Trading Places: How a Dentist Invented the Export Trading Company

Although Dr. Josepb Blaes considered himself reasonably imaginative, he never dreamed that his design for a more efficient dental clinic would have global significance.

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Although Dr. Josepb Blaes considered himself reasonably imaginative, he never dreamed that his design for a more efficient dental clinic would have global significance.

In 1973 Blaes and his partner, Richard J. Haffner introduced the "carousel" to their Sunset Hills Dental Group in St. Louis. The carousel is a group of 18 chairs, each separated by partitions and arranged in a circle. While patient traffic flows around the outside, the dentists and their assistants, whom the dentists call para-professionals," fill cavities, clean teeth, and perform other dental procedures on the inside of the circle. The arrangement, claims Blaes, is efficient and allows the dentists to keep a close eye on their assistants.

Four years ago, the dentists received a visitor from Saudi Arabia who had heard about the carousel clinic from a U.S. dentist practicing in his country. The philanthropic Saudi, says Blaes, was interested in bringing "world-class dentistry" to his country, where rapid growth -- and increased consumption of sugar and junk foods -- has been accompanied by an epidemic of tooth decay. After several months, the Saudi signed a contract with the dentists to draw up a plan for a clinic in the city of Jedda.

When bidding on the $20-million construction project takes place this fall, one of the bidders will be Universal Trading Group Ltd., a St. Louis-based export trading company (ETC) formed early this year. UTG's investors include a lawyer, an architect, an insurance executive, an international marketing executive, and dentists Haffner and Blaes. UTC, says Blaes, will offer a "turn-key contract covering construction management, equipment and supplies, and even the recruitment of dentists and paraprofessionals."

That a small trading company like UTG can stand a chance competing against large foreign cartels for a major construction project is in part the result of the Export Trading Company Act of 1982, which was signed into law in October of that year. In a significant departure from U.S. antitrust laws, Congress voted to give its blessing to "certified" trading companies that bring together competitive suppliers of goods and services to improve foreign bidding chances. Certification, which is voluntary, is granted by the Departments of Commerce and Justice once they determine that the export activities won't unreasonably affect U.S. price levels or other domestic exporters. Once certified -- a process that takes about 90 days -- competitors can exchange information on their export activities, fix prices, and divide up foreign markets. Previously, such activity would have been a flagrant violation of U.S.law.

But Congress was ready to take a radical step to try to reduce its growing trade deficit, which was expected to hover around $65 billion this year. Contributing to the country's eroding trade position, the act's drafters believed, was an adversarial relationship between government and business that put the United States at a disadvantage when competing in overseas markets.

"We are the only country that has been almost completely unorganized to compete," says Charles Allen, vice-chairman of Boles World Trade Corp., a $60-million trading company headquartered in Washington, D.C. By contrast, other countries have developed tremendous cooperation between business and government. For example, Japan's Ministry of International Trade and Industry works closely with the private sector to facilitate export activities through tax deductions and credits, subsidies, and low-interest loans. Japanese businesses can count on the country's financial institutions and trading companies to offer a broad range of export financing and services.

U.S. companies have found it increasingly difficult to go head-to-head with such organized competitors. "I don't have a government that will allow me to use its financial muscle," says Michael Henderson, president of Universal Trading Group. He remembers bidding against a representative from a Japanese trading company on a foreign government -- sponsored construction project. Accompanying the rep was a Japanese government official, who offered to purchase raw materials from the country in exchange for the construction contract.

Even for big U.S. companies with the capital to absorb losses associated with developing foreign markets, competing overseas has grown increasingly difficult. For undercapitalized and understaffed small companies, it has been even more difficult: Inadequate financing, fluctuating currencies, protectionist barriers, differences in language and business customs, and government red tape are just some of the hurdles.

"The more legislation that went on the books," says Henderson, "the worse the environment became for international trade." Many businesspeople complain that the Foreign Corrupt Practices Act, designed to prevent U.S. companies from bribing foreign government officials, causes Americans to lose precious time by forcing them to report and document legitimate payments to foreign customs officials. Foreign competitors, unencumbered by such regulations, can move much more swiftly.

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