The current global competitive conditions in the tool, die, and industrial mold markets pose new challenges with potentially significant implications for the U.S. industry, as well as many foreign industry competitors, reports the U.S. International Trade Commission (ITC) in its publication Tools, Dies, and Industrial Molds: Competitive Conditions in the United States and Selected Foreign Markets. Producers worldwide report a constant challenge to reduce costs and shorten delivery times, all within the context of an increasingly competitive and dynamic global market.

The United States is one of the world's leading producers of tools, dies, and industrial molds (TDM or tooling) and is also a major importer. The principal challenges facing the U.S. TDM industry include: (1) the recent downturn in the U.S. economy and its slow recovery; (2) a shrinking domestic market due to the migration of manufacturing customers to foreign locations; (3) excess capacity due to reduced domestic market demand and to increased productivity resulting from new technologies; (4) customer demands for lower prices and more services; (5) increasing foreign competition; and (6) rising costs, particularly labor-related costs.

The ITC, an independent, nonpartisan, factfinding federal agency, recently completed the study for the U.S. House of Representatives Committee on Ways and Means. As requested, the ITC reported on the competitive conditions affecting the U.S. tooling industry, competition from other important producing countries, strengths and weaknesses of U.S. and foreign producers, and challenges facing the U.S. tooling industry. Following are highlights of the report:

• For easy-to-ship products, such as small appliances and electronics or telecommunications items, it has become cost-effective for manufacturers to produce in low-cost foreign locations, such as Asia, for shipment to the U.S. market. The migration of such manufacturing along with the sourcing of TDMs to low-cost foreign production locations has adversely affected U.S. toolmakers who no longer supply tooling for many of these items.

• Technological advances within the tooling industry have improved productivity and competitiveness significantly while increasing capacity and reducing the need for highly skilled labor, a traditional strength of the U.S. industry. Because advanced TDM production technology is universally available, increased productivity is occurring simultaneously in both industrialized and newly industrializing regions.

• Demand for tooling is heavily dependent on new product introduction in the automotive industry, which absorbs nearly 50 percent of tooling in the United States. Therefore, the tooling industry has weakened during the last 24 months as automotive manufacturers have delayed the introduction of new products. At the same time, many of the industries supplied by U.S. toolmakers, such as the appliance industry, have become more cost-competitive, forcing many tooling customers who produce in the United States to reduce product costs by sourcing their tooling from less-expensive foreign locations.

• The compression of product cycles in many key industries (such as the automotive, appliance, electronics, and telecommunications industries) has required toolmakers to shorten their lead times to supply tooling to customers. In many cases, these shortened lead times have favored foreign toolmakers, particularly in Asia, who frequently operate their plants 24 hours a day.

• Price was by far the leading factor of competition reported by U.S. TDM producers. U.S. purchasers stated that price, delivery time, and product quality were the most important competitive factors for TDM producers, but that neither U.S. nor foreign TDM producers had any significant advantage with regard to competitive factors other than price. Further, the strong value of the U.S. dollar relative to many foreign currencies has adversely affected the competitive position of U.S. TDM producers in the global market.

• Competitive conditions constantly force U.S. and foreign TDM producers to minimize their production costs. Despite the significant capital equipment used in this industry, labor costs are the largest single component of production costs for U.S. TDM producers, and a significant component of production costs for all producers worldwide. With regard to labor costs, the U.S. TDM industry is at a significant disadvantage compared with China, Portugal, Hong Kong, Taiwan, and Korea. Chinese hourly compensation costs for toolmakers and tool designers are one-twelfth of those in the United States, and those in Taiwan are one-third.

• Canada is the largest U.S. trade partner accounting for 41 percent of U.S. TDM import value and 34 percent of export value in 2001. The other major export market is Mexico which accounts for 27 percent of total TDM export value in 2001. Other important trade partners include Japan (accounting for 33 percent of import value) and the EU (almost 16 percent of import value). During 1997-2001, U.S. TDM imports from China and Korea rose by 191 percent and 248 percent, respectively, albeit from relatively low bases.

Tools, Dies, and Industrial Molds: Competitive Conditions in the United States and Selected Foreign Markets (Inv. No. 332-435, USITC Publication 3556, October 2002) will be available on the ITC's Internet server at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may be faxed to 202-205-2104.

ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance, or the House Committee on Ways and Means. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.