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For years, U.S. steelmakers have been crying foul over cheap, subsidized foreign imports. But their industry isn’t the only one in which international trade issues have brought on mass bankruptcies. U.S. industries as diverse as fruit distribution and textile production have sustained more and more bankruptcies in 2001, as groups such as the World Trade Organization seek to promote a global marketplace free of tariffs where disputes can be settled in one, central forum. Some U.S. industries suffer from excess global capacity, a circumstance to which they contributed. But without tariffs to form a barrier to entry, U.S. companies have found themselves vulnerable to foreign rivals that can benefit from devalued currencies, government subsidies and other factors. “In the 20 years I’ve been in this industry, I’ve never seen the situation worse than this,” says Carlos Moore, executive vice president of the American Manufacturers Textile Institute in Washington, D.C., a trade group representing two-thirds of the textile industry. While the textile sector hasn’t experienced the 30 bankruptcies since 1998 that the U.S. steel industry has, it has had its share. Burlington Industries Inc., Steel Heddle Group Inc., Thomaston Mills Inc. and CMI Industries Inc. are among the 2001 textile bankruptcies, with Pillowtex Corp. being a late 2000 filer. Textile’s trade woes started with the Asian financial crisis in 1997. Devalued currencies in Asia have given textile makers there as much as a 30 percent price advantage in the markets that import their products. They have found ready buyers among U.S. retailers whose thinner profit margins have required them to become pure importers of inventory. Greensboro, N.C.-based fabric maker Burlington is the most recent company in the industry to file for Chapter 11 protection. In its November filing, the company cited cheap imports and the federal government’s trade policies as the reasons for its troubles. “A key factor that led Burlington to take these steps is the U.S. government’s history of using the textile industry as a bargaining chip in international relations,” said George Henderson III, the company’s chairman and CEO. “Imports have been growing rapidly for many years, but since 1999, the volume of imported apparel has grown at five times the rate of consumption, squeezing out U.S.-made products to the point that four out of five garments sold in this country today are imported.” U.S. furniture makers face a similar threat from Asia, particularly China, according to Ken Smith, a home furnishing consultant with BDO Seidman in High Point, N.C. The Chinese government’s willingness to put facilities together for manufacturers, coupled with the nation’s cheap labor market and the resulting low price of goods it can import have been disastrous for U.S. companies, he said. The list of bankrupts that filed in 2001 within the sector, while not as long as it is for textile manufacturers, includes Heilig-Myers Co., HomeLife Corp. and Krause’s Furniture Inc. Not everyone is convinced the U.S. government’s encouragement of freer world trade is to blame for the industry’s woes. “It’s the economic downturn, an overcapacity in the industry with a cutback in inventory,” said Dorothy Lakner, an analyst with CIBC World Markets. Thousands of retailers went bankrupt a decade ago mostly because their merchandising got off-track and their inventories piled up, she said. Though circumstances are different this time — inventory-tracking technology is more sophisticated — Lakner shrugs off the notion that trade issues have forced retailers into bankruptcy. Ditto for furniture makers. “They’re just looking for something to blame it on,” said one analyst, who asked not to be identified. Some observers even say that the poster child for trade restrictions, the steel industry, also has hurt itself because of too much manufacturing capacity. But U.S. steelmakers do face problems their foreign rivals don’t. As an industry, U.S. steelmakers face billions in retiree health and pension costs. Those are costs that the governments of their foreign competitors pick up. The Pension Benefit Guaranty Corp. insures pension plans on an individual basis, but has said it won’t do so industry-wide. The International Trade Commission has been a bit more sympathetic, acknowledging the damage done to the steel industry because of an influx of cheaper imports. The ITC has recommended President Bush take action, including imposing restraints. But that may be too little, too late. Besides the many steelmakers that have declared Chapter 11 this year — from Laclede Steel Co. to Trico Steel Co. to Bethlehem Steel Corp. — there has been a troubling uptick in impending liquidations in the industry. LTV Corp., the third-largest steel producer in the U.S. which filed for Chapter 11 in 2001, reached an agreement recently among its creditors, union and bankers for its liquidation. Bankrupt Acme Metals Inc., which can’t even keep its mills on hot idle this winter so it can at least sell them, says the dumping of subsidized foreign steel has hit it hard, too. More bankruptcies are likely, even among more efficient mini-mill steel producers. Sheffield Steel Corp. recently filed as did Heartland Steel Corp. earlier in the year. The next steelmaker to go could be Geneva Steel Holdings Corp., which has warned that it’s running out of cash and could be headed back to bankruptcy court as soon as Friday. Companies could look to Chiquita Brands International Inc. of Cincinnati for solace. The world’s second-largest banana producer, $700 million in debt, filed for bankruptcy in November. But the company won a major victory last summer, when the U.S. government and the European Union negotiated a settlement in which the EU lifted banana-import restrictions within its 15 member states. Chiquita said the quotas immediately cut in half its share of the European banana trade, its largest and most profitable market. It then couldn’t service its debt any longer. That trade dispute is history, but it took eight long years for Chiquita to resolve it, and ultimately, the company fell into bankruptcy anyway. Such trade-related dilemmas seem to resign companies in other industries to a similar, inevitable fate. Copyright (c)2001 TDD, LLC. All rights reserved.

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