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A Competitive Assessment
of the
U.S. Paper Machinery Industry

Prepared by

Capital Goods and International

Construction Sector Group

U.S. DEPARTMENT OF COMMERCE
International Trade Administration

March 1989

For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, DC. 20402

te pos- US£

5" 11 - >>1 ABSTRACT

The paper machinery industry is a long-established sector facing increasing competition in growing domestic and world markets. This industry embraces the production of machinery for the manufacture of pulp and paper from the woodyard through the pulping process to the manufacture and finishing of paper. The industry is modest in size, encompassing some 230 establishments with approximately 15,400 employees which produced about $1.44 billion in product shipments during 1987. U.S. paper machinery exports totaled $308 million in 1987, or about 23 percent of estimated production. Imports in 1987 totaled $562 million, a figure which includes some closely related equipment.

This study evaluates and ranks the major competitive factors
affecting the U.S.-based producers in the industry and offers an
assessment of that position in comparison with producers based
outside the United States. The first four sections of the report
describe the scope and nature of the industry, its history and
economics, patterns of U.S. trade in paper machinery, and the
characteristics of representative firms in the industry. Key
price-related competitive factors are assessed and ranked in order
of importance, including (1) the value of the U.S. dollar, (2) the
role of export financing, (3) costs of production, (4) tariffs and
the terms of trade, and (5) product liability. Nonprice factors
such as aftersales service, product quality, and nontariff barriers
do not seem to pose serious problems for the U.S. paper machinery
industry.

The second half of the report describes the major foreign producers,
the key firms in each country, general characteristics of the
market, the nature of research and development, government support
to the industry, and the level of participation in the U.S. market.
The report documents the extensive foreign penetration of the U.S.
market. It also examines the relative world market shares of the
U.S. and leading competitors, finding a decline in the U.S. share to
the benefit of such competitors as West Germany, Finland, and Brazil.

Options for U.S. Government action to assist the industry in its
efforts to remain competitive in international markets focus on six
broad areas: (1) expand export markets, (2) improve export
financing, (3) increase incentives for research and development, (4)
promote fairness in product liability laws, (5) increase usefulness
of U.S. Bureau of the Census statistics, and (6) insure an adequate
national security manufacturing base.

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FOREWORD

This competitive assessment of the U.S. paper machinery industry is the 50th industry assessment published by the Trade Development unit of the U.S. Department of Commerce's International Trade Administration. The Competitive Assessment Program is one of the Department's primary means of evaluating and communicating the competitive status of individual U.S. industries.

The purpose of the Competitive Assessment Program is to analyze the international competitiveness of specific U.S. industries, to inform government policy officials and private sector representatives of the implications of such analyses, and to identify ways in which the federal government can maintain or enhance competitiveness and increase American exports.

The Commerce Department has published competitive assessments for a broad spectrum of industries, ranging from the traditional to high-technology. These industries have been studied because either they are important to the U.S. economy, they are undergoing persistent competitiveness problems, they are newly emergent, or they exhibit some combination of these factors.

This assessment identifies the major economic and noneconomic issues facing the U.S. paper machinery industry. We hope this assessment will inspire debate on the issues and contribute to improved U.S. competitiveness.

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