Chinese President Hu Jintao is scheduled to visit Washington in April and Washington is abuzz with unfair trading practice rhetoric. Among the activity is an interesting report by United States Trade Representative Rob Portman. The report, U.S.-China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement, is the first comprehensive statement of U.S. trade policy towards China since it joined the World Trade Organization (WTO) in 2001. "Despite three consecutive years of growing U.S. exports to China, our bilateral trade relationship with China today lacks equity, durability, and balance in the opportunities it provides," said Ambassador Portman. "The time has come to readjust our trade policy with respect to China."

The report outlines the following actions that will be implemented in consultation with Congress and other stakeholders to ensure meaningful progress in achieving the key objectives outlined in the report:

• Expanding USTR trade enforcement capacity to better ensure China’s compliance with trade obligations, including through the establishment of a China Enforcement Task Force at USTR, to be headed by a Chief Counsel for China Trade Enforcement;

• Expanding USTR capability to obtain and apply comprehensive, forward-looking information regarding China’s trade regime and practices to U.S. trade policy formulation and implementation, by: (1) adding personnel to USTR’s China office to coordinate collection and integration of information on current and potential China trade issues from other U.S. government agencies and other sources; and (2) establishing an Advisory Committee for Trade Policy and Negotiation (ACTPN) China Task Force to provide strategic advice and recommendations related to U.S.-China trade policy;

• Expanding U.S. trade policy and negotiating capacity in Beijing and other resources in China to more effectively pursue top priority issues, especially the protection of intellectual property rights;

• Increasing coordination with other trading partners on China trade issues of common interest, such as enforcement of intellectual property rights;

• Deepening and strengthening trade relations with other Asian economies, and within the Asia-Pacific Economic Cooperation (APEC) forum, to maintain and enhance U.S. commercial relationships in the region;

• Increasing the focus on regulatory reform in China, including through initiating a high-level dialogue on steel with China under the U.S.-China Joint Commission on Commerce and Trade (JCCT), deepening and expanding the State Department’s high-level dialogue with China’s economic planners regarding structural reform, launching an initiative to evaluate, assess, and engage on China’s subsidies issues, expanding initiatives led by the U.S. Department of Agriculture (USDA) to improve China’s transparency and compliance with its sanitary and phytosanitary standards (SPS) obligations under the WTO, and focusing intensive interagency efforts to address China’s development of standards and of an anti-monopoly law;

• Increasing the effectiveness of high-level meetings with China’s leaders, including through holding annual, elevated meetings of the JCCT prior to presidential-level meetings where possible and conducting mid-year reviews of goals and progress under the JCCT at the Vice Minister/Deputy level;

• Strengthening and expanding US-China dialogue on numerous other specific issues of significance to the global trading system and on bilateral trade issues that pose potential problems for the relationship, including, e.g., China’s participation in global institutions; market access and standards issues related to telecommunications, financial services, healthcare and direct sales; subsidies and structural issues, especially in the steel industry; standards; labor; environmental protection; and transparency and the rule of law;

• Strengthening U.S. government interagency coordination, including through monthly review, by the Trade Policy Review Group and Trade Policy Staff Committee, of strategies and progress made in achieving the key objectives identified in this report; and

• Strengthening the Executive-Congressional partnership on China trade, through initiation by USTR of a program of regular briefings for Congressional members and staff, to update them on progress in pursuing the objectives outlined in this report and to ensure that the Administration’s China trade policy is informed by Congressional priorities.

I want to call your attention to the first one, "Expanding USTR trade enforcement capacity to better ensure China’s compliance with trade obligations, including through establishment of a China Enforcement Task Force at USTR, to be headed by a Chief Counsel for China Trade Enforcement." Sound familiar? If you were at the 2004 WMMA Fly-In, it should. Senator Debbie Stabenow (D-MI) has been a leading advocate of a China Trade Prosecutor, and she outlined her views in a speech to WMMA. Her legislation in this Congress is S. 817.

