Asia crisis hits home Trouble: Producers struggle to fill gaps left by a decline in exports caused by Asian currency woes that appear to grow more dire every day.

Economy

June 21, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Next to the General Motors Corp. plant on Broening Highway, where 2,700 workers were sent home after the plant ran out of parts, Titan Steel Corp. and its 60 workers are waging their own economic battle.

Unlike the GM plant, paralyzed by sparring between labor and management in Flint, Mich., Titan Steel is wrestling with a more distant foe: the Asian currency crisis.

The company, which buys tin-plated steel, customizes it and resells it, ordinarily ships 40 percent of its products to Asia.

"That's down to 20 percent and falling even further," said Peter Reid, the company's president. "And prices in Asia have fallen between 25 percent and 30 percent."

Titan Steel is one of many manufacturers trying to fill gaps left by a decline in exports caused by an Asian currency crisis that appears to grow more dire every day.

With the dollar growing ever stronger against Asian currencies, businesses and consumers in the Pacific Rim find goods manufactured there more reasonable -- if they are buying at all.

"The currencies have plunged in value by a range of 20 to 70 percent, making U.S. goods prohibitively expensive," said Marino Marcich, director of investment and finance for the National Association of Manufacturers in Washington. "On top of that, domestic demand in those countries has sunk."

James Hughes, director of international trade for Maryland's economic development department, said the crisis has started to have an impact here. "We work mostly with small- and medium-size firms," he said. "Most have pulled back substantially and are focusing their attention elsewhere, on Canada, Europe and Latin America."

Last week, the Commerce Department reported that the nation's trade deficit rose 9.5 percent, to a record $14.5 billion, in April as the Asian crisis dampened sales of a wide range of U.S. products. Imports fell 0.9 percent in April from a record high in March, but exports declined 2.6 percent.

For the Pacific Rim, which includes Japan, South Korea and other countries affected by the currency crisis, the U.S. trade deficit for the first four months of this year jumped to $46.7 billion, 38 percent more than a year ago.

The Clinton administration's intervention in the currency markets last week to support the yen calmed financial markets, but relief might be temporary.

"I think manufacturers that are heavily involved in exports are going to be severely hit," said Joe Rogers, former ambassador to the Asian Development Bank and now president of Rogers International Inc., a Baltimore-based consulting business. "And I think we have not seen the worst."

"When the dollar is headed to 150 yen, it's very difficult to sell a car in Japan," he said.

By cutting U.S. exports and lowering prices, the Asian currency crisis threatens to cut growth in the nation's gross domestic product from 3.1 percent to 2.6 percent, said Gordon Richards, an economist for the National Association of Manufacturers.

"By far, the biggest issue is what's going to happen in Japan," Rogers said. "The last time the bubble burst in Japan, we did get a recession here."

The crisis threatens the state's goal to boost annual exports from about $6 billion to $9 billion by 2000. But its effects on Maryland's economy should be limited, Hughes said. "Maryland's major markets are Canada and Europe," he said. "Latin America is its fastest growing market."

Last year, for example Maryland's top Asian market, Japan, accounted for $348 million of the state's exports, 35 percent less than in the previous year, according to state estimates. Taiwan accounted for $315 million; South Korea, $155 million; and Hong Kong, $121 million.

By comparison, Canada accounted for more than $1 billion and the United Kingdom for $467 million. In addition, manufacturing accounts for just 8 percent of the state's jobs. But Hughes said that the crisis could hurt business services such as software development and computer system integration in ways that are more difficult to track.

The U.S. companies that will be hurt include aircraft maker Boeing Co., the largest U.S. exporter; Texas Instruments Inc., the computer chip maker; Minnesota Mining & Manufacturing Co. and International Business Machines Corp. In Maryland, few manufacturers that export to Asia have begun to cut jobs because of the crisis, experts said.

Anirban Basu, an economist with the Regional Economic Studies Institute, said the state's exposure is limited by the high amount of business it does with the federal government. "We're not as vulnerable as Pennsylvania and Virginia," he said.

Towson-based Black & Decker Corp. doesn't expect a serious effect, said Barbara Lucas, a company spokeswoman. The Far East accounts for 4 percent of the company's sales and a smaller portion of profits.

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