No incentives to manufacture in U.S., industry tells Commerce Dept. official
By Gary Evans -- Furniture Today, April 27, 2003
High Point — Furniture and textile executives told a U.S. Department of Commerce official last week that there are almost no incentives for manufacturing in the United States, but plenty elsewhere. And they aren't at all happy about it.
Their comments were part of a field hearing conducted by Grant Aldonas, undersecretary of international trade for Commerce on manufacturing issues and concerns. High Point was the first stop in a series of visits the official is conducting in Rockford, Ill., California's Silicon Valley and other locations.
The central theme raised by participants echoed similar discussions at recent American Furniture Manufacturers Assn. meetings and other industry gatherings: To be competitive, U.S. furniture producers need a more level playing field.
Most of the input from the hearing, which will be incorporated into a report for trade negotiators, centered on the disparity between the United States, Asia and developing countries in everything from labor costs and trade practices to the manipulation of national currencies to benefit exports.
"U.S. manufacturers are caught in extremely competitive and sometimes unfair circumstances," said Quez Little, chief financial officer of Hickory Hill, who also represented sister company Norwalk at the hearing. He said "out of control" healthcare premiums, rising manufacturing costs and broad and complicated tax laws and regulations make it difficult for domestic producers to be competitive in the global marketplace.
"If competition is the goal, importers should be subject to the same requirements for labor and tariffs," Little said. "Right now, there is almost an incentive to move offshore."
He was also mystified by tariffs that tax rolled fabrics coming from China but not cut-and-sew covers using the same materials.
Robb Ginn, president and chief executive officer of Councill Craftsmen, noted that part of the increasing cost of domestic manufacturing comes from too many rules and regulations.
"Tort reform is important," he said, adding that OSHA, workman's compensation and environmental laws "are all driven by the legal system."
Pat Norton, chairman of La-Z-Boy, said U.S. furniture workers average $14.50 to $14.75 an hour compared to Chinese workers who earn 43 cents to 47 cents an hour.
"We cannot compete on that ratio — and that's what it's all about," he said.
Norton said the Chinese are building factories and tanneries at breakneck speed, fueled by government subsidies. "They have a whole different attitude about money," he said. "They don't have to worry about it."
In China recently for the first time in two years, Norton was amazed by the number of new factories. "I saw a 2.5 million-square-foot furniture plant," he said. "There's no such thing here."
The hearing here attracted about 20 participants, divided evenly between furniture and textiles.
Citing the difference in global pay scales, Jerry Rowland, president and chief executive officer of National Textiles, said the cost of health insurance for an American worker is five times the salary of a Chinese worker.
Even if he had zero labor costs, Andy Warlick, president and chief executive officer of Parkdale Mills, said there are areas where his company couldn't compete because trade laws are structured against U.S. manufacturers. "There is something wrong with a system that allows that situation," he said.
Dianne Howell, vice president of logistics for Keyser Roth, said her company is one of the most automated, technology-oriented companies in the world. However, the company still faces challenges in making a profit off a line of private-label hosiery it plans to produce for a key customer who buys six million pairs a year. The company can produce the new product overseas and make a 20% margin, she said, or produce here and lose 40%.
"We just told our salespeople to sell it and we'll figure it out," she said.
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