Export business on the rise for Pennsylvania companies
PITTSBURGH -- Pennsylvania companies exported goods worth a total of $41 billion last year. Representing a 17 percent increase from 2010 export levels, it was slightly better than the average 16 percent increase recorded for exports nationwide.
As encouraging as those figures are during the recovery from a recession felt across the United States and around the world, Lyn Doverspike believes exports can and should have an even greater impact on Pennsylvania's economy -- particularly in the western part of the state. After all, it's her job to encourage such international sales from the region as the Pittsburgh director of U.S. Commercial Service, the trade promotion arm of the International Trade Administration. The Pittsburgh office serves 36 counties in the western and central portions of Pennsylvania.
"We look for companies that are export-ready and get them to actually export," Doverspike said. "Or, if they've already established themselves in exports, maybe they're selling into one or three (foreign) markets, then we want to get them into five or seven markets."
Area companies that don't consider exporting their products are "leaving out about 90 percent of the world's purchasing power," Doverspike pointed out. "That is an enormous opportunity to grow your market."
Expanding to an international customer base also can help balance potential shifts in the domestic market for a company's products. "Those companies that have included exporting as part of their growth plan, as part of their strategy, have and will continue to fare better than those that do not have exporting as part of their plan," Doverspike holds.
Doverspike's Pittsburgh office is one of three the U.S. Commercial Service operates in the state and one of 105 offices located across the country. In addition, she noted, "We have 140 offices in embassies and consulates overseas," reaching into nearly 80 foreign nations. So, "If we have a company come to us that's in the aftermarket auto parts sector and they want to sell in the Netherlands, we know exactly who we need to go to."
Through its business matchmaking efforts, sometimes at overseas trade shows, the Commercial Service strives to make international connections for U.S. companies that are "looking for a joint venture, a foreign franchisee, anything that helps a U.S. export," Doverspike said. She stressed that her office does not help area companies that may want to develop foreign manufacturing; the organization's mission is to get U.S. products, not jobs, into other countries.
The Commercial Service also participates in domestic trade shows, where delegations of foreign buyers seeking U.S. products are invited. "You can't talk about a more motivated buyer of U.S. goods," Doverspike said of such delegations.
"American products hold great cachet overseas for their quality and dependability," she noted. Foreign distributors and consumers "know they're not going to get toys with lead paint on them."
The Commercial Service, which operates under the U.S. Department of Commerce, has resources to help companies target the best foreign markets for their products or services. Those resources include a free market research library and commercial guides for numerous countries that are updated annually. "We also do customized market research," Doverspike said.
Through export counseling, her office helps area companies navigate the export process, which can involve different regulations and documentation requirements depending on the products being shipped and the country where they're destined.
Through trade advocacy, the office also helps U.S. companies level the international playing field if they encounter unwarranted barriers to marketing their products overseas.
Doverspike recalled that the Pittsburgh office went to bat for a large area company that "couldn't even get in through customs" when it tried to ship its product to Japan. She explained the company was told its product didn't meet regulations but, at the same time, officials admitted the regulations hadn't been written yet. Within a year, she said, the guidelines were written and the company was able to meet them and ship its product.
In order for the agency to assist with such trade complaints, aggrieved companies first have to let it know there is a problem, Doverspike pointed out: "If you don't tell us, we don't know to bring it up in bilateral conversations."
While unable to disclose specifics due to client confidentiality, Doverspike indicated her office has provided services to some local companies that are involved in the defense-related export business.
Such companies may face the added challenge of meeting International Traffic in Arms Regulations (ITAR), which require exporters to obtain licenses and which set export controls for items that are deemed to contain military applications.
"We get a lot of questions about export controls," Doverspike said, noting that a seminar on ITAR will be included in a U.S. Global Growth Conference that the U.S. Commercial Service is cosponsoring April 12 and 13 at Saint Vincent College in Unity near Latrobe. "There is an overhaul coming to the system, but no implementation date is set at this point," she said.
Companies that are venturing into military-related exports "need to get an export control management system in place" with checks and balances to ensure the sales force doesn't strike a deal that would violate federal restrictions, Doverspike said, noting, among other things, "A violation can result in fines, loss of exporting privileges and being banned from exporting for a couple of years."
