Why Johann Can Export, But Johnny Can'tWilliam J. Holstein
At a time when U. S. export growth is flagging, the problems that frustrated Ron Ekas speak volumes. So, too, do the proposed solutions.
As the new international marketing manager for tiny Benton Corp. in Warrendale, Pa., Ekas sought help in discovering how to export the company's navigational testing devices. He got a list of foreign distributors from the Pittsburgh office of the U. S. Commerce Dept. But his quest for working capital took him in a circuitous route from Duquesne University to the Small Business Administration, from the Pennsylvania Commerce Dept. to the Export-Import Bank, and back again. "I got right in themiddle of a big loop," Ekas says. "Everyone sent me other places to look forassistance."
Benton, with only $4 million in sales, did eventually sell a $1 million missile simulator to Australia. But the presence of dozens of competing yet poorly staffed agencies in the U. S. export "infrastructure" is a major factor holding back thousands of smaller U. S. companies such as Benton. To lure more such companies into the export game, a growing number of experts argue, the thicket of federal, state, and local agencies must be made more rational.
TURF WARS. That's why Germany's Mittelstand system is a model. While the central governments of Japan and France take much responsibility for trade, Germany's export growth, similar to America's, is spurred by coalitions of local and state agencies backed up by chambers of commerce, industry associations, universities, and similar organizations. With Washington keeping the U. S. Commerce Dept. and Small Business Administration on short leashes, local export "movements" sprang up in the late 1980s in the dozen or so states that account for the bulk of America's manufactured exports.
A key difference from Germany, however, is that American exporters compete with one another for money while facing a morass of conflicting advice and buck-passing. Because the Germans started their export drive decades ago, they have had time to reduce the clutter. "They've eliminated the turf problems," says German-born Burkhart Holzner, director of the University of Pittsburgh's University Center for International Studies. "Here, it is still a problem."
With Germany as a model, Pittsburgh's civic elders are trying to grease their export machinery. In December, 1990, more than 200 business, government, educational, and nonprofit organizations endorsed the Pittsburgh International Initiative, in large part to make the export support structure more user-friendly. "We're trying to sort out the competition," says John McCartney, who heads the local U. S. Commerce Dept. office. Along with Holzner, he has been a sparkplug behind the initiative.
Nearly a year later, progress has been slow, but the end result could make a big difference. One accomplishment has been to pinpoint what role a World Trade Center can play. The World Trade Centers Assn. puts up major buildings in different cities where providers of export services, such as translators, can find office space.
But in U. S. cities such as Minneapolis-St. Paul, these trade centers have sparred with state and other export agencies for political and financial support. That's bad news for confused would-be exporters. So when Allegheny County decided that it, too, wanted a trade center in Pittsburgh, it worked with the other members of the Pittsburgh International Initiative to eliminate overlap.
Pittsburgh figures that these midsize exporters could be the key to future growth. The city already has such giants as Westinghouse Electric, USX, Alcoa, H. J. Heinz, and PPG Industries. A second tier of Pittsburgh companies, including Black Box Corp., a $100 million-a-year distributor of computer gear, and Mine Safety Appliances Co., is clicking in a big way on exports. With $474 million in sales, MSA makes gas masks, chemical suits, and similar equipment, a prime example of an American Mittelstand company. These niche market companies have built their international strategies from scratch, and new expansion is weighted toward faraway places.
That means smaller companies could be a major force in creating new jobs for Pittsburgh. Of course, a better export infrastructure won't help unless the companies also improve their own business culture. The depth of resistance is great: A survey sponsored by the U. S. Commerce Dept. found that many smaller companies do not have a basic knowledge of world markets, do not want to go on trade missions, and do not want to translate sales material into foreign languages--all basic requirements for successful exporters.
QUIET COMEBACK. Others are learning the same lessons. The state of Oregon commissioned a study of how German Mittelstand companies can be such successful exporters of wood-manufacturing equipment. The New Jersey unit of the American Electronics Assn. is trying to imitate German industry associations by providing its members with export help. And export-trading companies, widely discredited in the early 1980s, are making a quiet comeback. The single most successful such company is the Port Authority of New York & New Jersey's Xport unit, which says it has helped smaller companies rack up $200 million in exports.
It's not likely that the American Mittelstand will ever become as well organized as Germany's. "The pieces of it are there, but there isn't a consensus about it," says James D. Thayer, president of Portland-based Overseas Strategic Services, which is conducting the Oregon study.
But even modest progress could have an impact on faltering U. S. export growth. "We're in the early days," says management consultant Tom Peters. "It's all part of a long-term transition" to a more globe-girdling economy. Now that the U. S. has reaped the full benefits of a cheap dollar, the tougher step of creating a more export-conscious manufacturing sector is just beginning. Digging out of hard times may depend on it.