Our trade relationship with China has been taking an interesting path over the past decade or so. An economic collapse helped lead to an enormous amount of outsourcing to the Far East. That has frequently led to disappointing quality and even has resulted in the production of dangerous products. There have been lengthy turnaround periods, tariffs, trade wars and, of course, most recently, a pandemic.
Metal fabricators like Wiley Metal have had a front row seat to these events. We’ve seen manufacturers embrace Chinese production and are now seeing many distance themselves from them.
What will be the long term effects of these latest events? What will we learn from all of this and where we will be headed going into a post-pandemic world? Let’s start by taking a quick look at our history of trade with China and how we got where we are.
A Quick History of US-Chinese Trade
Back in school, many of us heard about the famous Silk Road, where envoys of Chinese pioneers traveled Middle Eastern trade routes two thousand years ago. During later dynasties, the Silk Road was supplemented by maritime trade routes, expanding China’s reach into Africa, Central Asia and the Middle East. Rather than continually expanding trade however, during the Ming and Qing Dynasties (1368-1911) the Chinese actually discouraged trade. In the middle of the 18th century, the Chinese government restricted sea trade, setting up the Canton System.
In the 19th century, some European countries used their military to force trade with China. This started a series of trade partnerships with the West, where trading partners were provided certain privileges. This came to an end when the People’s Republic of China was established in 1949. While the world’s economy and trade was growing, China took steps to become self-sufficient and self-sustaining.
Over the next 30 years, China gradually increased trade with the rest of the world, but it was minimal. In fact, through the 1960’s foreign trade only accounted for about 2% of their Gross National Product (GNP).
Throughout this period, The United States had banned trade with China until the early 1970s. When the ban was lifted, trade grew more rapidly for China but it still only amounted to about 6% of the GNP by the end of the decade.
In the 1980s, China adopted a policy of more open trade to the outside world and the country created a framework to facilitate foreign economic relationships. These changes boosted the Chinese economy and further integrated the country in the world’s economy. Over the next five years, China’s economy grew and foreign investors flocked to the country. In 1984, President Ronald Reagan visited China to help improve diplomacy and economic relations with China.
US/China Trade Today
In 1986, the United States became the second largest importer to China and its third largest partner in overall trade. American goods imported to China included industrial and high-tech products and agricultural products. Today, China and the United States represent the world’s two largest economies, with China now the world’s largest exporter and the U.S. now serving as the world’s largest importer.
The issue has been what most feel are the inherent problems in trading with China. While there are plenty of attractive reasons to trade with China, there are also challenges. Big ones. Manufacturers and metal fabricators find themselves competing against lower wages, substandard quality, unfair trade practices, currency manipulation, intellectual property theft, technology theft and more.
Trade is far too complex to fully discuss here. The bottom line, however, often results in customer conversations that start something like “You are producing this part for me for $20. Can you produce it for $9?” It is difficult to combat that large of a price difference. Tariffs can help close the gap, but likely won’t solve the problem. We must promote conversation that shrinks that difference. We must talk again about the benefits of choosing suppliers like metal fabricators right here in the U.S. It is why agility is more important than ever for metal fabricators in the U.S.
As we’ve seen, economic conditions can change quickly.
Why Agility is So Critical for Metal Fabricators
Metal fabricators like Wiley Metal have so many agility-based benefits that can minimize any cost benefits to dealing with China. Some of these include:
- Quick turnaround. Purchasing parts and materials from China takes a clairvoyant. You need to have good insight into your needs anywhere from 8 to 18 weeks out. As we’ve seen, economics can change quickly. Chinese suppliers can’t match turnaround times of their American counterparts.
- Responsive changes. This quicker turnaround also allows more flexibility in order changes. Part orders can be increased or trimmed more easily with fabricators in your own region.
- More flexibility in design changes. Working with a domestic metal fabricator allows you the ability to react to changes that may improve a part or take advantage of less costly materials. Getting changes made after an order is submitted to a Chinese fabricator can be daunting.
- Stronger relationships. Strong relationships with a metal fabricator you can actually visit can be a significant benefit, especially in challenging times. Building partnerships that are mutually supportive can provide the needed flexibility through difficult times.
- Higher quality standards. We have heard numerous stories regarding substandard products from Chinese providers. These substandard parts and accessories can impact a manufacturer’s image and reputation, increase the cost per part and even can lead to lost clients. How much are “savings” costing you? At Wiley Metal, we are committed to continuous improvement.
- Keeps the supply chain running. Metal fabrication is an essential part of the supply chain. At Wiley Metal, for example, we produce a variety of components critical to the tractor trailer industry, vital to trucking. We also produce parts for emergency vehicles like ambulances and fire trucks, also vital in these times.
An Opportunity for US Manufacturers and Metal Fabricators
Those looking for a silver lining to challenging times may find it in the hope for change. That the realization that putting our country’s manufacturing sector at risk of a supply chain interruption between countries may not be the most prudent decision. That paying slightly more can be worth a more secure nation and economy.
If poor quality, dangerous products, long turnaround times and trade deficits don’t quite grab our attention, perhaps a pandemic will. We must build and support our manufacturing base in the United States. This has always been our focus at Wiley Metal and it will continue to be through and beyond this health and financial crisis. We encourage you to join us.