When Senator Stabenow introduced the bill, she said, "Under the current structure of the office of the U.S. Trade Representative, we are asking our Trade Representative to do too much. Quite simply, the office is not able to deliver. The current structure demands that they negotiate trade agreements with foreign nations and simultaneously enforce other agreements with those same countries—all without damaging the U.S.'s ability to negotiate the next trade deal. It's not working. And, while significant portions of our trade imbalances are not caused by lax enforcement, much of it is."

Whether the position is created by legislation or executive action, it is important that unfair trade practices are vigorously challenged.

Small Business Legislative Council (SBLC) has brought back its’ public policy briefing telephone conference. It is an improved product and it is free! This is an opportunity for SBLC member association staff and member association members (e.g. board, public policy committee) to participate in a briefing by SBLC President John Satagaj on the hot small business topics of the day.

Upcoming teleconferences are scheduled for:

• Wednesday, May 10, 2006
• Wednesday, July 5, 2006;
• Wednesday, September 13, 2006

All teleconferences are scheduled for 11:00 – 11:45 am ET. Call toll-free 1-888-577-0004, Pass code 7252#.

You have the option of deciding who participates. No need to RSVP. All we ask is that you bear in mind that we want to be as candid as we can so the information is useful. By participating in the teleconference, you agree not to record the presentation, nor to quote or attribute comments to speakers.

The WMMA exhibited in India’s most important woodworking equipment trade fair. Eight members shared the WMMA booth; another 2 exhibited on their own.

The following are observations of the fair, the Indian woodworking equipment market and potential for WMMA members both as a market in its own right and as a country for outsourcing product or component production.

IndiaWood 2006
Since its inception in 1999 IndiaWood has more than tripled in size. This year it occupied about 8,000 -10,000 sq. meters net with about 300 exhibitors and attracted about 20,000 visitors. In 2004 the show was slightly more than 4,000 sqm. net. In discussions with the fair organizer and principals from the Taiwanese, Italian and German woodworking equipment associations, the 2008 fair is expected to remain at the existing site in Bangalore and grow by at least 20%.

Bangalore does not have any easily accessible fairgrounds with permanent facilities. The Palace Grounds, this year’s site, are centrally located but government regulations prohibit any permanent facilities on what is deemed to date, Government land. Thus, the organizer was forced to construct temporary facilities with plywood floors. While this sounds terrible, there was adequate air conditioning (outside temperature rose to 90° but inside it was a cool 68°) and power (thanks to a number of generators) and exhibitors were able to move in, level, power up and demonstrate heavy machinery with little trouble. For the 2008 event it is doubtful that the circumstances will change.

The following countries organized national machinery pavilions: Germany (the largest by far occupying over 20% of the entire fair area); Taiwan (occupying about 15% of total space), Italy and Spain (each with less than 3%).

The 5-day fair ran from Thursday – Monday. Attendance was very good and steady with Saturday and Sunday predictably generating the most traffic (about 9,000 total) and Monday the fewest number. However, even Monday brought about 3,000 interested buyers up until closing.

WMMA Stand
Size: 18 sqm.
Number of members sharing stand: 8
Number of member employees attending: 1
Number of Buyers Guides Distributed: 360

The stand was ideally located, next to the main entrance to the hall and across the isle from the Weinig stand. Booth traffic was steady and at times heavy as visitors were keenly interested in the association and members’ products. A number of leads were generated.

The Market
The following are some basic facts on India:

• GDP: $600 billion
• Growth: Estimated 8% in 2004-05; 8% in 2003-04 Est. growth for 2006: 7-8%
• Breakdown: Services equal 50 % of the GDP; industry and agriculture equal 50%
• Ranking: 12th largest economy in the world in 2003, and fourth largest in purchasing-power parity terms
• Per capita income: $539 in 2003-04, (almost double the figure of two decades ago). Of the 1 billion people, 39% live on less than $1 per day
• Purchasing power: In 2004, approximately 150-200 million people had growing purchasing power, thus creating a growing middle-class consumer population
• Youth Power: Over 58% of the Indian population is under the age of 20. That is over 564 million people, nearly twice the total population of the United States

In brief, the Indian woodworking equipment market is in its infancy and many of our European and Taiwanese competitors are still experimenting with distribution channels. The market has significant potential and WMMA members, showing patience and persistence, could be successful. However, as with any developing market there are a number of challenges, not the least of which is price point. Although most Indians prefer not to buy Chinese or Indian made equipment, price is a major factor. And, even if the purchaser is committed to buying a high quality product there will be hard price bargaining before the dust settles.

