While the U.S. government sits mired in the muck of yet another financial quagmire, sectors whose fiscal health impact the valve industry face an uncertain future.
The new fiscal cliff includes severe spending cuts that will take effect on March 27th, 2013. The Center for American Progress estimates that program cuts could range from 8.5-10% for 2013 with large cuts on defense spending. While that certainly impacts weapons manufacturers, defense cuts are relatively low on the list of things about which the industrial valve industry should be concerned.
For manufacturers in the U.S., the biggest problem with a stalemate and budget cuts could sit right at the borders. U.S. homeland security chief Janet Napolitano projects the cuts could affect the equivalent of about 5,000 border patrol agent positions, many on the Canada-U.S. border. The equivalent of 2,750 inspectors is also on the chopping block. The U.S. Customs and Border Protection agency estimates these cuts could result in as long as five hours at larger ports of entry.
This comes at a time when the recent U.S. successes in hydraulic fracturing are beginning to attract attention in other countries. Poland and China are planning a fracing industry, and the U.K. recently backed off an earlier ban. But if there are huge delays in imports and exports, what impact will that have on industry that relies heavily on goods moving across borders?
In a memo sent to its members this weekend, the Canadian Council of Chief Executives and the Canadian Manufacturers and Exporters group warned that there is no evidence that any border contingency plan has been worked out between the U.S. and Canada. Beyond that, what about people moving across the borders? What effect will increased border wait times and cost of travel have the valve industry when so many of its executives and engineers must travel as they interact with end users, suppliers and offshore plants?
On another political front we sit, still, with the whole Keystone XL pipeline debate. Or should we say debacle? In early February, a prestigious science journal, “Nature”, green lighted the project by saying that the oil coming from Alberta’s oilsands is not as dirty as some content. In an editorial entitled “Change for Good”, the editors argued that the pipeline won’t determine whether the oilsands are developed, and oil produced from the oilsands is not as dirty from a climate perspective as many believe. The editorial actually argued that some of the oil produced in California is in fact worse, and that there are several benefits to approving the pipeline.
For U.S. energy security, this seems to be a no-brainer, but if Keystone XL is nixed, will it mean the valve industry will be left out in the cold? Probably not, because that oil still needs to move from point A in Alberta to markets elsewhere. Many Canadian politicians and energy sector heavy-hitters are tiring of the never-ending debate about sending it south, so they are looking east to get the country’s largest natural resource to market, leading from Alberta to Saint John, New Brunswick, from where it can get to international markets.
For suppliers north of the 49th parallel, it could be a windfall if border backlogs affect delivery times for valves, pipes, actuators and controls from the U.S. Even though many North American valve industry players have interests on both sides of the border, it could become a detriment to the viability of some U.S. companies at a time when growth is tenuous at best.
The frustration in all of this is that nobody seems to be able to make a decision, stick with it and get on with the business of business.