Opens up new opportunities
The newest development in export regulations, which should open up new opportunities for U.S. businesses, is a Free Trade Agreement with Korea that took effect on March 15. According to a Commercial Service press release, the new agreement gives duty-free status to almost two-thirds of U.S. agricultural products and almost 80 percent of U.S. industrial products exported to Korea. The latter category includes auto parts, building products, electrical equipment, scientific equipment, chemicals, footwear and paper products....Other product categories will have tariffs reduced more slowly over a period of years. The agreement also enhances intellectual property rights connected with U.S. items marketed in Korea.
Korea has the world's 12th largest economy and is Pennsylvania's 10th largest export market. "Korea has been an export growth market," Doverspike said, noting the state's exports to that nation increased from $0.79 billion in 2010 to $1.1 billion in 2011 -- a jump of 39 percent, the largest among Pennsylvania's Top 10 export destinations last year.
According to Doverspike, Canada has far and away been the leading foreign destination for Pennsylvania products, accounting for $11.38 billion worth of the state's exports in 2011. For many years, Mexico was ranked second for snapping up the state's output, she added. "Only in last two years has China taken over at number 2," growing from $2.67 billion worth of exports in 2010 to $3.52 billion in 2011. Japan was ranked in fourth place, with $2.09 billion in Pennsylvania exports, followed by Germany, the United Kingdom, the Netherlands, Brazil and Belgium at number 9.
Also in 2011, chemicals topped the various Pennsylvania industries in dollar value of exports, at $7.85 billion, followed by non-electrical machinery, primary metal manufacturing, computer and electronic products and, in fifth place, transportation equipment ($3.28 billion). While minerals and ores ranked sixth, at $2.96 billion, and petroleum and coal ranked eight, at $1.55 billion, they were ranked first and fifth as the fastest-growing exports since 2006. Exports of minerals and ores have grown by 611 percent since then, while petroleum and coal saw a rise of 122 percent; oil and gas grew by 221 percent during that period, in the third fastest increase.
"China does represent such a big market," Doverspike acknowledged. But, she cautioned, that doing business there can be challenging, in part due to concerns about how intellectual property rights are treated -- as is the case in parts of Asia, which otherwise is seen as another promising growth market for exports. "If you want to sell in China, you need to have a China strategy even before your first visit," she advised.
Check it out first
She encouraged area companies that are contemplating a move into exports or addition of a new market that is unfamiliar to them to check in with the Pittsburgh Commercial Service office. "Call us early and call us often," she said, indicating her office can direct business owners to resources that can help them make more informed decisions about exporting. "We have an intellectual property right tool for every country in Asia," she noted.
Doverspike suggested that the planning and paperwork that often is involved shouldn't deter area companies from exploring the potential of export markets, regardless of the size of the business. She said one of the leading misconceptions about exporting is "that it's only for the big guys." While 70 percent of the value of U.S. exports can be attributed to the activities of larger companies, she noted that 88.3 percent of the exporters in Pennsylvania are small to medium-size businesses with less than 500 employees.
The Pittsburgh region's $12.2 billion in exports in 2010 was up 46 percent from 2009, the second biggest increase among metropolitan areas, according to the International Trade Administration.
In addition to completing homework in advance before launching into an export market, Doverspike advised that companies "take a long-term approach."
She said some companies have begun selling their products in other countries when the domestic market was in a slump and then have made the mistake of halting exports once U.S. sales recovered, thus alienating the new found foreign customers. "People overseas have long memories," she noted.
While the Commercial Service can offer various resources and counseling, ultimately, "Companies assume their own liability. They have to make their own decisions," Doverspike said.
But, she stressed, "We want to set up everyone for success." As an added incentive, she noted, she and her staff are personally graded in their job performance based on their success rate with clients: "We are 100 percent invested in the success of the companies we deal with. An export success to us is that the company made the sale, signed the agent or signed an agreement."
For more information about exporting information and resources, contact the Pittsburgh Commercial Service office at 412-644-2800 or visit www.export.gov/Pennsylvania/Pittsburgh .