Major woodworking equipment producers shipped $19 million to India in 2004, a 44% increase over 2003. Final official figures are not in for 2005 from Italy and Taiwan. However, both Germany and China dramatically increased shipments in 2005; Germany to $5.4 million (50% increase) and China to $1.2 million (100% increase).

India is dominated by 4 major equipment distributors/agents: HBR Consultants, Pvt. Ltd., which represents major German, Italian manufacturers (including Weinig), Ramu Machinery Pvt. Ltd., which represents mostly Italian manufacturers, Woodtech Consultants Pvt. Ltd. which mainly represents Taiwanese equipment but with some suppliers from Australia, US and Europe, and Woodcon Consultants Pvt. Ltd. which represents a number of Italian lines, including SCM Group. Together, they probably account for over 90% of foreign equipment sales in India. My understanding is that none of the 4 is over 10-12 years old with Ramu having been formed within the last 3 months. Detailed information on each distributor will be posted in the WMMA International Distributor Directory.

From fair exhibitors, visitors, US Foreign Commercial Service officers and interviews during plant tours the following was determined:

On the positive side…

• Foreign direct investment and the increase in the number of Indian professionals returning home are creating a fast growing demand for consumer goods and real estate. Most foreign automobile producers have set up production/assembly operations in India. The aerospace industry is also growing quickly as are the health care products production and of course, products in support of the back office and IT services industries. To the extent WMMA members also manufacture products for the auto, aerospace and plastics industries, there is added incentive to go to India.
• Real estate values are climbing rapidly, especially in high tech corridors of Bangalore and Hyderabad.
• Labor prices are also increasing, creating more purchasing power.
• More and more commercial and residential buildings are being constructed using standard sizes for doors and windows.
• 330,000 homes are being built per year valued in excess of US$1 million each.
• Per Jeld-Win, 120 containers/mo. of door skins are being shipped to India (4,800 skins/container). The market is expected to double in the next 1-2 years.
• Local production of MDF and particleboard is both low and poor. My understanding is that both Siempelkamp and Dieffenbacher are actively marketing in India. The principals of both companies were present at IndiaWood. The feeling is that once high production, high quality MDF and/or particleboard production is introduced, the Indian secondary processing market will dramatically expand.
• Most wood is being imported from Malaysia, Myanmar, Thailand and Africa. There is a growing understanding that raw material prices will climb and therefore a need to become more efficient. To some extent New Zealand and South African pine is being imported.
• There is a large supply of technically qualified manpower in India at reasonable rates to undertake customer support services, but these technicians must be properly trained.
• There were a number of sawmill owners at the fair looking for ways to produce downstream products.

On the negative side…

• Recent laws prohibit the felling of trees and modernizing older sawmills. What happens to this segment of the industry is very much up in the air.
• Interest in newer methodologies is high but capital spending is still low within the woodworking industry.
• There are over 34,000 wood product producers in India. However, most are small, craft like producers with little machinery. While most are interested in adopting newer technologies, they are reluctant or don’t have access to capital to make the investment. This was evident at the fair where a number of visitors were small shop owners (1-2 employees operating out of a garage with an old lathe and maybe a single side planer).
• Unless the purchaser is involved in exporting product, imported machinery carries a 30% plus duty. The duty rate may go down as a result of the new budget now being debated.
• While European equipment sales are increasing the base is low and many are having difficulty making sales, due to price, lack of demand or both.
• While labor rates are climbing, they are still very low and there is continuing demand for craft made furniture.

Marketing Strategies
This infant market has huge potential. Whether it develops is dependent upon at least two major uncontrollable factors:

1. Labor wage rate creep: will India’s labor rates continue to grow and migrate to high value added industries and thus pass by the woodworking industry? This seems doubtful given the large labor force and the large discrepancy in wage earnings between blue and white color labor.
2. Whether the woodworking industry can develop competitive products for the world market: This is up in the air. It will have to compete with non lumber producing countries such as China and Vietnam as well as the developing nations that have lumber supplies like Malaysia and Indonesia.

