Things look like they might get worse before they get better. While not the most creative way of putting it, that about sums up the consensus of the main presentation during the Flexible Packaging Assn.'s recent "Impact of Imports" Fall Executive Conference last month in Chicago.

About 100 converting professionals were on hand to hear Bruce Deckman, president of West Lawn, PA-based Strategic Analysis, Inc., detail the results of its research into how imports are affecting the US flex-pack industry. Commissioned by the FPA, the report combined data from FPA members, suppliers, foreign packaging manufacturers and US end users. Five specific packaging structures converted in the US were compared with the economics for five similar products from China, India and South Korea.

The 2:1 trade deficit in flexible packaging is not about to go away, say FPA members. Among those surveyed, 68 percent forecast that their revenues will only be further impacted by imports in 2005. Similar numbers of respondents say their prices will definitely be eroded due to imports next year, as well as their profits. And 21 percent go so far as to predict the definite likelihood of both line shutdowns and employee layoffs in 2005 due to rising flex-pack imports.

"The threat from Chinese flexible packaging manufacturers is real, sustainable and likely to continue," says Deckman. China, which accounted for about 30 percent of flex-pack imports to the US last year, has several inherent advantages that make it hard to beat—now or ever if they remain unchanged. These include a fixed currency with a 40-percent exchange advantage, fixed or low equipment cost, low energy prices, very limited expenses for worker safety and environmental protection, and, of course, those infamously low labor rates of 80 cents/hr.

The stories aren't much different when looking at India and South Korea as major flex-pack exporters. "India could become a bigger exporter but producers have set their sights instead on the Middle East and Africa," Deckman says. A $10/hr labor rate in South Korea, while high compared to China, is still less than half that in the US. And a high-level of printing and converting expertise means "Korean flex-pack makers can be formidable competitors," he says.

It is just this evolution toward the capability in China (and other places) to convert high-quality, 10-color, complex packaging structures that signals why the flex-pack import crisis isn't likely to moderate anytime soon. Ten years ago, if you wanted basic, low-quality LDPE film, you could get all you wanted from China—and cheap, too, because that's all they made. Today, not only is the country well positioned to supply commodity structures, it's investing heavily in equipment to convert much more sophisticated materials, Deckman says.

The future may look bleak "trade-deficit-wise," but all is not lost. Vigorous trade-expansion plans, along with strong application of anti-dumping laws are only two ways the federal government can use to slow or reverse the current trend. And you can fight fire with fire by playing up America's strength in producing the highest quality packaging in the world now. It's worth the price.