Wisconsin firm learns ups and downs of doing business in China
Tuesday, January 18, 2011; 12:37 AM
MANITOWOC, WIS. - As much as any U.S. firm, Manitowoc Co. has tied its fortunes to China's star, designing its corporate strategy around the promise of a booming billion-person market.
But as President Obama and Chinese President Hu Jintao prepare to meet this week, Manitowoc's fitful performance illustrates the challenges of U.S. trade with China, even as it has become crucial for many companies, particularly in the decade since Beijing joined the World Trade Organization.
From the shores of Lake Michigan, the oddly diverse company - a manufacturer of industrial cranes, commercial ice makers and high-tech ovens - has pumped out exports for China and helped sustain a workforce of about 8,000, mostly in Wisconsin. But the company has also been slapped by China with unexpected import taxes that threaten to put some of the employees out of work.
Manitowoc has acquired local plants and staff in China, moving into niche markets - for example, restaurant equipment adapted for local dishes. Yet Chinese competitors have also spirited away some of the company's designs and ideas, leaving it with little recourse.
For executives at this old-line manufacturing company, which built World War II submarines during its heyday in the ship business, grand expectations have been supplanted by a sometimes frustrating reality.
"We went over there to be a global player," said Manitowoc chief executive Glen Tellock, whose company started selling ice makers in China in the early 1990s and diversified as the nation joined the WTO amid hopes for strong and steady growth. But, Tellock said, "they have thumbed their nose at the WTO's policies and procedures. . . . They have become bigger than anybody thought, and nobody wants to slap their wrist."
The discussions between Obama and Hu will be about more than economics. The agenda is thick with defense and security issues, including the tension over North Korea's nuclear program and that nation's recent belligerence toward South Korea. But U.S. officials, business leaders and analysts say they hope the two presidents can begin to right a trade partnership that has - at least from an American standpoint - been drifting in a troubling direction.
Original goals thwarted
U.S. officials involved in the negotiations leading to China's accession to the WTO in 2001 and supporters of its membership said at the time that U.S. exports would benefit dramatically, and that has been the case. American companies sold upwards of $90 billion worth of goods to China last year, compared with $19 billion in 2001, a larger increase than with any other nation.
Similarly, China's low-cost manufacturing has helped hold down prices for apparel, household electronics and other items, benefiting lower-income families in the United States and elsewhere.
But analysts and business officials say the relationship has evolved in ways that have foiled some of the initial ambitions. China has complied with many of the explicit promises it made to lower tariffs and other barriers but has failed to adhere, as many hoped it would, to the broader spirit of free trade.
"Some aspects of it were oversold," said Pieter Bottelier, a China expert at the Johns Hopkins School of Advanced International Studies.
The economic relationship has become less balanced, not more. The U.S. trade deficit with China ballooned from about $83 billion to a peak of $268 billion in 2008, as a surge in consumer spending boosted Chinese exports to the United States. Meanwhile, American firms found it easier to produce goods for the Chinese market in China rather than make them in the United States and export them.