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Frustration and the Fiscal Cliff


bordertrafficbackupWhile 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.

Kate Kunkel is senior editor of VALVE Magazine. You may reach her at This email address is being protected from spambots. You need JavaScript enabled to view it.  


Who’s Going to Fill Those Jobs?


obamaIn an initiative laid out in his State of the Union address, President Obama has stated his plans to build on the momentum of manufacturing growth in the U.S. The plan basically rests on four proposals, outlined here from the White House web site:

  • Partnering with businesses and communities to invest in American-made technologies and American workers through a network of new Manufacturing Innovation Institutes: The President has proposed a one-time $1 billion investment to create a network of 15 manufacturing innovation institutes across the country, and urges Congress to act on this proposal. But to make progress right away, he is also acting through executive authority to launch three new institutes, which are partnerships among business, universities and community colleges, and government, to develop and build manufacturing technologies and capabilities that will help U.S.-based manufacturers and workers create good jobs.
  • Ending tax breaks to ship jobs overseas and making the U.S. more competitive: To support our manufacturers and encourage companies to invest in the U.S., the President has proposed to reform our business tax code, lowering the rate for manufacturers to 25 percent, expanding and making permanent the research and development tax credit, and putting in place a global minimum tax to prevent a race to the bottom in corporate tax rates.
  • Bringing Jobs Back: The President has proposed a new partnership with communities to attract manufacturers and their supply chains, especially to hard hit manufacturing towns. The President is also proposing to expand SelectUSA, a program designed to partner with our governors and mayors to bring in business investment from around the world, ensuring that America can compete globally and bring jobs and investment to our shores.
  • Leveling the playing field and opening markets for American-made products: In addition to the President’s efforts to double exports, including through new steps to open markets in Asia and Europe to American-made goods, the President will continue to enforce trade laws to protect American workers from unfair trade practices and strengthen the Interagency Trade Enforcement Center launched last year.

So, these institutes are “partnerships among business, universities and community colleges, and government, to develop and build manufacturing technologies and capabilities that will help U.S.-based manufacturers and workers create good jobs.” Translated: expensive consultants will be paid a lot of money to come up with ideas on how to make manufacturing more efficient, leaner, greener, more technology-based and sexy so that we can get more people back to work.

That sounds very cool, but I’m a little confused about how they are going to solve one of the biggest issues faced by manufacturers even now. So many times in my interviews, I hear that, despite the high unemployment rate, companies have to scramble to find skilled workers or to find replacements to fill the jobs vacated in increasing numbers by baby boomers. This is true of manufacturers and end users including refineries, petrochemical plants and utilities. Are training programs going to be included in these institutes? And if they are, where are potential employees going to get the money to take the courses that will prepare them for high technology manufacturing jobs? Is that money going to be included in these billion dollars?

If anyone out there has the answers, I’d love to hear from you so we can pass them on to our readers.


Kate Kunkel is Senior Editor of VALVE Magazine. You may reach her at This email address is being protected from spambots. You need JavaScript enabled to view it.


Clearing the Air by Coming Back Home


chinese factory pollutionIn the Winter 2013 issue of VALVE Magazine Harry Moser and Millar Kelley expanded on an article I originally wrote about Moser’s work in a Web Feature entitled “The True Cost of Reshoring." For anyone considering the possibility of bringing manufacturing back to America, there is plenty here to consider, not the least of which is the potential to improve our domestic economy.

Even ignoring the human rights issues, there are many benefits to reshoring, but one thing that isn’t usually taken into account when considering such a move is the environmental benefits of bringing manufacturing back home. While it might be beneficial to our own environment to have manufacturing going on somewhere else, the overall impact on the planet needs to be considered, and when we see what happens when air quality is ignored, it might behoove us to add this into the mix when discussing the benefits of reshoring.

Consider that on Tuesday, January 29, the Chinese government ordered 103 heavy-polluting factories to suspend production until Thursday due to the extreme levels of industrial smog that suffocated the city for the fourth time in the past month. Residents were urged to stay indoors and more than 100 flights were cancelled in several cities as visibility was reduced to about 300 feet.

But China is hardly alone in its pollution problems. Since its shift to a more open and liberal economy in the 1990s, India has grown to be the third largest global economy after China and the U.S. With the grown in the textile, food processing, chemical, steel, mining and petroleum industries has come pollution on a scale that is hard to fathom.

In China, India and other developing economies, environmental controls are practically non-existent. While there may be laws and regulations on the books, they are largely ignored or enforced only when politics or some disaster makes it impossible to hide the impact deadly runoff, spills or emissions have had.

While it’s easy to imagine that the pollution to the air and water and soil that happens in these nations has no effect on us here, that simply isn’t true. Scientists have been documenting the path of pollution clouds from Asia to the U.S. since the 1990s, and recent research from Princeton University indicates that Asian emissions directly contribute to ground-level pollution in the United States.

On the other hand, here in North America pollution controls are generally stringently enforced, as are labor and materials safety laws. Independent of whether or not climate change is real and independent of whether it is caused by humans, air and water pollution are global concerns.

Compared to similar facilities in China or India, American factories generate little environmental impact and perhaps that should be on the balance sheet when considering whether or not to bring manufacturing home.

Kate Kunkel is Senior Editor of VALVE Magazine. Contact her at This email address is being protected from spambots. You need JavaScript enabled to view it..  


Defining Crude

Kate Kunkel

1-oil-sands-plantTransCanada has been ordered to temporarily stop working on a piece of property in Texas where it has been building a pipeline to carry tar sands oil to the Gulf Coast from Canada. The landowner is in court today, December 13, representing himself in a hearing that could be a defining point in the long-running battle that has the Keystone XL project and environmentalists and landowners.

It has been argued that the tar sands oil is not in fact “crude” because it has already been heated and diluted in order to make it liquid enough to transport. Because it has been processed, it is argued, it does not meet the definition in Texas and federal statutory codes which define crude oil as "liquid hydrocarbons extracted from the earth at atmospheric temperatures”.

While TransCanada says that courts have already ruled that the diluted bitumen is in fact crude, it will be interesting to see what comes of the hearing today. What effect could a decision saying that bitumen is not in fact crude, from this judge, in this area, have on this entire project or any others going through Texas? What effect would this decision have on the suppliers for this pipeline?

Only time will tell.

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


The Fiscal Cliff

Cliff Edge warningNow that all of the election nonsense is over, it’s time for the government to get back to business. Quickly.

On January 1, the United States could face what has been called the “fiscal cliff”. It is then that several Bush-era tax cuts will expire, meaning, among other things, that individual income tax rates will increase to Clinton-era levels, tax rates on long-term capital gains will increase from 15% to 20%, the tax rate on dividends will increase from 15% to ordinary income tax rates And the limits on itemized deductions will be restored.

This is just a sampling of the tax changes that will cost more to all individuals. Combine that with the reduction in spending that is also possible under the Budget Control Act of 2011, and, it is feared by many, the U.S. economy will fall over the fiscal cliff.

Under the law, one half of the budget cuts will come from national defense and the other half from both mandatory and discretionary non-defense programs. So, while increasing taxes and decreasing spending would seem to be a positive move toward balancing the budget, it is believed it would push the U.S. back into a recession which the International Monetary Fund has warned would have large international spillover.

With the manufacturing, including valve, actuator and control manufacturing, just coming out of the recession and, some say, actually leading the tenuous recovery, cuts to infrastructure and defense budgets seem counterintuitive.

Of course, I don’t have any answers. I’m a writer, not an economist, but I wonder if it would behoove our illustrious leaders to look at the approach Iceland took in comparison to Greece and Spain.

Just saying.

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