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June 2013
Exporting Globally
By Jim Froneberger

     For decades, the American economy grew and prospered thanks, at least in part, to the post-war manufacturing boom. American companies found that domestic markets provided robust demand for their products, and sales and profits soared.

     But over the last 30 years, as globalization and automation have changed the nature of American manufacturing, many industries have moved their manufacturing operations overseas. As our traditional manufacturing base began to erode, the high-paying manufacturing jobs of the 1960s and 1970s relocated abroad.

     This shift of manufacturing to offshore locations helped give rise to new, growing middle classes in places like China, India, and Brazil. So with domestic purchasing power stagnating and new wealth being created abroad, American companies are increasingly looking to these new global markets as fertile ground for their products and services.

     Thanks to the Internet and online commerce, gone are the days when only large multi-national corporations can be meaningful players in international trade. Today, small and medium-sized businesses can easily connect with buyers around the world. That’s the message that Greg Sizemore, director of the Charlotte U.S. Export Assistance Center, touts.

     Right now, he points out, the United States represents only about 5 percent of worldwide buyers, so as domestic markets mature and emerging markets continue to grow, looking abroad will become increasingly important for more and more American businesses of all sizes.

     Sizemore’s employer, the U.S. Commercial Service (USCS) is the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration, and was established to help American businesses take advantage of opportunities in international trade. The USCS maintains 80 Export Assistance Centers across the United States and offices in U.S. embassies and consulates in nearly 80 countries.

     The USCS trade professionals help connect U.S. companies with international buyers, while also providing market intelligence, trade counseling, business matchmaking, and advocacy/commercial diplomacy support. In North Carolina, the lead U.S. Export Assistance Center is located on East Morehead Street in Charlotte with satellite facilities in Greensboro and Raleigh.

 

Why Export?

     In March of 2010, President Obama signed an executive order establishing the National Export Initiative (NEI) with the goal of doubling U.S. exports by the end of 2014. The Obama Administration sees increasing exports as an ideal way to create more U.S. jobs and boost the economic recovery.

     In 2012, U.S. exports hit an all-time record of $2.2 trillion, despite significant economic headwinds from Europe and other parts of the world. Exports as a share of U.S. GDP were 13.9 percent, tying a record set in 2011. Growth in exports to America’s free trade agreement partners as well as record exports of motor vehicles and agricultural products were key contributors to the success.

     In North Carolina, exports of merchandise totaled $28.7 billion in 2012. Canada is far and away North Carolina’s largest trading partner, representing over 24 percent of the total. Fast growing China, with 9 percent of N.C. exports, has now surpassed Mexico’s 8 percent. And while Europe is a tough market for exports due to high barriers of entry, if looked at collectively, the European Union would be second only to Canada for N.C. exports.

     North Carolina’s largest export category is chemicals, accounting for over 18 percent of total merchandise exports in 2012. Other top categories include machinery, transportation equipment, computer and electronic products, and textiles and fabrics. And whether its sweet Muscadine wines from the Yadkin Valley that are becoming hot sellers in Asia, aerospace products from a bevy of component manufacturers in Monroe, or a rapidly expanding energy services sector in Charlotte, North Carolina’s export base continues to diversify.

     The Charlotte-Gastonia-Rock Hill metropolitan area is the state’s largest export source, generating $6.3 billion of exports in 2011. Greensboro-Winston-Salem was second with $5.4 billion, and Raleigh-Durham was third at $4.9 billion.

     “We used to spend a lot of our time telling companies about the benefits of exporting,” says Sizemore. “But these days, we don’t usually need to have that conversation because as soon as a company puts up a website, whether they know it or not, they are competing globally.

     “We tell our clients to consider going to those parts of the world where their competitors are not,” continues Sizemore. “We tell them to look at Latin America, Asia, Eastern Europe, the Middle East, and even selectively at markets in Africa.”

     Sizemore says there are a number of key benefits of exporting in addition to simply growing the market for their products or services. He points out that business cycles vary around the world, and when growth slows in one place, it’s often accelerating somewhere else. Exporting allows a company to offset a downturn in one region by looking for new opportunities in another.

     Exporting may also allow a company to extend the life cycle of their products by introducing them into new markets. Products that no longer sell in the U.S. often still have viable markets abroad, particularly in the developing world.

     “A great example of life-cycle extension are the components used by the textile industry,” explains Sizemore. “A lot of that manufacturing has gone abroad, so those component manufacturers are able to follow that work overseas. The developing world also buys products that support more labor-intensive work that we don’t have much need for in the U.S. anymore.

     “Some of the companies that we work with say if not for exporting, they might have gone under in 2008,” continues Sizemore. “Not only that, they often tell us the tweaks they made to their products to compete globally helped increase the product life cycle here at home. If they had never looked overseas they would have never made those innovations.”

 

Selling Worldwide Opportunities

     The U.S. Export Assistance Centers exist primarily to serve small and medium-sized businesses. Over 8,700 companies exported products from North Carolina in 2010 (the most recent data available) and over 88 percent of those were businesses with fewer than 500 employees. But only about 1 percent of all small businesses export, and of those, about 60 percent are exporting to just one or two markets.

