Reagan's Secret Export Program
In my dream, I see the federal government attacking the trade crisis the way Patton's Third Army attacked Nazi Germany -- with courage, with confidence, and with enough firepower to do the job. I see an elite agency of well-paid, well-trained, well-equipped trade promoters -- as many as 1,200 T-men -- working from 200 offices around the globe, analyzing markets, identifying trade leads, and breaking down trade barriers by daring and sleuth. And I see American business responding to government's lead as it hasn't since the days of the old National Recovery Administration, doing to the Asians and the Europeans what they have so effectively done to us.
A dream? Well, only partly. In fact, this force of T-men already exists, operating as the U.S. & Foreign Commercial Service (US&FCS). It may not be quite as sexy as Her Majesty's Secret Service, but it's not a bad start for a branch of Washington's sleepiest bureaucracy, the Department of Commerce. And early next year, operations at US&FCS go into high gear with the inauguration of a worldwide computer system, which will give any business owner real-time access to detailed market information for thousands of product categories in some 70 nations.
That's the good news. The bad news is that US&FCS has been around since 1981, with little visible effect on a national trade balance that went from $3 billion in the black in 1975 to $170 billion in the red last year. For whatever its capabilities, it remains a program that almost nobody has heard of. "It's the best-kept secret in Washington," complains the government's top export promoter, Mike Stevens.
It is, of course, in the nature of businesspeople to be skeptical about government programs. So was Stevens. Packing an M.B.A. from Stanford University and sales and marketing experience both at IBM Corp. and a small New Hampshire telecommunications company, he was lured to Washington last year by a Presidential mandate to promote American exports. At first he remembers thinking that what government could do to help companies export was simply to stay out of the way. "But let me tell you," he says now, "I've gotten educated.
"We could be headed for a disaster," Stevens warns in his now-practiced crusading style. "My feeling is that you've got national-security implications here. Our security is based on an economic foundation, and if the American businessman doesn't wake up soon and realize that he is dealing in an international marketplace, our economic strength is going to flounder."
By many accounts, Stevens is an optimist. Despite a sharp decline in the dollar, the trade deficit continues to climb. Imports are at an all-time high, while exports, although rising, have been disappointing in such key areas as agriculture and high-tech electronics. Our trading partners, flush with dollars, have begun snapping up the whole range of American assets, from stocks and bonds to real estate and entire companies. The feeling is taking hold that we have already begun to squander our national patrimony, and that the day may not be too far in the future when our capital, companies, and jobs will largely be controlled from overseas.
If America's importhungry consumers have not exactly responded to this challenge, neither have America's export-shy businesses -- at least not in great numbers. A mere 250 companies still account for more than 80% of U.S. exports, while another 30,000 judged to have export potential sit on the sidelines. Many of these companies are themselves feeling the pinch of shrinking domestic markets and increased foreign competition. But, according to studies, most lack the information and confidence to foray into international markets.
It is precisely this kind of mental trade barrier that Mike Stevens spends his days trying to break down. On paper, he's got some powerful tools. Take the case of the Iowa manufacturer looking to sell his test instruments to customers in Great Britain. He walks into the US&FCS office in Des Moines, ambles up to the computer, and indicates his product and his target country. Out comes a three- to five-page abstract on the test-equipment market in England -- which suppliers dominate, which distributors to go through, what the tariffs are, what kind of certification is required.
But that's only the first part. If the abstract contains anything interesting, a $500 fee can get the manufacturer a market-research report on his specific product, conducted by one of the T-men posted at the American Embassy in London or contracted out to an expert. After six to eight weeks, a 15-page report arrives that indicates who his competition would be, how payments are structured and prices set, and which lines of distribution seem to make the most sense. The embassy will even make appointments with agents and distributors. Should the manufacturer venture further, T-men will be available to assist in choosing a reputable agent and working through the details of currency, tariffs, and export licenses.
Aah, but I see you are still skeptical. Have a talk, then, with Harrell Freeman. Freeman's Louisiana company makes a switching device for radio-based car and rural telephone systems. The technology has been around since the 1950s, but Freeman Engineering Associates Inc. was launched in 1982 on the theory that it would be commercially viable for decades more. Then along came cellular phone systems and put the theory in doubt. Freeman watched -- helplessly, he thought at the time -- as his market began to disappear.
Then an idea struck. If his device represented yesterday's technology in the United States, perhaps it was still useful in developing countries. "We figured it might be a tremendous advantage in a place not already wired for telephones to go by radio instead," he recalls. "What with the cost of copper and the labor costs of wiring, it might prove an efficient alternative."
When Freeman walked into the Commerce Department office in New Orleans, he was unsure if anyone would even be interested in his company, which has only $3 million in sales. Instead, he found a T-man eager to help. The T-man loaded Freeman up with all manner of trade literature, and he put him in touch with several other small Louisiana companies already in the export game. "That really boosted our confidence," Freeman says.
Then one day last year, a telex arrived from Robert Winship, the US&FCS man in the American Embassy in Port Moresby, the capital of Papua New Guinea. The government there was looking for a radio telephone system for its capital. The call went out to Freeman Engineering, and before too long, Freeman found himself in the export business with a $130,000 contract.
Mind you, the experience was not without its costs or its hassles. Freeman had to send someone to Port Moresby to make sure the bid papers were in order -- Canadian and European companies were after the job, too. Finally, after the system was shipped this summer, he had to dispatch a technician to the South Pacific to help with the installation.
But as things stand, Freeman couldn't be more pleased. At around the same time, he landed another export contract, this one with the People's Republic of China, for $330,000. And he began to advertise heavily in the international trade press -- a move that has generated inquiries from Africa and the Middle East. "Exporting gets in your blood," he explains. "It has been a delightful change of pace for us."
Lee Jones, in Skokie, Ill., would certainly agree. Jones is director of international sales for Powers Process Controls, a manufacturer of control valves. Last year, he traveled to the Low Countries on a trade mission sponsored by US&FCS. And since then, he figures his $2,500 in travel expenses and fees have netted him about $130,000 in sales.
"In each location, we got a briefing on the economy, trends, and opportunities," Jones recallas of the five-day trip. "Then we had rep-arranged interviews with prospective distribution agents. All those people had been prequalified by the U.S. Commerce agents over there, so it wasn't like you walked off an airplane and simply picked up the Yellow Pages. It is the best program I've ever been involved with in terms of breaking into a new market."
He continues, "I figure it saved us maybe a year in terms of identifying, interviewing, and assigning representation. The other intangible was that it was all done under the auspices of the American Embassies, which brought a tremendous amount of credibility to a small company like ours trying to break into those markets. Without that, we probably would not have received the attention we did."
But the nice stories Jones and Freeman have to tell will remain largely that -- nice stories -- if there aren't more of them. And there won't be more until the government begins to do a better job of selling its export services to the 30,000 businesses that could use them. Oh, sure, there are the racks of brochures on display at your local federal building, and the Rotary Club speeches, and the "Send Your Hearts to Seoul" newspaper and magazine ads that occasionally run for free in the business press. There may even be free television ads that will run on Sunday mornings. Add it all together, however, and it comes to a rather feeble and unsophisticated marketing effort for a program in which the government has already invested six years of development costs -- one that holds the potential for generating $1 million in additional tax revenue for every $100 million in sales that it generates overseas.
Is this any way to fight the trade war?
The follows who fight the real wars sure wouldn't think so. Over at the Pentagon, they're spending a couple hundred million dollars each year to advertise for fresh recruits. They hire several slick Manhattan ad agencies to produce effective TV commercials. And then they run them when people are watching -- like during the Super Bowl and the NBA finals. Expensive? Yes. Also effective: the military meets its recruitment goals year after year.
No one is suggesting that the government's export program be advertised during the Super Bowl. But any sharp marketer could suggest an aggressive program of direct mail, advertising, public relations, and special events that could be tested and refined in small markets before being rolled out nationally. That's the way any good business would handle it, and for an Administration that once promised to bring business skills to government, it's surprising it hasn't given it a try. Quite the opposite, in fact. At a recent congressional hearing, a Commerce Department official actually boasted of how little the department was spending on its promotional efforts.
Mike Stevens is right when he says that our economic security is every bit as important as our military security, and deserves a similar level of commitment as military programs. For if our trade deficit is not brought under control sometime soon, the United States will be in the unenviable position of having a military establishment second to none, protecting and defending somebody else's assets.