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BUILDING PRODUCTS DIGEST is published monthly at 4500 Campus Dr., Ste. 480, Newport Beach, Ca. 92660-1872, (949) 852 1990, FAX 949-852-0231, www.building-products.com, by Cutler Publishing, Inc. (a California Corporation). lt is an independently-owned publication lor building products retailers and wholesale distributors in 37 states East of the Rockies. Copyright@2004 by Cutler Publishing, Inc. Cover and entire contents are fully protected and must not be reproduced in any manner without written permission. All Rights Reserved. Building Products Digest reserves the right to accept or reject any editorial or advertising matter, and assumes no liability lor materials furnished to it.

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PUBLISHER Alan Oakes (ajoakes@aol.com)

PUBLISHER EMERITUS David Cutler

EDITOR David Koenig (dkoenig@building-products.com)

ASSOCIATE EDITOR Lisa Maresca (lmaresca@building-products.com)

ADVERTISING SALES MANAGER Chuck Casey (ccasey@buildi ng-products. com)

ADMINISTRATION DIRECTOR/ SECRETARY Marie Oakes (mfpoakes@aol.com)

CIRCULATION Heather Kelly (hkelly@building-products.com)

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About the Cover

The fronl cover is a paid advertisement, this month sponsored by Everwood Treatment Co.

Made in America or Ghina?

It does not matter which industry you look at, manufacturing jobs are pouring out of the country at breakneck speed as imports continue to gain larger market shares. While certainly not a new debate, it is interesting to understand that while our economy appears to be getting on track, recovery so far is being achieved without the creation of new jobs that economists would normally expect for a lasting strong economy. Why, and what does this all mean?

The end result is all about globalization-a facr of life from which we cannot run away. The reality is that U.S. manufacturing companies, with their high labor costs and all the extras such as environmental restrictions and liabilities, struggle to compete with nations that pay l/40th of the rates we pay here-3OQ to 409 an hour versus, say, $14 to $16 an hour. Manufacturers know that the shirt that costs them $12 here to manufacture will cost $2 to $4 abroad. Low-skilled, labor-intensive manufacturing in the U.S. is going the way of the dodo bird-into extinction.

In my opinion, this is only the first wave, as countries like China and Vietnam will continue to raise their skill and technology levels, and will gnaw away and compete at all skill levels within the next 10 years or so.

In some industries, like toys and shoes, there is virtually no manufacturing left in America. In time, ours will go the same way unless we start to tackle the issues at a company and national level. In Indiana, for example, where manufacturing is responsible for the largest share of GDP among all states, an estimated l07o of manufacturing jobs have been lost in the last three years. Even non-manufacturing jobs are being moved overseas. Last month it was clear to me a call I received from a large computer company was coming from India, the Silicon Valley of call centers. These truly are jobs that, in my opinion, are a disgrace to send overseas.

Manufacturers believe it is cheaper to produce abroad. Therefore, the prognosis for what is left of manufacturing

ALAN OAKES publisher ajoakes@aol.com

looks at best poor unless we rethink how we can fight back. In the furniture industry the move to produce overseasparticularly in China-has gained fast momentum over the last three years. Even very high-end manufacturers are all now producing in China or similar countries.

Last year at the retail level, Wal-Mart reportedly imported around $12 billion from China. Globalization has arrived, and is here to stay. If we are not prepared to change our business models, I hesitate to think where we will be in 10 years or so.

While we can no longer compete on wage costs, our closeness to the market and knowledge of distribution channels still gives us a large advantage. We can compete on short runs, more consistent quality, closeness to market and raw materials, technological superiority, product design excellence, and being able to turn on a dime to meet windows of opportunity and market needs. Our lead in technology can overcome much of the labor cost issues as processes become more and more automated. The manufacturing process needs to be refined down to its core to eliminate waste and labor costs. Yet, in the U.S. in the last four quarters, equipment investment was less than the depreciation taken by manufacturers-a very sad state of affairs and an indication that we are running away from an issue we cannot run away from. Our focus needs to be on cutting manufacturing and distribution costs, not eliminating them by moving offshore.

I believe in a free-trade economy (but I struggle with how to define free trade and the level to which governments sponsor their industries). I do not believe in "protectionism." There are solutions to compete. Perhaps we need a national debate and strategy on how we are going to protect not only American workers and manufacturing, but how we are to protect our nation from becoming a nation of lowpaid service economy jobs.