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China's move won't sweep away all trade barriers

As an Orlando area salesman has learned, China's entry into the World Trade Organization doesn't necessarily mean smooth sailing for international traders.

By KRIS HUNDLEY, Times Staff Writer
© St. Petersburg Times
published March 3, 2002

Wayne Paul figured making brooms in China would be a snap.

That was before he learned about the Mexican monopoly on broomcorn, concerns about orangutans in Indonesian forests and a 1912 U.S. ban on imports of natural bristle brooms into West Coast ports.

Paul's experience with a simple broom reflects the intricacies and implications of international trade. Though China's entry into the World Trade Organization may smooth the path to overseas production of goods, there still will be plenty of stumbling blocks even for the savviest trader.

Paul represents Shanghai Manufacturing, which is owned by the Chinese government. The company owns about 280 factories in the booming city of Shanghai and had about $3.5-billion in revenues last year. Its biggest customers are the Chinese domestic market as well as Japan and Australia.

Paul joined the company four years ago with a mission to find U.S. manufacturers who wanted to expand their product lines with Chinese-made goods. With his red hair and bushy beard, Paul looks more like a college professor than someone who arranges the foreign manufacture of products from toilet bowl brushes to tents.

Though he travels from his tiny office outside Orlando to China at least six times a year, Paul speaks no Chinese. Instead, Paul, 49, said he brings knowledge of consumer products, an understanding of what the U.S. manufacturer wants and a willingness to be available nearly around the clock to his bosses half a world away.

"My U.S. customers don't want to have to reach somebody at their Chinese factory when it's 2 a.m. here," Paul said of the 13-hour time difference between Florida and Shanghai. "Instead, he can call me. And my boss doesn't hesitate to call me at all hours."

Paul said there's plenty of competition among contract manufacturers, all touting the advantages of manufacturing, especially molded plastic products, in China.

"I can do it for 25 percent of the cost in 30 percent of the time," Paul said. "I'll qualify the factory to make sure it has things like a roof and floor and can produce the product. The customer then picks out the factory he wants, based on quality and price."

Paul said he's doing contract manufacturing for about 20 U.S. companies, making products from garden tools to flashlights to stationery. Citing the competitiveness of his business, Paul declined to identify any clients, who usually buy from a number of contract manufacturers representing several countries. The broom buyer, for instance, also buys brooms made in Mexico as well as producing a few sizes in the States.

Though Paul says he can take a molded plastic product from design to production in six weeks, he admits that the corn brooms were considerably more complex. He discovered that the variety of earless corn used for the bristles was virtually unknown in China. Importing it from Mexico, the major source of broomcorn, would be too expensive.

So Paul's boss worked with regional and local government officials to convince about 400 farmers throughout China to experiment growing the corn.

"These are farmers with two acres of land," said Paul, who met with several small groups of farmers throughout the country. "We had to convince them to replace a cash or edible crop with something new. We had to assure them we'd supply them with seed, give them a deposit and pay them for their crop. And we had to hope we'd have a crop in the end."

One problem: Most of the farmers had never seen a broom since Chinese traditionally sweep with branches or rags tied to a stick, Paul said.

With Shanghai Manufacturing's request reinforced by local officials, the farmers planted their first crop in spring 2001. There were problems. The tassel at the top of the cornstalk -- the part used for the bristles -- has to be harvested by hand at exactly the right stage, then carefully dried for four days. If the tassel becomes too brown or if it rains during the drying process, the crop is ruined.

"We tossed a lot," said Paul, who said the initial planting was for a 2,000-ton harvest.

Once harvested, the stalks are hauled by horse to town and by truck to Shanghai, a trip that can take three to five days. There, the seeds are stripped by hand from the tassels, the stalks are bundled with wire by one machine, stitched by another and attached to a handle.

The handles have posed another dilemma for Paul. Ramin wood from Indonesia has traditionally been used to make top-quality broom handles. But under pressure from environmentalists, Indonesia has designated ramin wood forests, which support wild populations of orangutans, as endangered. Manufacturers using ramin wood must now have special permits proving the wood is from a certified forest.

Paul, who imports metal handles from Ohio, New Jersey and Italy, is looking for wood alternatives. "I have five people in Canada who said they could help me," he said. "But none of them have called back."

Today, Shanghai Manufacturing has about 200 workers making about 1,300 corn brooms of various sizes each day. The workers, mostly young men and women recruited from rural areas on one-year contracts, make about $150 a month, Paul said, with pay based on the number of brooms made. Workers live in company dorms and receive three meals a day.

The most highly skilled employees work the wire and stitching machines. Paul said the process is quickly moving from hand to machine work.

"We imported two used wire-winders from the States for about $15,000 each," he said. "By the next time I visited, they had another 10 winders, all made in China for about $800 each."

Last year, while the workers were being trained, Paul was able to bring only a few thousand Chinese-made brooms into the United States. This year he hopes to ship as many as 250,000 brooms to the States; the rest, which won't meet U.S. quality standards, will be sent to other countries. The brooms sell in the this country for $3 to $12 in retailers like Wal-Mart and Target.

Though it's a fledgling business, Chinese corn brooms already have had an impact on the market. Paul said the price of broomcorn grown in Mexico, which has a near monopoly on the market, dropped to $1.19 from $1.65 per pound this year.

That has not made him many friends in the Mexican broom business. Paul figures his competitors alerted U.S. Customs when he mistakenly shipped his first two containers of brooms into California, only to learn West Coast ports won't accept them.

"I had to either burn it or return it," said Paul, who said he took a $13,000 hit on the shipment. "So now I have to ship them to the East Coast, which costs another $800 per container and takes 15 days longer."

The brooms he brings into the United States are subject to a 32 percent duty, a tax that was put in place in 1996 at the behest of the U.S. broom industry. According to congressional testimony, 382 people were employed in the U.S. corn broom industry in 1995.

"That 32 percent duty means higher cost to the consumer to protect about 350 jobs," said Paul, who doesn't expect that import tax to be reduced immediately despite China's entry into the WTO. "My product still has to land in the U.S. cheaper than ones made here. And they are."

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