Remarks by Franklin L. Lavin
Under Secretary of Commerce for International Trade
Trade Winds Forum: Europe, India and Africa
Crystal City, VA
May 16, 2007
Thank you for participating in the Trade Winds Forum today. It’s wonderful to be here with great American businesses looking to export.
Let me make use of my time with you to put into a conceptual framework some of the themes and lessons you have been hearing about for the past two days by examining why companies export, why they look at new markets, and what we can do to help you reach new customers and manage your competitive space in the marketplace.
Trade Winds Focus – 3 Regions
You have come here to learn more about doing business in three very different but very important markets: Eurasia, India and Africa.
- Eurasia, which includes the European Union, is our nation’s largest trading and investment partner. We enjoy a long and rich commercial relationship with many of these nations while at the same time we are just reopening for business in others in the last 15 years.
- India has become one of our fastest growing markets in recent years as they have taken steps to liberalize their economy and invite in American businesses. In the first quarter of this year exports to India continued to boom with an increase of more than 35 percent.
- Sub-Saharan Africa is the third region. We are the region’s top trading partner and it offers great opportunities to American business. In fact, trade with Africa last year was larger than our trade with Spain, Russia and Brazil combined.
Each market holds its own distinct appeal and each has its own challenges, challenges that if met strategically with skill and resourcefulness can be highly rewarding for American companies.
Why do Companies Export?
This raises the fundamental question of why companies decide to export in the first place and the process they undergo when choosing which markets to enter.
Let me touch on five reasons we tend to encounter:
The first reason to export is to find “More of the Same”: Companies begin exporting for more customers, more revenue and more profits to expand their business. In other words, companies migrate abroad for the same reasons that a company expands domestically from state to state. If that is your objective, you should start exporting to familiar markets with few barriers.
Second is scale - Economies of scale are created by producing more, and this lowers the costs of production. If there is a new market that you can sell more products to, then you can produce more at a lower cost per unit.
The third reason is scope - Exporting softens business cycles, so while the market might not be good in South Africa next year, it might be great in India. And that can also be true with inputs. Right now, a high Euro makes it less expensive to source from the U.S. than the Euro Zone. The same might be true with regard to other inputs that might be more or less plentiful in one market or another.
A fourth reason is knowledge - As your company gains skills and experience overseas, you might also find it easier to develop new products or otherwise experiment. Then you can transfer those experiences back to the U.S. or other markets, providing your company a competitive advantage. It has taken Americans to make a market for many great ideas and products invented elsewhere… for example Hungarians Laszlo and George Biro invented the ball point pen, or DuPont licensed cellophane from its inventor, Jaques Brandenberger, a Swiss textile engineer, or Harry Wasylyk, a Canadian, invented the plastic garbage bag and Union Carbide bought the invention and brought it to market.
Finally, the best defense is a good offense - Just as you are thinking about entering new markets, your global competitors are thinking about coming here. You need to deny them new territory and keep them on the edge. Do not give away your home market advantage.
The point is that every company in this room will likely draw on one or more of these reasons as you develop a rationale and strategy to export. Only then can you devise the right approach for you.
What We Can Do For You
Let me suggest that whatever your reasons for exporting are that the Commerce Department can help you reach your international business objectives. We have a team here from around the world, as well as many of our public and private partners who are experts in particular industries and geographic regions. Let me recap the five key areas where we can help:
1) Export counseling and research: If you are trying to develop research on your sector, or understand the regulations in your industry, or to find out which competitors are in the market, our commercial team can help you with that.
2) Matchmaking: We can find distributors, wholesalers, and others who will carry your product or represent your industry in foreign markets.
3) Trade missions: The Department of Commerce takes groups of businesses on trade missions, with quite a few going to Europe, Africa and India. We have conducted more than 200 missions in the last six years. For example at the end of November we took more than 200 American businesses to six cities to India on our largest trade mission ever.
4) Trade Shows: We help American companies participate in international trade shows by organizing USA pavilions and through trade show certification. In the last two years we have been part of more than 200 trade fairs.
5) Advocacy: We advocate on behalf of U.S. companies competing for contracts, cutting through red tape and making sure our companies are treated equitably.
Please follow up with us on all these points as you go through your one-on-one meetings and discussions after the conference. We have a terrific assembly of talent, and we would love to put them to work for you.
Let me conclude with this final thought. The single biggest reason why companies don’t succeed in doing business abroad is not a lack of skills or aspirations, but the lack of a plan. By being prepared, knowing the risk, and developing a strategy you can increase the chance that your international experience will be positive.
How and when you decide to enter to market, or whether you go into any of these markets at all, is entirely for each company to decide through its own consideration of the risks and opportunities involved. We can help you do that analysis, and help you turn your aspirations into reality by developing a plan for success.
Being here is a good first step. Your next step is to work with the experts that are here who are committed to helping you reach your goals.
I hope you have found this conference worthwhile. Best of luck, and thank you for participating.