- The Washington Times - Monday, April 5, 2004

America’s sunset industries are rising in the East. Literally.

Many steel and textiles mills that are no longer competitive in the United States are being packed up and shipped to China and other Asian nations, where lower costs of doing business give the machinery new life and foreign workers new jobs.

“There’s been a lot of movement of equipment to China,” said Carrie Casey, president of Pittsburgh-based Casey Equipment Corp., the country’s biggest buyer and seller of used steel-mill equipment. Miss Casey estimates that in the last 18 months, the firm has sold used steel-mill equipment totaling more than $100 million, almost exclusively to buyers in China.

The liquidations follow company bankruptcies, which mean lost jobs — a hot campaign issue as the Bush administration and presumptive Democratic nominee Sen. John Kerry both interpret the latest economic numbers and offer their own prescriptions for faster growth.

The textile industry has been especially hard-hit, and as more companies shed workers or go out of business, equipment sales to China also is a big business.

“There are two major players — southern Asia and the Far East. First China, and then coming back this way, Pakistan, India and Bangladesh,” said Charlie Kimbrell, vice president of international sales at Republic Textile Equipment, a York, S.C.-based dealer of used textile machinery and equipment.

U.S. used textile- and apparel-equipment sales to China were $400 million last year, according to an analysis of government figures by economist Charles W. McMillion, occasional consultant to the textile industry. While the dollar figure has held steady the past three years, the volume of equipment is apparently rising as more becomes available and prices decline, he said.

The equipment itself is a combination of outdated and state-of-the-art. And the effect on the U.S. industrial base is mixed.

Clothing, fabric, steel and other manufacturers often howl about foreign competition, and textile production in the United States is declining. But the steel industry also complains of domestic overproduction and steel production is not lagging.

U.S. manufacturing companies have shed 3.5 million jobs since mid-1998, when employment reached 17.7 million, according to the Bureau of Labor Statistics. But rising productivity, often through new technology, has allowed manufacturing output as a share of total economic output to hold steady for the past half-century, according to a Congressional Budget Office analysis.

Many workers, especially in textiles and steel, have blamed Bush administration trade policy for costing some of those jobs. Foreign countries, they say, subsidize companies, manipulate currencies and allow workers to be underpaid or abused.

The administration has responded with some protectionist measures, such as temporary steel tariffs and caps on some clothing imports, but prefers to focus on opening foreign markets, rather than closing the U.S. market. The Bush administration has warned against “economic isolationism,” while Mr. Kerry has clamored for “fair” trade.

The U.S. steel and textile mills are closing not just because of trade.

Bankrupt Pillowtex, a Kannapolis, N.C., manufacturer of home textile products, folded under intense foreign competition and is on the auction bloc. On Thursday, vehicles and material-handling and shop equipment from Pillowtex’s Kannapolis manufacturing and warehouse facility are scheduled to be sold off. Nine other auction dates at sites around the country run through July.

Industry sources speculated that much — but not all — of the Pillowtex equipment will go to China.

“That plant is so huge that there is no market that can absorb that much,” Mr. Kimbrell said.

Chinese steel producer Qingdao Iron & Steel is buying $40 million in equipment from idle Geneva Steel, a company founded in Utah during World War II. Geneva, with its odd location and insurmountable debt, was no longer competitive in the United States, but the equipment was attractive to Qingdao and a rival Chinese firm that bid up the price.

“The caster was just beautiful. It is state-of-the-art,” Miss Casey said of the equipment that forms slab steel. Other components were dated, but also were sold to China.

Miss Casey also identified other firms partly or entirely shipped to China, including equipment from Newport Steel of Newport, Ky.

“Newport Steel is being dismantled now. It’s a Chinese customer in a northwest province,” she said.

Charles Bradford, a steel-industry consultant, said equipment used today is little different than that of 15 or 20 years ago, aside from modern controls and computers — an easy upgrade for old machinery. But the integrated mills turning iron ore into steel are generally not competitive in the United States because of labor, legacy and raw material costs. “If you take the equipment anywhere else in the world, it will be lower cost,” Mr. Bradford said.

Mr. Kimbrell said some textile firms folded because they were poorly run.

U.S. manufacturers also face a variety of competitive challenges, according to industry groups. Wages in the United States are significantly higher than in developing countries, and costs from taxes, health and pension benefits, litigation, regulation and rising energy prices place a heavy burden on manufacturers, according to a National Association of Manufacturers study.

The unit labor cost in the United States was $24.30 per hour in 2002, while in China it was $5.34, said the NAM study, released in January.

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