Packages are prepared for export at RBC Industries, a Warwick company that produces epoxies.
R.I. companies say U.S. tariffs are too low, favor importers
RBC Industries Inc., an adhesives maker in Warwick, started exporting more to foreign markets when its main customers, jewelry manufacturers, left the country in the 1990s.
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Now the company sells about 15 percent of its product overseas.
Many other Rhode Island manufacturers are also looking to exports in an effort to stay competitive in a global market, and last year overall exports by companies in the state were up 16.6 percent from 1997 to $1.27 billion, an analysis based on U.S. Census Bureau data conducted by the World Institute for Strategic Economic Research shows, although the numbers fluctuate each year.
The single biggest export category is computers and electronics, with $171.9 million in exports in 2005 (a 32.4-percent decline from 2004). Machinery exports totaled $133.5 million, and $130.5 million worth of chemicals was exported last year.
Raymond Fogarty, director of the John H. Chafee Center for International Business at Bryant University, said Rhode Island exports have increased because of trade pacts such as the North American Free Trade Agreement (NAFTA), which eliminates tariffs on goods traded between the United States, Canada and Mexico.
“Canada, Mexico and the United Kingdom – those are the top destinations for our products,” he said.
Despite the generally positive trend, however, many local manufacturers would like to see U.S. foreign trade policy focus more closely on expanding exporters’ access to foreign markets and ensure that they are treated fairly by other countries as they deal with competitors and partners abroad.
George Shuster, president of Cranston-based Cranston Print Works, said the U.S. tariffs on imports average 1.6 percent, while other countries impose tariffs as high as 40 percent on goods exported by the United States. Fogarty said that disparity hurts some manufacturers in Rhode Island, including the few remaining textile manufacturers.
“It makes it hard for them to sell their products abroad,” Fogarty said.
And it gives other countries a competitive edge because they not only are able to manufacture goods with lower overhead and less-strict environmental regulations, Fogarty said, but they also face low tariffs that allow them to keep the prices of imported goods low.
U.S. exports have other barriers working against them, such as customs fees and regulations both abroad and at home. Those barriers depend on the product type, said Maureen Mezei, international trade director at the R.I. Economic Development Corporation. For example, Mezei said, medical products must comply with the destination countries’ regulations.
In addition, Fogarty said, since the Sept. 11, 2001 attacks, the U.S. government has imposed tighter restrictions on where companies can sell a product that could be used for military purposes. Violators can be subject to imprisonment.
That’s not a big deal for RBC Industries, said Vice President George Sherring: “We don’t deal with Iran.” But the company, which sells its adhesives to jewelry makers and for flooring systems, faces its own challenges when looking to break into foreign markets such as China, which imposes a 25-percent value added tax on goods imported from the United States, he said.
The cost of taxes, shipping and customs fees also can make it difficult to export, he said, but that doesn’t mean it isn’t worthwhile. Exporting can contribute to the bottom line.
Fogarty agreed: “Companies that continue to do international trade and export are holding steady,” he said, whereas others might have difficulties if they don’t learn to compete in the global marketplace.
Companies that export might be experiencing greater stability because “the market outside the United States is fairly large,” Mezei said. And because some countries’ economies are growing quickly, they can create opportunities for U.S. manufacturers.
Wages in China, for example, are rising, Sherring said, and that could increase the buying power of the Chinese people, benefiting companies that export to China.
“I think [Rhode Island manufacturers] are in a situation where they have to realize you have to go out and get the market now,” he said. “When you’re selling a product, you’re not just competitive with the guy next to you anymore, you’re competitive worldwide.”
Fogarty said the next step is making sure U.S. exporters have a fair playing field. He’s optimistic.
“There are tariffs being lowered through World Trade Organization agreements,” he said, adding that China, for example, is ranked sixth among countries accepting Rhode Island products, whereas it used to be much further down on the list.
“I think we just have to keep on making sure it’s a truly level playing field for our businesses so we can compete around the world,” said Fogarty. “That’s what most U.S. businesses want – they want fair trade.”
