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Overseas Sourcing — China: A Limited Threat

May 2007 By Erik Cagle
Senior Editor
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AS ALL book printers are aware, the practice of publishers outsourcing certain work to Asian, European and South American countries is not a novel concept—no pun intended. But the rules of engagement have changed in the Internet age, and some of the firms impacted most by the inequity of the U.S. trade imbalance have taken exception to advantages that foreign governments provide firms who export to America.

In the case of China and the recent tariff levied on the import of coated paper, it matters little. Book publishers are saving as much as 50 percent by farming book manufacturing overseas to popular industrial locales such as Shenzen, in a country where labor rates are ridiculously low (as in $1 per hour).

The U.S. Commerce Department found that Chinese exporters of coated free sheet paper reaped what are termed “countervailable subsidies” of just above 20 percent from their government. South Korea and Indonesia could also be subject to tariffs, but aren’t viewed as the level of outsourcing threat China poses in the book printing realm.

It’s difficult to examine the topic of overseas sourcing without overly obsessing on the subject of China. Generally speaking, the United States has a trade imbalance with China that swelled to more than $2 billion in 2006. It has become the poster child of lost market share for many U.S. book printers, who either steer clear of market segments that are most susceptible to outsourcing, or they find value-added alternatives that can keep publishers in the fold—not an easy task.

Certain products beg to be outsourced: medium-length sheetfed runs for trade publishing, such as children’s books (especially pop-ups), cook books, coffee table works, and photographic and art books with high-quality illustrations. Products with long lead times and heavy doses of hand assembly also fall into this category. There are other printed items that can be more economically produced overseas, such as posters and calendars, but books clearly pose the greatest danger to North American printers.

Yearly Income Is $1,000

Rémi Marcoux, executive chairman for Montreal-based Transcontinental, explored the threats posed by China in a speech, “Quebec Inc. in the Chinese Age,” that he gave last October to that city’s Board of Trade. Marcoux spoke of touring some of the country’s printing shops and how they had gone through a major transformation, with inefficient state-run shops replaced by modern, specialized plants that are privately held or partnering with the government or foreign interests.
 

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