Crouching Tiger, Hidden Opportunities
Hunley explained paper from countries like China or Indonesia is cheaper because it is produced by companies that are vertically integrated, which means companies there control the plantations, the pulp mills and the paper mills, eliminating many of the "middlemen" found in North America.
"Until the U.S. market removes its trade barriers, allowing printers to compete on price, we will continue to see growth in the overseas printing market as U.S. producers continue to source their materials from far more affordable sources," Hunley concluded. "Meanwhile, as business flows to international printers, they are investing new more modern, cost-effective equipment—further expanding their advantage over U.S. printers."
But those aren't the only factors putting the United States at a disadvantage.
Ron Hira, associate professor of public policy at the Rochester Institute of Technology whose research focuses on offshoring and U.S. manufacturing industries including the print industry, said there are many reasons for the growth of Chinese exports to the U.S.: trade policy, subsidies/incentives, market access, lower cost labor, currency manipulation, lower environmental and other standards and trade agreements that are more about creating cheaper export platforms than trade.
"I think this is compounded by the fact that the overall U.S. market in print has not grown. For example, China is gaining market share in a shrinking overall market. That hurts even more. The U.S. has no national policy strategy for manufacturing. The export initiative of the Obama Administration is so limited that it isn't even worth mentioning. American policymakers have sat idly by while America's manufacturing capability has been hollowed out at a dramatic pace in the past decade," Hira said.
Hunley believes it is because international companies have invested in their businesses while U.S. businesses haven't.
"In fact, the U.S. printing and paper making today is in the same boat as the U.S. auto industry during the 1980s," he remarked. "When car makers did not invest in new technology to increase production efficiency, it opened the door to international competitors stealing market share—first by importing more vehicles, then by investing in manufacturing operations here. U.S. carmakers never recovered market share. Unless something happens here today, the same will happen with the printing and paper industries. The fact that many companies are contracting with international printers proves it."