Last updateFri, 07 Aug 2020 4pm

Free Trade and the Valve Industry


flags of the worldwebIt has been 25 years since Canadian Prime Minister Brian Mulroney and U.S. President Ronald Reagan negotiated and signed the Free Trade Agreement, resulting in duty-free movement of goods across the 49th Parallel. There is no consensus as to whether the agreement turned out to be beneficial to either or both countries, but one thing is certain, it did change the face of trade on this continent.

NAFTA followed soon after, in 1994, and some have argued its passage resulted in the loss of many jobs to Mexico. Certainly many manufacturing jobs have moved out of both the U.S. and Canada to Mexico, but the removal of protective tariffs has also resulted in greater sales of equipment (including valves) and machinery from the U.S. going to its neighbors north and south. But has it been a net gain or loss? And what effect have these agreements had on the economies of the participants in relation to each other and the rest of the world?

There is no way to know, of course, what would have happened with the economies of any of these countries had free trade not been instituted, but there does appear to be consensus that market forces, such as currency values, have a greater effect on the economies of all countries than they would have with tariffs. We are seeing this now with the rising of the Canadian dollar in comparison to the U.S. currency.

Free trade is here to stay, obviously, and even more agreements are being considered between the U.S., Canada, and the rest of the world. Does this make us more vulnerable, or somehow more insulated against the ups and downs of national economic downturns?

Also, in the long term, how does free trade affect the valve industry? Is there more opportunity for American valve, actuator and control manufacturers because of it? Has there been any effect on intellectual property rights because of it? What effect has that had on your business?

We’ve seen the effects globalization has had on the industry in terms of offshore producers coming into the U.S. In fact, next week we’re posting in our Web Features a special article tracing the effects of the influx of offshore valves back in the 1970s and how it has permanently changed the valve industry. But that is separate from free trade, and if you have noticed particular trends in how it affects your business, positive or negative, we would like to hear from you.

And how would you feel about a North American Union, much like the European Union? Some people have asserted that the Security and Prosperity Partnership of North America is the first step toward such a union.

Drop me a line at This email address is being protected from spambots. You need JavaScript enabled to view it., or post your thoughts here on the blog.  


Addressing the Skilled Labor Shortage


laborerarcweldingwebThe U.S. Department of Labor recently announced funding of over $175 million for community colleges to grow and enhance their manufacturing education and training programs. Part of the $500 million 2012 Trade Adjustment Assistance Community College and Career Training (TAACCCT) Grants Program awards, this funding is intended to make it easier for manufacturers to have access to talented individuals with a good education and advanced skills.

For valve, control and actuator manufacturers, this should be welcome news, as the skills gap will become increasingly evident when the so-called “Baby Boomer” generation retires in a few years. I’ve talked to many managers over the last couple of years who tell me they’ve had to woo back more than a few good employees who were planning on retiring. There are just simply not enough young people with the right training.

According to Jennifer McNelly, president of The Manufacturing Institute, these grants to Community Colleges will enable students to earn the skills they need to access and advance in manufacturing jobs and support schools in building quality, relevant manufacturing programs that offer individuals industry-based certifications.

The problem is more than just the education system, though, or the way community colleges designed their curriculum in the past. As one “old timer” said to me recently, “Ours is not glamorous work. It’s not Silicone Valley or Wall Street. You get dirty out here, you get hot and sweaty. A lot of these kids have grown up with cell phones and video games and stories of striking it rich by creating apps. Why would they want to work in a factory?”

While that may have been an issue before, you would think that, with all the news of unemployment numbers staying high and economic recovery being slower than we’d hoped, there would be a lineup of people waiting to get good manufacturing jobs. In fact, there might be many people wanting to do that, but how are they going to get into these programs in the schools?

Many people simply don’t have the money to get into these programs. Whatever savings many families had for education was depleted when the economy tanked, so no matter how good the education might be, there’s no realistic way to finance it. Is this where the manufacturers come in, maybe with apprenticeship programs or other creative strategies to help potential employees get the training they need?

If you have some creative ideas to address what could be a serious skilled labor shortage in the very near future, please comment here on the blog or write to me at This email address is being protected from spambots. You need JavaScript enabled to view it..


Short Term Gain or Long Term Income?


enbridgepipeThis week marks not only return to school, but also a return to hearings for Enbridge, a Canadian company intent on building the controversial Northern Gateway project (NGP). The $6-billion project is a twin pipeline; one will carry 585,000 barrels of diluted bitumen each day from Alberta’s oilsands west to Kitimat on the coast of British Columbia and another will carry the diluents back to Alberta.

The company recently announced $500 million in improvements to pipeline safety for the Northern Gateway pipelines. Those include increasing the thickness of the line by 2%, adding 50% more shut-off valves and increasing inspections by 50%. However, the recent spills at Enbridge pipelines in Michigan and Wisconsin remain fodder for environmentalists and First Nations representatives so it’s really no surprise they are opposing the pipeline over fears of a catastrophic spill in Canada’s relatively pristine north.

Opposition to the project came from a surprising sector last week: some of Canada’s most powerful trade unions. After all, Enbridge and the Alberta government claim that the province will lose $72 billion over nine years if the pipeline is not built, and Enbridge claims that the NGP will create 63,000 person years of employment during the construction of the pipeline, and 1,146 full-time jobs once it’s completed.

However, a recent study has come out saying that Enbridge’s job creation estimates assume that workers would otherwise be unemployed, and a large share of the estimated jobs come from induced employment, i.e. the economic impact of expenditures by Enbridge workers and governments. The report says that these “induced” impacts are particularly difficult to estimate and notoriously easy to overstate.