If the Indian market does develop and I very much believe it will, members will need to have their distribution channels and servicing centers in place to take advantage of it. Otherwise, Indians will gravitate to traditional European suppliers if they seek high production/flexible machinery that can keep tight tolerances. On this score the International Business Development Committee is investigating ways it can provide member marketing support services in India. As this effort takes shape members will be advised.

Finally, most Indian woodworkers will not change their tune easily ---- price is the driving force in making a purchasing decision. A practical approach for some members will be to outsource component or product production.

Outsourcing
To reduce product import duties or other local costs and ensure a stable market share, several U.S. and other foreign companies have set up product assembly shops in India.
Our quick investigation into the India market provided evidence that there are ample metal fabrication shops able and willing to manufacture members’ products and/or components at competitive costs.

As a source, India provides significant advantages over other countries:

• High quality production facilities already producing for the local and overseas automotive, aerospace, plastics, medical care and IT industries;
• Relatively low manufacturing wage rates;
• English as a spoken language;
• Strong, growing economy
• Sound banking system
• Sound and relatively consistent regulatory environment;
• Country export incentives and duty drawbacks for imported components if incorporated into exported products

For the above reasons, India is an ideal market in which to outsource to service the Indian as well as US and 3rd country markets.

At our request, the US Foreign Commercial Service (FCS) is hosting a live webinar on the Vietnammarket for US woodworking machinery, cutting tools and accessories. This will be a one hour webinar, including a question and answer period.

To register, email Export Director Harold Zassenhaus at hzassenhaus@fernley.com. You will then be emailed the access code and other pertinent information.

To make this presentation germane to your interests, the FCS has asked if you have any specific questions/areas you want addressed. Please forward your questions to Harold’s attention at the address above.We know that our European competitors are active in the market and in fierce competition with product from Taiwan and China.What is it going to take for US suppliersto enter the market and what could be the financial payoff? Clearly, there are other questions you have or issues you would like to see addressed. Please forward them to Harold -the earlier the better, so the FCS can begin organizing their presentation.

This is an opportunity for you to become more familiar with one of the world's most dynamic woodworking markets. In 2004, Vietnam exported over $1 billion of wood furniture; through September 2005, Vietnam exported over $1.2 billion, a 47% increase over the prior year.

WMMA is organizing a member pavilion in VietnamWood, the country's most important woodworking equipment trade fair, October 19-22, 2006. If there is enough interest we willalso organize a series of plant tours and briefings either before or after the fair. If you are interested, please contact Harold at hzassenhaus@fernley.com.

Opportunities to Explore and Enter the Vietnam Market

The WMMA is organizing 3 events to assist you in understanding and entering the world’s fastest growing and 8th largest exporter of wooden furniture --- Vietnam.

1. Webinar: Marketing to Vietnam, April 13th
   Mark your calendars for a live one hour webinar hosted by the US Foreign Commercial Service Officer, Ho Chi Minh City. Members will be allowed to ask questions and have them answered, live. See details in the previous article.

2. WMMA Pavilion in VietnamWood 2006
   Ho Chi Minh City, Vietnam October 19-22, 2006. Sign up Deadline is June 30th.
   See below for more information.

3. Plant Tours/In-Country Briefings
   In conjunction with VietnamWood 2006, the WMMA will organize a series of plant tours and briefings with dealers, end users and the US Foreign Commercial Service to gain a fuller understanding of market trends and marketing opportunities. There will not be a charge for the service; however, members will be responsible for their out of pocket travel and related expenses.

A principal activity of WMMA’s International Business Development Committee is organizing WMMA pavilions in some of the world’s best known international trade fairs, as well in regional shows that offer excellent opportunities for members. We are organizing a member pavilion in the above fair. The sign-up deadline is June 30th. Do not delay – space is limited!

This unique exhibit service allows members to conserve costs and time, enhance exposure and gain support from fellow members and the WMMA staff. Exhibiting members services include:

In addition, the WMMA will have its’ own booth at VietnamWood at which it will be advertising members’ products and services. Members who want to share the booth can do so for $200. This entitles members to display literature, run product videos and/or work out of the booth. All participants will receive a summary of the event, a copy of the exhibition catalog and leads generated.

