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TABLE 1.9

PAPER MACHINERY INDUSTRY:
WORLD MARKET SHARE OF FIVE LEADING EXPORTING NATIONS,
1981-85

Year 1981 1982 1983 1984 1985

mil. $ $ mil. $ $ mil. $ $ mil. $ $ mil. $ $ World Market 2329 100. O 2O99 1OO. O 1828 100. O 1989 100. O 24 10 100. O West Germany 593 25. 5 529 25. 2 499 27. 3 54 3 27.3 644 26 - 7

United States 3.41 14. 7 3O1 14. 4 195 10. 7 254 12.8 241 10. 0

Italy 136 5. 9 150 7. 1 160 8. 8 1.65 8. 3 201 8. 3 Japan 146 6. 3 105 5. O 101 5. 5 18:8 9. 4 186 7.7 Finland 197 8 . 4 19 O 9. 1 93 5. 1 137 6.9 175 7. 3 5 Nation 4 13 60. 8 1275 60. 8 1048 57.4 1287 64 - 7 1447 60. O Total

NOTE: U.S. export values MAY differ from data reported by the U.S. Bureau of the Census.

Source: Organization for Economic Cooperation and Development
(OECD), Micro Tables, Series B, Annual Foreign Statistics by
Country, 1981-1985.

over the period, and data for 1986 and 1987, which are not available for all countries, show a continued growth in trade.

Most of the industry's trade is between developed countries of Europe and North America. However, although the volume of trade is much smaller with developing nations, trade in paper machinery spans the globe and major markets exist outside the European and North American continents. Chapter V provides a discussion of highlights of each individual country's paper machinery industry.

Leading markets for the major exporting nations vary, in part, according to economic size and proximity. For example, in 1985 the United States was the leading market for exports from Canada, West Germany, Switzerland, Italy, and Japan. The United States is also a primary market for relatively new competitors such as Brazil. Table 21 shows trends in the market shares of the top 10 foreign suppliers to the U.S. market.

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TABLE 2.0

WORLD TRADE IN PAPER MACHINERY
SELECTED COUNTRIES : 1981-85
($ million)

Country 1981 1982 1983 1984 1985
United States
Exports $350 $316 $2O3 $259 $251
Imports 273 2O7 210 301 411
Balancis 78 1O9 - 7 - 42 -160
Brazil -"
Exports $ 70 $ 34 $ 28 $ 27 $ 62
Imports 36 13 8 9 12
Balance 34 21 20 18 50
Canada
Exports $ 67 $ 65 $ 96 $ 53 $120
Imports 125 91 59 77 125
Balance - 48 - 26 - 37 - 24 5
Finland
Exports $187 $179 $ 82 $128 $159
Imports 32 27 18 25 36
Balance 155 152 64 103 133
France
Exports $140 $ 98 $17 ° $133 N/A
Imports 98 102 118 142 N/A
Balance 52 - 4 55 - 9
Italy
Exports $136 $150 $160 $165 $2O1
Imports 87 84 108 104 128
Balance 49 66 52 61 73
Japan
Exports $147 $104 $101 $1.87 $1.87
Imports 42 32 40 63 91
Balance 105 72 61 124 96
Sweden
Exports § 77 $ 78 $ 67 $ 74 $105
Imports 104 79 70 102 132
Balance - 27 - 1 - 3 - 28 - 27
Switzerland -
Exports $176 $165 $19.1 $200 $248
Imports 62 50 52 56 50
Balance 104 115 139 142 198

TABLE 2.0 (CONTINUED)

United Kingdom

Exports $ 93 $ 84 $ 84 $105 $174

Imports 92 9 O 92 $155 183

Balance l - 6 - 8 - 50 - 9 West Germany

Exports $593 $529 $499 $543 $644

Imports 446 38.4 362 437 552

Balance 147 145 13.7 106 92

Source: U.S. Department of Commerce, International Trade Administration internal documents. Trade data drawn in part from foreign government sources May not be consistent with U. S. Government data.

Indonesia was Japan's leading export market in 1985 for machinery for making or finishing paper-paperboard; the United States was the next most important export market for this Japanese product. South Korea and Taiwan were also significant markets for Japanese paper machinery products.

For the United States, foreign markets formed a different picture, as indicated in Table 22. In 1985, Canada was the primary market for U.S. exports of machinery for making or finishing paper-paperboard and for machinery for making cellulose pulp. However, Canada and Mexico were second and third, respectively, to Japan as markets for U.S. cutting, bag-making and box-making machinery. In the past, Australia, New Zealand, Venezuela, Chile, and Colombia have been good export markets for U.S. paper machinery.

Competitive Factors

This section identifies key competitive factors, ranks their importance, and indicates for each competitiveness factor how the U.S. paper machinery industry compares to foreign competition.

A firm competes in terms of price-related and nonprice factors. Though all factors are important, leaders of the paper machinery industry have specified the exchange rate value of the U.S. dollar as probably the most influential competitiveness factor. Supporting analysis in a later section shows a strong correlation between the variation in exports of this U.S. industry and the variation in the value of the dollar. Availability of competitive export financing May be the next most important factor affecting the price and eventual outcome of a sales effort by the paper machinery industry. The U.S. Export-Import Bank (Eximbank) has taken steps to meet especially tough competition from French and Japanese credit agencies.

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Apart from the external exchange rate and financing environment, another fundamentally important price-related factor is production cost competitiveness. U.S. paper machinery firms producing in the United States have been at a cost disadvantage to producers abroad, particularly for major inputs such as steel and labor. For this and other reasons, U.S. paper machinery firms have established Hubsidiaries abroad. However, the extended depreciation of the U.S. dollar in recent years against Japanese and West European currencies has largely accounted for a strong recovery of U.S. price competitiveness for major carbon steel products such as plate steel as well as narrowing the labor wage gap in some nations. Other factors affecting U.S. price competitiveness are (1) the disparity between the near-zero U.S. tariff level and the substantial levels

in other nations -- International negotiations May reduce this inequality, and (2) the higher costs of product liability in the United States than abroad -- some completed as well as impending

congressional legislation May help to reduce this inequity.

Among nonprice factors after sales service, product quality and nontariff barriers can have a significant effect on competitiveness. None of these factors pose a competitiveness problem for the U.S. paper machinery industry.

The price and nonprice factors discussed above relate directly to sales competitiveness. However, there are two fundamental competitive factors which, while not as directly related to sales as the above, are also essential to the long-run competitiveness of any industry: (1) investment in plant and equipment and (2) research and development.

The Value of the Dollar and U. S. Paper Machinery Exports

Some executives in the U.S. paper machinery sector regard the past high value of the U.S. dollar as their principal competitive disadvantage in earlier export efforts abroad. Economic theory also suggests that trends in the direction of the value of the dollar can be an important factor in the competitiveness of U.S. exports. The essence of the theory is that a decrease in the value of the dollar should help exports increase, but a rise in the value of the dollar would hinder export competitiveness. What does the historical record show in this regard for U.S. paper machinery exports?

Figure 4 shows that from the early 1970s to 1986 a strong association did exist between trends in (1) the multilateral trade-weighted index of the nominal value of the U.S. dollar and (2) the nominal dollar value of U.S. paper machinery exports. While the index trended downward to a low point in 1980, paper machinery exports trended upward to peak a year later in 1981. Afterward, as the index changed direction and rose until 1985, exports failed to recover to the 1981 peak. However, from 1985 to 1987 the U.S. exchange rate index Fell 32 percent. By 1987, the U.S. paper machinery export value had almost recovered to the 1981 peak.

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