According to Enbridge’s own estimates, the pipeline will only create about 1,850 construction jobs per year for three years. Even adding in upstream employment from pipe and valve manufacture, if that were to occur in Canada, the reality, according to the report, is that there would be no more than 3,000 jobs per year for three years.

Also, the Alberta Federation of Labour has argued that Canada’s refining industry will actually shrink, with an expected loss of 8,000 jobs if the pipeline project goes ahead and diverts bitumen feedstock to China. Canada, and by extension, the manufacturers who supply valves and controls and actuators and pipes for refining, will lose out on opportunities from upgrading and refining, because oil sands bitumen will be exported to China after only minimal processing.

In an attempt to overcome these objections, a British Columbia newspaper tycoon, David Black, has stepped in with a proposal for a $13-billion refinery in Kitimat as a way to bring economic benefit to the province. Enbridge seems uninterested.

Gil McGowan, leader of the Alberta Federation of Labour, said, “We think this project will kill more jobs than it will create.” He noted that Enbridge’s own figures estimate a 4% reduction in refining capacity by 2018 in Canada as a result of the pipeline. “This isn’t just about losing value-added jobs in the future, it’s now becoming clear that existing jobs in the refining sector are also threatened,” he said.

So with its environmental record in question, the powerful trade unions and First Nations and countless other organizations against the project, it seems Enbridge is going to have a tough week.

What does all this mean for valve, actuator and control manufacturers? While most of them sell to global markets, it seems that short term benefits of selling to the pipeline could result in losing long term domestic opportunities that could come from building and maintenance of a refinery in North America. What do you think?

Kate Kunkel is editor of Valve Magazine.com – contact her at This email address is being protected from spambots. You need JavaScript enabled to view it.


Gas in a Free Market Economy


natural gas refineryI just completed a summary of one of our Market Outlook presentations on the oil and gas industry. It was a great presentation by John Spears, and it’s going to be hard to shrink all that information to the 700 or so words I have available for it in the fall issue of Valve Magazine. Since it is important for everyone in the valve industry to know what he had to say, I’m also posting a more in-depth piece Monday August 27 in a Web Feature on ValveMagazine.com.

But as an appetizer, I thought it would be good to share a piece written by John Egan for Industrial Info Resources. In a recent article, John discussed the question of whether exporting LNG from the U.S. would make the domestic price too high. He discussed a recent study that “ pooh-poohs the potential for LNG exports to meaningfully push up the price for gas paid domestically.”

The study, titled "U.S. LNG Exports: Truth and Consequence," by Rice University professor Ken Medlock, points out that there is a big difference between a policy decision to authorize a particular level of LNG exports, the actual amount of exports that will occur, and the price that will result. Medlock wrote “The bottom line is that certification of LNG exports will not likely produce a large domestic price impact."

It seems to make sense. After all, just because there are permits granted, it doesn’t mean the terminals will be built, nor does it mean that the maximum amount of gas will be exported, nor does it mean that the price will necessarily rise to levels untenable by current domestic users.

That should be of comfort to domestic power producers, like Kevin Geraghty of NV Energy (also a speaker at the Market Outlook) who have switched from coal to natural gas as the cost became competitive. And it’s also good for the domestic producers of natural gas and the companies that supply rigs, pumps, valves and piping to them.

As I mention repeatedly in this blog, I am no economist, but it seems to make sense to me that, whatever the commodity, it is healthy for producers and consumers alike to move away from pricing being connected to contracts and speculation and more toward pricing based on costs. So why not grant the licenses, and see what happens?

I think that’s called a “free market economy”, isn’t it?

Kate Kunkel is Web Editor for ValveMagazine.com. You can contact her at This email address is being protected from spambots. You need JavaScript enabled to view it..


Singing the Blues


chicagoI returned from my first Market Outlook in Chicago this week very enthusiastic about the forecasts the presenters made for the next couple of years.

According to Allan Beaulieu of ITR Economics, we can expect relative stability and growth over the next few years, and those who invest and expand their businesses now will be able to ride out the downturn expected in 2019. While much of the growth in power generation including nuclear will be overseas, it was clear from the presentations by Kevin Geraghty and John Spears that North American valve producers should be able to take advantage of the drive to deliver reliable electricity to people in the developing world. Even the petrochemical industry is seeing positive growth in North America, thanks in large part to the natural gas boom (no pun intended).

So I have to admit I was a little confused when I picked up a newsmagazine at the airport and read that Economist Paul Krugman is among several experts singing the blues, arguing that America’s “ongoing malaise is a depression and not merely a recession.”

Now I am certainly no economist; I have trouble balancing my bank account. So I most definitely cannot say with any authority that Allan Beaulieu has an inside track that Paul Krugman does not. But it seems to me that attitude and expectations do have a big effect on economics. After all, if we’re feeling optimistic, we would follow Beaulieu’s advice and invest now to position stronger in the future. However, if we believe Krugman is right, that the country is actually in a depression, the tendency would be to hold onto whatever we do have in a kind of personal protectionism.

When we do that, though, we self-fulfill the prophecy of economic downturn, because that means you’re not hiring or investing in a business or spending, all of which are necessary to spur growth. If you’re among the 69% of the American population who thinks we’re still in a recession, chances are you’re going to be pretty careful with your money, even if it means foregoing opportunities.

your choice

Since that seems counterproductive, I’m turning back to my notes from the Market Outlook workshop to rejuvenate that feeling of prosperity with which I left the Windy City. I’ll leave blues singing to the experts.

If you were at the Market Outlook workshop, I’d love to hear your thoughts on the forecasts, and if you weren’t, contribute your personal thoughts about the state of growth (or not). What’s your position?

Kate Kunkel is Web Editor for ValveMagazine.com. You can contact her at This email address is being protected from spambots. You need JavaScript enabled to view it..

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