in China, Korea, Thailand, Indonesia, and Japan to aim their products at the vibrant US market. With European markets remaining flat, they've had few choices.
In addition, there has been a surge of investment around the world. This has increased global capacity in many industries well beyond demand. "There's a lot of product out there seeking buyers, so price competition has been very intense," says Mr. Hartquist.
On Friday, the surge in imports was reflected in the advance gross domestic product numbers, which showed the economy's growth slowed from a 5.5 percent annual rate in the first quarter to a 1.4 percent annual rate in the second. Those numbers were stronger than many Wall Street economists had expected. Some economists, in fact, had predicted the second quarter would be negative for the first time since 1991.
Why economy keeps going
Instead, strong consumer spending and a vibrant housing market helped to keep the economy humming. "The domestic economy is great. The consumer is spending his heart out," says David Wyss, economist with Standard & Poor's DRI in Lexington, Mass.
Even so, he expects the Commerce Department to revise the number downward next month to reflect the deterioration in trade. In Friday's report, the government estimated exports fell by 8 percent while imports rose 12 percent.
For many businesses, the import surge is something they've been coping with for some time. Take Wellman Inc., the manufacturer of packaging resins and polyester fiber. Eight months ago, Wellman's fiber markets were deluged with imports.
Then, six months ago, it was fabric. Now, James Casey, president of the fibers division, says there has been a surge in imports over the last 14 weeks in finished garments from Korea, Indonesia, and Pakistan.
"They are selling them at 15 percent below their already low price," he says.
Since these garments are made with foreign-made fabric and fiber, Wellman loses business. "I know we are not selling as much as we would this time of year," says Mr. Casey.
So far, Wellman has not had to lay off any workers or close factories. Instead, he says, the company is scrambling to provide better customer service and engineering services.
Still, many businesses are resorting to formal trade complaints. That's the case with the nation's specialty-steel manufacturers, who have filed two anti-dumping complaints.
On July 21, Commerce Secretary William Daley took the unusual step of announcing how large a duty he was going to slap on overseas producers of stainless-steel rod for selling their product at less than their cost of production, plus a reasonable profit.
"He apparently wanted to use it as an example of how they care about Asian issues," says William Pendleton, director of government relations at Carpenter Technology Corp., based in Reading, Pa. "It sends a message to the Asian people that this government is watching trade very carefully."
Competing with the imported prices can be expensive. Even so, companies like Carpenter are striving to keep their market share. "But it's like shipping it [the steel] out and wrapping it in dollar bills," says Robert Cardy, company chairman.
Republic Engineered Steels in Massillon, Ohio, says it has lost business by not matching low import prices on rod. "We would have higher levels of employment in our Baltimore plant," says John Vaught, president of the specialty division. For example, he has one finishing plant operating only a single shift. "I've taken people there and moved them to other places," he says.
Impact on Harper's sheep ranch
For others, the imports are causing far more damage. The sheep industry estimates imports now represent 30 percent of the market, up from 7 percent five years ago. Imported lamb has reduced prices to the point where many domestic producers are not expected to make any money this season.
"We lost everything we had this last year," says Mr. Harper. "We've just been wrecked financially."
That was the situation, too, for Ms. DiFelice, whose Southwood Farms brand of canned mushrooms was close to disappearing. Many of her customers had shifted to Chinese imports.
In just a few more months, "we would have suffered losing our business," she says. Instead, last week the Commerce Department tacked on duties that ranged from 168 percent to 189 percent on Chinese canned mushrooms. "It was getting pretty hairy there," she says.