Go to manufacturing.gov and you can read all about how the U.S. government supports manufacturing in this country. In fact, there are literally miles of related lip service and gov-speak (not etymologically related to biz-speak) on the Internet, if you're so inclined to wade chin deep in gobbledygook.

You'll find that the Manufacturing Council, made up of private sector “leaders” from across the U.S., “works with the Commerce Department to advocate, coordinate, and implement policies that will improve U.S. manufacturing competitiveness.” Sure, sure.

The fact is that, today, government at all levels in this country is damned picky about manufacturing it will or won't support, and if you're a heavy industry variety, there's not much chance you're on anyone's preferred list. The U.S. steel industry, among others, could write an encyclopedia about that, which should be required reading for everyone in the U.S. pulp and paper industry.

Reality 101 Some of our larger U.S.-based paper companies have been taking notes and studying hard in recent months. Several have come to the inescapable conclusion that this may be a really great market for selling paper products (highest demand in the world, by far), but maybe it's not such a hot place for manufacturing them anymore. Accordingly, some business strategies have begun changing, this time for real.

How can a country like the U.S. completely lose its competitive edge in an industry such as pulp and paper, almost overnight? Just 10-15 years ago, the U.S. paper industry couldn't startup enough new paper machines, couldn't rebuild and modernize fast enough. It was spending at a rate of $20 billion a year on three-year projects to expand in literally every grade sector, and then some. Lines for new paper machines stretched 10 years long.

In the past four or five years, the industry has contracted to less than what it was before the boom of the '80s even started. Spending is no more than a quarter of its peak in 1990 and a hundred or so paper machines have evaporated into thin air, some 16,000 jobs along with them. What remains, without sufficient capital reinvestment, is rapidly deteriorating into competitive obsolescence on the world stage.

Complex Factors An article in this issue (Changing Paper Production, Market Dynamics Cloud Future of U.S. Mills) takes a look at problems that have been dragging down the North American paper industry for some time. Paper industry consultant Jim Atkins, one of four experts contributing thoughts to this article, says that the factors are more complex than just lack of reinvestment. Developing countries, such as in South America and Asia (China especially), have rapidly blossoming advantages that dried-up over time in the U.S.-fiber supply and labor costs, for example, and probably most import, government support.

In most developing countries, such as Brazil, the government is not just supportive of the paper industry—it's extremely enthusiastic, Atkins notes. This is one of the industries that will help raise the standards of living for all Brazilians, just as in China. They don't have nearly as many government regulations and restrictions there, and manufacturing is wanted and needed in all regions. For those reasons, the developing world is where many large U.S.-based paper companies will go in the future to grow and expand their production base, Atkins explains.

He compares this situation to development and expansion of the paper industry into the U.S. South 50-70 years ago. The fast growing southern pine was discovered by the paper industry as an ideal fiber supply for the then new kraft pulping process, and later was developed into a suitable fiber for most other grades, Atkins notes.

At the time, southern pine represented a definite fiber advantage over slow growing conifers in Canada and even in Scandinavia, similar to the eucalyptus plantations in South America today. Labor costs were still fairly low in the South and the state and local governments needed the jobs. That's not really true today.

But it's abundantly true that governments in countries such as Brazil, Argentina, Chile, and in Asia do need and want paper industry related jobs and will do whatever is necessary to get, support, and keep them. Maybe 75 or 100 years from now, Brazil will not have the manufacturing advantages it currently has, and paper companies will be looking elsewhere for a new production frontier. Somewhere along the way, a country or region's original advantages always seem to get lost, Atkins believes.

The U.S. paper industry today may be a living, though barely breathing, example of that fact.

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