Topics >  Running a Business >  Legal Issues > 

Unfair Trade

Analysis of the current trade difficulties for U.S. exporters and the hazards of late payments from exports.

Small-company exports could put a big dent in the U.S. trade deficit. Why, then, do we make it so hard to get started?

Want to know one secret to reducing the trade deficit? Take a good look at Patrick M. Williams Sr.

Williams is chairman of Stanley Industrial Corp., a Jacksonville, Fla., manufacturer of ventilating equipment that reports sales of $5 million. His company exports -- but very rarely, and it does not actively pursue overseas business.

That's the way Williams likes it. Before coming to Stanley, he worked for a company that sold heavily abroad. There, Williams saw what life as an active U.S. exporter was like -- and vowed never to repeat it. He saw his employer competing against foreign companies that could offer better payment terms, often because their governments helped guarantee credit risk. "American companies were out there fighting almost with both hands tied behind their backs," he says.

The experience taught Williams something important about exporting: "It's not worth the hassles." But, he adds, if government policies changed, "we might be interested."

That's a big if. Still, it could be the if that means the difference between solving or not solving our $100-billion trade deficit. And that means the difference between building a healthy, strong economy -- or dismantling the one we've got by selling assets to foreigners to pay our import bills. To balance our trade today, we'd have to increase our exports by at least 25%. To do that, we need the help of the many Patrick Williamses who now export infrequently.

And many they are. When the Census Bureau did a comprehensive survey of U.S. exporting data, the results were astonishing. According to one analysis of the bureau's data, 29% of the nation's 100,100 exporters made only two international shipments in 1987, worth an average annual total of $50,000. All in all, 86,600 infrequent exporters accounted for only 9% of reported international sales, while 3,600 frequent exporters did 78%. (The remaining 9,900 were considered growing exporters.)

Those numbers suggest two things. First, it is critical that we encourage our frequent exporters, because we depend on them so much. But the percentages also hint that something is not right. Why are there so few frequent exporters? What prevents the vast majority from exporting more? After all, it is unreasonable to expect just 3,600 companies that already export heavily to eliminate a $100-billion trade deficit.

In truth, there are numerous barriers facing a company that starts exporting, particularly if it's small. While we do a fine job of producing government brochures and inspiring magazine articles about going international, we're not so hot at the less glamorous work of building a solid trade infrastructure, one that supports and encourages the small exporters we need. It's as if we'd asked our astronauts to reach the moon but wouldn't invest in a space program.

* * *

One of the biggest barriers is financing. And the trouble with export financing for U.S. companies that have a small amount of international sales is pretty easy to understand. "There isn't any," says Leslie Stroh, editor and publisher of The Exporter magazine. "It isn't available."

Stroh is exaggerating -- slightly. Few would dispute the significant shortage of export financing in this country, especially for small companies. A recent report by the Exports Subcommittee of the House Small Business Committee states the problem well:

* * *

The U.S. has failed miserably in providing these [small] businesses the necessary means to export successfully. Specifically, the U.S. has failed to provide small business with the financial resources that are required in order to compete. U.S. companies are in desperate need of financing either to cover expenses leading to an export sale (usually in the form of a working capital loan to cover expenses related to labor, material, and other production and shipping costs) or to provide the foreign buyer with more flexible terms of payment. Working capital loans are especially needed by small and medium-sized businesses that are interested in exporting.

* * *

That financing gap means lost foreign sales for U.S. companies. In a 1988 House banking subcommittee survey of exporters (including large ones, which generally have better access to capital), 53% said they had lost export business because they couldn't get financing. Two-thirds reported that competitive financing was only sometimes or rarely available.

The problem is getting worse. Exporters are particularly vulnerable to the current credit crunch because their lines of credit are perceived as especially risky. Ironically, this crunch is occurring at a time when, because the dollar is low, export opportunities have seldom been more plentiful -- or more important to our economy. The National Association of Manufacturers estimates that in the first half of 1990 exports accounted for 80% of U.S. economic growth.

Read more:

What You're Not Doing to Maximize Profit (But Should Be)

Redbox's Smart Move: What You Can Learn

What Makes a Company Resilient?

Sign-up for our Small Business Success Newsletter

Email Address: