Greasing The Skids For ExportsDouglas Harbrecht
When Export-Import Bank Chairman Kenneth D. Brody first arrived on the job last January, he got a quick lesson in just how frustrating it can be for exporters to deal with Washington. At the advice of a senior Ex-Im official, Brody called 411 for the phone number of his agency, which arranged for $15 billion in financing and insurance for overseas sales by U.S. companies last year. When he dialed the listing, a recording told him how to get tickets for a tour of the Bureau of Engraving. "I'm under no illusions here," Brody says. "We have a long way to go."
At least the Clinton Administration now has a road map to its destination. With battles over the North American Free Trade Agreement and the General Agreement on Tariffs & Trade--holdovers from Republican Administrations--now won, Clinton's trade officials are finally on to their next task: oiling up the U.S. export machine (table). They're boosting coordination among all agencies with a hand in exports. They're shifting resources for export assistance to small and medium-size exporters and to novel ventures. And they're changing the focus away from Japan and Europe to such "big emerging markets" as Mexico, Brazil, and Turkey. "This single-minded focus on helping business position itself in overseas markets is long overdue," says Barry K. Rogstad, president of the American Business Conference, a trade association of midsize companies.
"SCARED." Still, the Administration faces plenty of skepticism, starting with exporters themselves, who have long viewed Washington more as a barrier to trade than as a catalyst. Licensing controls devised during the cold war, for instance, barred the export of scores of goods easily obtained at a neighborhood Radio Shack. And companies complain that U.S. embassy bureaucrats often show disdain for business and are at best indifferent to export efforts. "These guys have been scared to help you," says Lee Berlin, an advocate of small exporters and the retired chairman of LecTec Corp., a Minnetonka (Minn.) maker of medical adhesives.
If the Administration has its way, such roadblocks are about to tumble. Step One begins in late January, when the Commerce Dept. opens export centers in Los Angeles, Miami, Chicago, and Baltimore to provide "one-stop shopping" assistance to U.S. businesses seeking markets abroad. In the past, companies interested in expanding abroad had to deal with up to 19 agencies--all requiring separate paperwork. Next, the President's 1995 budget, to be released in February, will call for up to $150 million to fight "tied" aid provided by foreign rivals--funds conditioned on the purchase of goods from the donor.
Finally, a shift in Ex-Im's lending strategy will allow it to funnel more funds to small and medium-size exporters and to riskier export ventures, primarily in the former Soviet Union. To free up $100 million in loans and loan guarantees for that purpose, Brody cajoled major beneficiaries of the agency's financing, such as Boeing Co. and McDonnell Douglas Corp., into accepting higher loan fees. In return, those manufacturers can now ask for larger financing packages. Meanwhile, other large, routine loans will be delegated to commercial banks for processing, freeing Ex-Im officials to devote time to the more adventuresome projects. "We're leveraging ourselves as much as we can to get the job done," says Brody.
Tackling trade problems is the top priority for both Brody and Jeffrey E. Garten, Commerce Under Secretary for International Trade. Both came to Washington from Wall Street. Brody was a partner at investment banker Goldman, Sachs & Co., where he was a colleague of White House Economic Advisor Robert E. Rubin. Garten, meanwhile, came from the Blackstone Group, where Deputy Treasury Secretary Roger C. Altman also worked. Brody, a top Clinton fundraiser, knew Commerce Secretary Ronald H. Brown from the campaign. Even before they were nominated to their posts, they all began to plot a revision in the country's trade policy.
Brody, 50, started the process last May when he was named to chair the Administration's Trade Promotion Coordinating Committee. In September, the panel proposed lifting export controls on 70% of all computer goods in the U.S. and laid out 50 recommendations for improving export promotion.
While Brody is the money man, the guy in charge of the policy overhaul is Garten, 48. It's his idea to reorient the government's attention toward emerging markets, where half the world's population lives. According to Commerce Dept. projections, these countries will account for 40% of the growth in international trade in the next decade. "It's a strategic objective of the highest order that we figure out a way to penetrate these markets," says Garten.
Information about the business opportunities in many of these markets is scarce. So Garten is compiling a data base of big infrastructure projects in the developing world with work of interest not just to multinationals, but to smaller companies seeking niche markets overseas. In the 1995 budget, Clinton will ask Congress for an additional $5 million to $10 million for Commerce's Foreign Commercial Service to be used to train embassy personnel to help business make overseas contacts and gain access to bidding on foreign contracts.
Business, while pleasantly surprised at all these initiatives, isn't yet rejoicing. E. Martin Duggan, executive director of the Small Business Exporters Assn., notes that the Administration is mostly rejiggering existing funds, not pouring in new money. The U.S. spends $5 billion a year in direct aid to promote exports, but Duggan contends it's not spent properly: About 80% of the money in the 1995 budget will go to agriculture, which accounts for only 10% of exports. "It is ludicrous for the Administration and the Congress to talk trade, jobs, and global competitiveness while continuing to overfund less productive areas of our economy," says Duggan.
Nor is it clear how much of a market there will be for one-stop shopping offices. Trade experts doubt there are hundreds of small operations out there just waiting for government guidance to launch an export juggernaut. Many midsize companies, meanwhile, grew tired of waiting for help and developed their own export savvy. For example, in 1992, Richard W. Snyder, CEO of SnyderGeneral Corp. in Dallas, struck a joint venture with an Indian company, Kirloskar Ltd., to market its air-conditioning and air-filtration systems. The $750 million company, which gets 45% of its sales from abroad, lined up letters of credit and staffed up overseas without Washington's aid. "I'm not sure what the government is going to do now that is going to help us," he says.
IMPEDIMENTS. Garten's shift in target markets has doubters, too. Emerging economies are plagued by unstable governments, widespread corruption, and different attitudes toward contracts and property rights--all impediments to small U.S. exporters. And some executives who have tried to penetrate these second-tier nations doubt they'll see a payoff anytime soon. Such markets have "always [had] huge potential, but not big sales," complains John P. Morgridge, chief executive of Cisco Systems Inc., a Menlo Park (Calif.) computer-networking equipment maker. "It has never materialized into real business opportunities."
But most trade experts and economists say that one way or another, exports will be the U.S.'s engine of growth. Merchandise exports as a percentage of American output grew from 5.5% in 1986 to 7.5% in 1992 and are heading higher. With the dollar weak and productivity gains high, U.S. companies are showing that they can compete. Washington wants to help them do even better. "Nobody says this was going to be easy," Garten says. "But this is our bet on the future." You'll know easily enough if he and Brody are making headway: Call Washington information, ask for Ex-Im's number, and see what you get.
CLINTON'S PLANS TO BUILD AN EXPORT MACHINE
FOCUS on "Big Emerging Markets"
--China, India, Indonesia, Poland, Argentina, and 7 other countries--where economic growth outpaces that in the industrialized world
COORDINATE efforts by 19 agencies to boost sales efforts by the President and other traveling dignitaries
HELP small and midsize businesses by creating one-stop export centers in key ports, setting up an infrastructure project data base, and boosting funding for inexperienced exporters
FINANCE more unorthodox ventures--especially small business, energy, and environmental goods and services
Douglas Harbrecht in Washington, with Robert D. Hof in San Francisco