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Testimony of Thank you Chairman Manzullo and Rep. Napolitano for calling this Field Hearing of the U.S. House of Representatives' Small Business Committee to address a number of important issues affecting small businesses in California. I am Bart Alcamo, President of RBK Tool & Die in Modesto, California. RBK Took & Die, a plastics injection molder and tool maker, employs 26 persons and serves the medical, agricultural, automotive, construction and toy markets. On behalf of The Society of the Plastics Industry, I would like to address one of the issues slated for your consideration today: the adverse impacts on companies from the recent tariffs on steel. Founded in 1937, The Society of the Plastics Industry, Inc. is the trade association representing one of the largest manufacturing industries in the United States. SPI's 1,500 members represent the entire plastics industry supply chain, including processors, machinery and equipment manufacturers and raw material suppliers. The U.S. plastics industry employs some 1.5 million workers and provides $330 billion in annual shipments. The plastics processing industry is the fourth-largest manufacturing industry in the United States after motor vehicles, electronics and petroleum refining. California, it must be noted, ranks No. 1 in the country in terms of plastics jobs, employing 147,000 persons. The state ranks second for shipments, shipping more than $27 billion in plastics raw material, products and equipment. In the six-county region from Los Angeles to San Diego, the plastics industry is responsible for more than 70,000 jobs and $14.3 billion in shipments, and Los Angeles County has more plastics jobs than any other county in the entire United States. Thus, I don't think there should be any doubt about the significance of the plastics industry to the United States, California or, in particular, this region of California. Ours is an industry that has grown more rapidly than overall manufacturing for the past 25 years, as it has continued to adapt to meet the ever-growing needs of consumers and to meet ever-changing economic challenges. Today, however, the industry is certainly facing some particularly tough times, as it has been hard hit in the past two and a half years during the nation's economic slowdown. For example, the plastics equipment sector experienced a 40.4-percent decline in shipments in 2001 compared to 2002. Shipments of injection molding machines, the largest industry equipment market, dropped nearly 50 percent from Quarter 4 2001 compared to Quarter 4 2000. The hope that 2001 was a bottoming out of the equipment market did not materialize as the first quarter of 2002 continued the downward trend, with an additional 23.3-percent slowdown compared to the previous year. The current economic climate for the plastics equipment sector has been very hard indeed, with frequent announcements of layoffs and plant closures that hurt American workers and the industry. In one company survey of 1,000 mold makers, another plastics industry equipment segment, the average profitability for moldmakers is down to just 1.4 percent. All this serves to explain - as you may have been wondering - why the plastics industry is here to testify before the Small Business Committee on the affects of the recent steel tariff decision by the Bush Administration. And that is because the equipment and mold sectors of the plastics industry are steel consumers and the President's imposition of tariffs on steel has exacerbated an already challenging situation. As an example, Universal Dynamics, a plastics auxiliary equipment manufacturer, experienced a 20-percent increase in their steel price immediately following the tariff decision. Its steel suppliers have told them that another increase may be expected in September. Estimated annual costs to this company from steel price increases are more than $100,000 annually. While this company has grown to meet the global demands of the worldwide plastics industry, uncertainty about if and when a steel increase may happen, or how much the increase may be, adds another level of uncertainty to an overall already volatile economic environment. Another large diversified company, ITW, which is a major plastics processor and employs some 52,000 workers in plants in 43 countries, believes that the tariff increase may cost the company nearly $20 million annually in additional duties. Other major plastics equipment manufacturers have experienced price increases ranging from 9 to 16 percent since March 2002, when the tariff was implemented, with increases growing to more than 35 percent over the past year. While there have been exclusions granted from the U.S. Trade Representative for certain steel imports, steel consumers are still feeling the pinch. One plastics company, for instance, applied for 21 exclusions from the tariff, to have only four granted. The resulting increased tariff manipulates the market and further erodes the plastics industry's ability to plan strategically for the long term. My company, RBK Tool & Die, has not, quite frankly, experienced some of the significant consequences of the steel decision that some of my colleagues in the industry have faced. However, while we strive, as a small company, to adapt to global changes, the moldmaking side of the business has been in decline for about five years. Therefore, the tariff increase works to exacerbate market conditions that have been eroding for several years, as my customers, who are uncertain about the future, are not investing. The tariff also has created considerable confusion regarding which products are excluded from the tariff, further hindering short-term and long-term business planning. Further possible retaliatory action taken by U.S. trade partners in response to the tariff also serves to erode confidence and place yet another layer of ambiguity into the marketplace. I began today by talking about the importance of the plastics industry. Quite coincidentally, on August 29, Los Angeles Times columnist James Flanigan wrote an article titled, "Future of Plastics." He noted that "The Bush administration has been preoccupied with helping the U.S. steel industry, but its impact on the economy is minuscule compared with the manufacture of plastics." The plastics industry is "at the crossroads of the global economy," he continued. "Small to medium-sized companies in California and elsewhere are threatened by low-wage competition from Asia and Latin America but manage to hold their own by innovating products and manufacturing processes. The plastics industry … may not be the first industry that comes to mind when people think of business in this state. But considering that it's a manufacturing industry that relies on basic chemistry and adroit development of technologies and new products, and that it is integrally involved in the global economy, plastics are a natural for this region and this state." Flanigan concludes by adding, "Maybe the Bush administration should pay attention to the health of the plastics industry; it's more important than most." SPI certainly agrees and urges the administration to place a moratorium on its March 5, 2001, Section 201 steel decision and discontinue the patchwork of confusing tariff exclusions. And it certainly should allow the steel consuming industries to have a voice before it and the Congress on such matters of economic importance. As such a consumer, I am grateful, Chairman Manuzullo and Rep. Napolitano, for this opportunity to come before this distinguished session and provide comments on the impact of recent tariff decision on the plastics industry. Thank you for the opportunity and I respectfully request the opportunity to revise and extend our written submission to the panel.
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 © Copyright 2003 The Society of the Plastics Industry.
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