Cost: The cost for a walk-on package*: $220.00/sq. meter, 9 sq. meter minimum. This amounts to a 20% discount. Members can increase their booth by multiples of 3 sq. meters.

• Carpeting, 3 walls, header with name
• One standard 13 amp/220v single phase outlet
• Lighting
• Furniture (counter, table, two chairs, 2 shelves for display and lockable sliding door cupboard, waste basket)
• Daily cleaning and security
• Use of pavilion storage area for small items, supplies, product literature, etc.
• Enhanced pavilion design to attract buyers **

How to Apply for Space: Complete space contract form found here or contact Harold Zassenhaus, WMMA Export Director301 652 0693; fax (215) 963 9785; email: hzassenhaus@fernley.com

VietnamWood 2006, Ho Chi Minh city, Vietnam, October 19-22, 2006
Size (2005): 7,000 sqm.
Attendance (2005): 12,900
Exhibitors (2005): 400
Website: http://www.linkage-vn.com/hcm/wood/brochure2006.asp
Comments: The fair is the most important in 2006. It has been growing and is now endorsed by EUMABOIS, the European Federation of Woodworking Machinery Manufacturers Associations, guaranteeing participation of most European suppliers. About 85% of fair visitors came from Vietnam with the remainder coming from other Asian countries.

** To see how the WMMA enhances exhibitors’ ability to attract visitors, click here to view designs of WMMA pavilions in past overseas fairs.

WMMA’s Manufacturing Strategies Committee is sponsoring a member’s only webinar on “Driving Operational Excellence via Lean Manufacturing,” an executive overview on the principles of Lean Manufacturing and how to apply them. The webinar will take place on April 5, 2006 from 12:30 – 1:45 PM EST.

To register, please email Harold Zassenhaus at hzassenhaus@fernley.com. He will respond with access information.

Background: Driving Operational Excellence via Lean Manufacturing

The overall objective for a firm that wants to “go lean” is to eliminate all the various forms of waste in the organization for the purpose of being more customer responsive, efficient and profitable. Lean organizations are tightly linked to their customers and produce products at the “pull” of the customer, in other words, making no more, and no less than is demanded.

Learn first hand how Lean improves quality, reduces cycle time, improves delivery performance, reduces Work-in-Process (WIP) and can enable your business to improve both profits and the balance sheet. Participants will be introduced to concepts such as standardized work, visual signals, batch-size reduction, pull systems, cellular flow, value stream mapping, and more. Discussion and dialogue among the participants and the instructor will be stressed. Emphasis will be on techniques that tie to business strategy, and effectively align lean continuous improvement with your organization, both above and on the shop floor.

This presentation will be given by Bill Donohue, Vice President of Virginia’s Philpott Manufacturing Extension Partnership; representing 59 NIST affiliated MEP centers located across the country. MEP centers are focused on affordably assisting small and mid-sized manufacturers in their pursuit of excellence. With over 1400 agents in the field, a NIST project manager is typically within 2 hours driving time of any customer in the US.

To gain insight into the key online marketing trends that are impacting manufacturing companies, SVM E-Business Solutions conducts an annual study of industrial marketing executives. Over 220 manufacturing companies participated in this year’s study, providing insight into their online marketing experience and initiatives.

Based on our study, here are the top five online marketing trends that will affect you in 2006:

Trend #1 - Marketing Budgets Are Shifting Online

Online marketing budgets are on the rise among manufacturers. According to our study, three-quarters of manufacturers will be increasing their online marketing budget.

In the short term, some of the money will be shifted away from traditional marketing vehicles, especially magazine advertising, trade shows and direct mail. However, about half of industrial marketers will be upping their total marketing budget, rather than decreasing traditional marketing spending.

However, traditional marketing vehicles may be vulnerable to more cuts in the future, the research indicates. When asked about the effectiveness of different marketing vehicles over the next three years, industrial marketers think magazine advertising, industry directories and direct mail will be less effective at producing results. Meanwhile, the majority of manufacturers think Websites, search engine marketing and email marketing will become more effective over the same period.

