Costs of Doing Business

BUSINESS COST INDEX FOR PLASTICSPROCESSING IN THE U.S. & CANADA (The Five Lowest-Cost Localities in Each Region)
Region/Locality  New England/Atlantic Charlottetown, PE Moncton, NB Halifax, NS St. John’s, NF Burlington, VT Northeast Sherbrooke, QC Quebec City, QC Montreal, QC Waterloo Region, ON Toronto, ON Southeast Greenville-Spartanburg, SC Dothan, AL Nashville, TN Jackson, MS Atlanta, GA  Midwest Edmonton, AB Saskatoon, SK  Calgary, AB  Winnipeg, MB  Salt Lake City, UT  Pacific Kelowna, BC Vancouver, BC Las Vegas, NV Boise, ID San Diego, CA	Cost Index  91.1 92.7 93.8 100.5 101.3   88.9 91.2 92.2 92.8 93.5 94.4 94.6 95.6 96.0 97.2 93.2 93.4 94.5 96.0 98.4 94.1 96.8 101.0 101.1 103.8
Source: KPMG 2004 Competitive Alternatives Report.

Everyone seems to agree that U.S. plastics processors are being beaten up by foreign competition. The Society of the Plastics Industry issued a new report, U.S. Plastics Industry Trade Through 2003, that cites an $8.8 billion trade deficit in goods (like cars) made wholly or in part of plastics. SPI calls that deficit “staggering.” Indeed, it represents roughly $4.4 billion in lost business for domestic plastics processors. (I’m using the rule of thumb that processing roughly doubles the sales value of plastics raw materials.) But to put things in perspective, $8.8 billion is only about 3% of the more than $260 billion U.S. annual output of processed plastics products. Not staggering, perhaps, but not trivial either.

Another recent report may shed some light on this imbalance of trade. KPMG LLP, the New York audit, tax, and advisory firm, came out with the 2004 edition of its Competitive Alternatives study of business costs around the world. (It’s available online at www.competitivealternatives.com.) It compares labor, utilities, transportation, taxes, and other costs for 17 industries in 11 countries (China not included). For plastics product manufacturing, KPMG ranked Australia the lowest-cost country and Canada the second-lowest. The U.S. ranked sixth, after the U.K., France, and Luxembourg. The biggest factor making the U.S. more expensive was wages and benefits. If plastics processors have any remedy (other than pleading for higher tariffs), it must be to implement technologies that make labor more productive. Too many U.S. molders are too slow to take advantage of those technologies.