Pencil price wars pit imports against U.S.-made

July 27, 1994|By Ellen Gamerman | Ellen Gamerman,States News Service

WASHINGTON -- Could there be anything controversial about a pencil, the age-old instrument painted the color of school buses and sunshine?

These days, the answer is yes.

The school kid's most trusted possession is creating an international price war -- and the U.S. government is in the middle of the fray.

Domestic pencil makers say cheap imports from the Peoples Republic of China and Thailand are jabbing at their business like newly sharpened No. 2's.

U.S. manufacturers want the federal government to impose higher duties, which could double the price of the foreign-made goods.

But pencil importers and distributors are fighting the move, saying the price rise could snap their businesses in two.

They argue that imported pencils are so poorly made that no self-respecting U.S. manufacturer should be afraid of the competition.

Enter the U.S. Department of Commerce. This agency, in a recent preliminary ruling, supported a 100 percent duty on imported pencils. A final ruling is expected by mid-August.

The Writing Instrument Manufacturers Association, a pencil trade group, last fall petitioned the federal government to impose higher duties. The group argues U.S. pencil makers will reap an extra $30 million in sales annually if it wins its case.

"Figures on the actual costs of production show very clearly that the Chinese are dumping these pencils on the U.S. market," said Robert Waller Jr., the group's executive director. "There's no way we can compete with that."

For less money than it costs U.S. manufacturers to buy wood for one pencil, he contends, Chinese manufacturers can sell an entire finished product.

The price differences are evident in the pages of office supply catalogs. A recent United Stationers flier lists a dozen Chinese-made pencils at $1.89, compared to U.S.-made Dixon pencils at $3.36 a dozen.

If the Commerce Department imposes higher tariffs, it would do so under anti-dumping statutes. Dumping occurs when a country sells its products abroad for less money than it does at home.

Because the Chinese government subsidizes pencil production costs, manufacturers have been able to sell the products very cheaply in the U.S. over the last decade. Manufacturers started complaining to the government about possible anti-dumping violations within the last few years.

Officials at Faber-Castell Corp., which produces roughly one-third of the 2.5 billion pencils sold in the United States each year, complain that cheaper imports are threatening to create a pencil glut.

"There's nothing wrong with competition," said John Brandewie, marketing manager for the company, based in Parsippany, N.J. "I think it's the fairness of that competition that is at the heart of the anti-dumping suit."

Oddly enough, importers defend their business by insisting that the foreign pencil is poorly made.

Importers say that because the pencils are deservedly cheap, they can do little harm to the large firms dominating the U.S. pencil manufacturing industry.

"The Chinese pencil is quite inferior -- it just doesn't compete," said Washington lawyer Lawrence Walders, who represents pencil distributors. "We don't believe the industry is injured by imports."

Mr. Walders contends that consumers, particularly students, would be hurt by new duties. School kids need pencils, and they need them cheap. "School kids buy 50 or 100 at once," he said. "They lose a pencil a day or they chew them up."

Mr. Walders said home-grown pencil supplies are so expensive that smaller companies can barely compete.

"The price of wood for U.S.-made pencils is very high, and it is available in limited supply," he said. Most distributors, he argues, "have no choice but to import from China."

Meanwhile, little wars like the one over pencils are keeping the HTC Commerce Department -- and plenty of Washington lawyers -- in business.

In the past month, said Washington trade lawyer George Thompson, dozens of cases have been filed to cover a number of different products in different countries.

"If you think pencils are mundane, U.S. industries brought a case against China over -- believe it or not -- paper clips," he said.

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