Trend #2 – Websites Are Becoming the Hub of Industrial Marketing

The Web is increasingly becoming the hub of many manufacturers’ marketing efforts. In fact, over half of all manufacturers consider their Website to be their most powerful marketing tool. This makes sense because, compared to other marketing vehicles, a Website has the unique ability to continually perform three key marketing tasks:

• Deliver a compelling marketing message
• Engage prospects and customers to take action
• Collect and route information to the appropriate sales channel

To enhance their marketing process, industrial marketers have packed their Websites with sales lead generation features, online product catalogs, e-newsletters, self-service knowledge centers and online ordering. And this is only the beginning. In the coming year, over three-quarters of manufacturers will continue to invest in further enhancements to their Website.

Trend #3 - Marketing Will Become More Accountable for Results

Business value and return on investment (ROI) has never been of greater concern to industrial marketers. Measuring the return on marketing investments is a top challenge and top priority for manufacturers in 2006.

Marketing is fast becoming a results-driven discipline. Gone are the days when an industrial marketer can execute a campaign without tying it back to bottom-line results. No longer can industrial marketers rely purely on their past experience, intuition and gut feel. ROI needs to be as fundamental an ingredient in marketing as it is in finance, sales, R&D or any other strategic department in the company.

Trend #4 - Search Engine Marketing Will Help Drive Sales Lead Generation Efforts

Search engine marketing – the art and science of making your Website appear at the top of search results to draw targeted traffic to your Website – will continue to grow in importance for manufacturers. About half of industrial marketers engaged in some form of search engine marketing in 2005, and this will increase significantly in 2006.

It is wise that manufacturers are including search engine marketing in their marketing budget. The investment will go a long way toward increasing traffic, generating leads and increasing sales.

Search engine marketing delivers the most qualified prospects. That's because potential customers who find your offerings through search engines are looking for your products on their own. As a result, they are predisposed to hear your marketing message and take the next step. You can't find a more qualified prospect than that.

Trend #5 – Email Marketing Will Be Used to Nurture Relationships with Customers

Manufacturers will continue to embrace permission-based email marketing to nurture relationships with customers and prospects. In the coming years, more than half of industrial marketers will engage in new email marketing programs. Those that have experience with email marketing feel it is most effective for educating customers and prospects, brand awareness and customer retention.

The email marketing tool of choice most often is an email newsletter, or e-newsletter. Email marketing with a regular e-newsletter offers you an opportunity to build an ongoing, interactive dialogue with your customers. Not only can an e-newsletter demonstrate value to your customers, but also it can change your customers’ perception of your business. By including timely articles solving current business problems, you show your customers that you understand them and their needs. This repeatedly reinforces their importance to you and builds their trust in your company.

By embracing these trends and implementing successful online marketing programs, manufacturers will be poised to thrive in 2006 and beyond. To learn more about the key e-business and online marketing trends impacting manufacturers, download the full E-Business Trends in Manufacturing Report at http://www.svmsolutions.com/survey.

Bob DeStefano is President of SVM E-Business Solutions, a leading online marketing agency focused on delivering measurable business results for manufacturers.
SVM is the preferred online marketing provider for WMMA Members. SVM can be reached on the Web at www.svmsolutions.com or by calling 1-877-SVM-EBIZ.

The 15th Annual Woodworking Industry Conference will be held May 3-6, 2006 and is the premier forum for education and networking. Attending the WIC '06 at the Wailea Marriott Resort, Maui, HI, is the right choice for your business.

The Early Bird Deadline for WIC 2006 Registration has passed, but it’s not too late to sign up for this exciting and productive conference! The 2006 Woodworking Industry Conference is just around the corner! Register now and take advantage of all that WIC 2006 has to offer.

Learn more about the WIC '06! Visit http://www.wmma.org/events/wic.cfm.

Mark your calendars for IWF 2006! WMMA members are entitled to a 20% discount on booth space at IWF 2006 provided the payments due April 22nd (passed), January 20, 2006 (passed) and May 12, 2006 are postmarked by a government postal agency or overnight delivery service (not a company postage meter) by the respective due dates. Visit www.iwf2006.com for details.