     The Export Assistance Center says their typical client is a business-to-business supplier providing a solution for a manufacturing process. As a lot of heavy manufacturing has shifted overseas, they are seeing increased demand in the U.S. for higher-tech light manufacturing that supports those industries that have moved offshore.

     “People often ask us where they should export, but I think it all comes back to their product,” says George Thomas, senior trade specialist with the Charlotte U.S. Export Assistance Center. “We have to take a look at the product and where it might make sense, as well as the skill set in the company and their experience in exporting. We try to create a customized export plan for each client.

     “I have an aerospace client from up in Mooresville that will be exhibiting their armed surveillance airplane at the Paris Air Show this summer,” Thomas continues. “We sent their literature to our Embassy in the Philippines, put an Embassy letter on top of that, and hand-delivered an invitation to the Philippine Ministry of Defense officials that might be attending the air show. We’re also doing a similar thing in Indonesia and Bulgaria.”

     The hallmark of the Export Assistance Center’s offerings is their Gold Key Service which helps introduce small businesses to potential export markets. Commercial specialists in an overseas U.S. embassy or consulate help evaluate the company’s products for fit in their market. These specialists come from the business community in that country and know the language, customs and culture. They also help identify potential agents that can sell the company’s product locally.

     “To get the process started, we’ll do a conference call with the industry specialist in the embassy that is going to help that company find partners to work with,” explains Thomas. “The company sends over its marketing literature and we put embassy letterhead on it and it gets sent out to potential partners and agents.”

     “Our goal is to get people on airplanes and in front of qualified buyers overseas,” adds Sizemore. “Building that relationship is still critical in global business. We’ve got a lot of great technology out there, but there is no substitute for building those relationships.”

     Based on the profile of the client’s typical buyer, industry specialists in the overseas office will pre-qualify agents and distributors and set up meetings for the company. Before they get on a plane at Charlotte-Douglas, the company already knows whom they are meeting with, they have an itinerary, and in some cases, they’ve already begun to correspond.

     Local in-country staff meets them when they get off the plane, a driver helps them negotiate the city, and an interpreter is on hand for the meetings. Within two days they could meet with 10 or 15 folks.

     The Export Assistance Center also conducts six or seven Export University seminars around the state, with two being held this year in the Charlotte area. The program covers the essentials of exporting—how to get paid, how to ship, how to find qualified buyers overseas, and how to comply with U.S. export regulations.

     The North Carolina District Export Council, one of 56 District Export Councils in the U.S., sponsors Export University. The District Export Councils are not-for-profit private sector organizations whose members are appointed by the Secretary of Commerce and which work closely with the U.S. Export Assistance Centers to help small and medium sized businesses that want to export their products.

     The U.S. Export Assistance Center trade specialists all have years of international experience as well as private sector business experience, and many have lived overseas. Most of the export counseling services they offer are free of charge, with the primary exception being the Gold Key Service, which costs a small business $700 per trip, plus the costs of drivers and interpreters. The Export University is $65 per attendee, but those funds go to the District Export Council that then uses the funds raised to provide stipends of up to $350 to companies to help defray the cost of using the Gold Key Service.

     “Every day we’re on the phone, sending emails, coordinating conference calls with our overseas posts, looking at market intelligence for a company, looking at a target market, assessing standards, assessing documentary requirements, or maybe getting that random call to help solve an export-related problem for a client,” explains Sizemore. “We answer all those calls and its all for free in our U.S.-based offices. But when things go overseas, our overseas offices work on a cost-recovery basis, so that’s why they charge for Gold Key.”

     Besides the U.S. Commercial Service, the Small Business Administration also has their regional international trade finance specialists co-located in the Charlotte Export Assistance Center. The Export-Import Bank and the N.C. Small Business and Technology Development Center also have an employee in the Charlotte office one day a week.

 

Charlotte: Global Trade Center

     “This city is quickly coalescing around trade and I think Charlotte is positioning itself to compete globally in international trade,” says Sizemore. “A big driver of that is going to be the new intermodal center at the airport, but I also think you have some great resources out at Central Piedmont Community College and UNC Charlotte, and I think those resources are going to generate new ideas for export education and high tech products that can be quickly integrated into trade and manufacturing processes here in Charlotte.”

     Sizemore thinks that Charlotte area companies are going to see increased access to export resources and those who support the export business—including private sector folks that provide freight forwarding services and the international departments at the banks— are going to see more demand for their services.

     He also points out that with increased exports come higher paying jobs. Americans working for firms that export earn, on average, 15 percent more than those who work for non-exporting firms.

     “A lot of this is just good timing and a number of things are coming together that will make a difference in a very short amount of time,” Sizemore predicts. “We’ve got the intermodal center coming on line at about the same time as the expansion of the Panama Canal, plus we’ve got the President’s National Export Initiative as well as state and local initiatives like the Mayor Foxx’s Export Charlotte. It’s really an exciting time to be involved with international trade in Charlotte.”

 

Jim Froneberger is a Greater Charlotte Biz freelance writer.
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