U.S. producers can survive through niches, innovation
Thomas Russell, Associate editor -- Furniture Today, June 15, 2009
When China announced its $586 billion economic stimulus plan last fall, the immediate impact for the furniture sector was a little vague. The package was largely directed at major construction projects such as subways, railways and airports. At the time, there was some mention of tax breaks for exporters.
Recently, those details came into sharper focus. Earlier this month, the Chinese government raised the Value Added Tax rebate on raw materials purchased in China for use in furniture and other goods intended for export. The rebate only went up slightly — from 13% to 15% — according to Chinese manufacturers familiar with the issue.
Still, the message is clear: The Chinese government wants to promote furniture and other industries that have been a key part of its economic growth. That's not to say the U.S. government isn't serious too. President Obama's $787 billion stimulus package will certainly put a lot of people back to work. But aside from state and local incentives given out on a case by case basis, there appears to be no direct government investment in the U.S. furniture industry similar to that offered by China.
That has been a point of contention by the American Mfg. Trade Action Coalition and others that have supported a Border Tax Equity Act introduced in Congress, which would impose a tax on imported goods.
AMTAC contends that U.S. producers, including furniture manufacturers, faced a $474 billion trade disadvantage in 2007 alone. This represents value added taxes that U.S. manufacturers pay for goods they export to countries with a VAT system in place, combined with the amount of VAT rebates paid to foreign producers.
Previous efforts to implement such a border tax on imports have failed in Congress. A new bill will soon emerge, but if past performance holds true, manufacturers may not want to sit around waiting for it to pass. There are just too many other conflicting interests, including retailers, who are responding largely to the consumer demand for more value-driven goods.
Instead, U.S. producers likely will want to take competitive matters into their own hands by sharpening their focus and creating more efficient operations. That message was loud and clear at the American Home Furnishings Alliance Manufacturing Summit, held June 5 in North Carolina. Speaker after speaker said U.S. manufacturers can survive by developing niches and value-driven products that speak to the need for innovation and best utilize the space in their factories.
This is just a quick summary of the topics discussed at the Summit. But the overlying message gave hope to those looking to continue manufacturing in the United States without much government support. If and when that comes is anyone's guess.
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