Plus ça change, plus c’est la meme chose — Jean–Baptiste Alphonse Karr BINGHAMTON — The epigram attributed to French writer Karr translates as: “The more it changes, the more it remains the same thing.” How apropos of America’s historical attitude toward global trade, which periodically swings like a pendulum between encouraging and discouraging multilateral agreements. Encouraging […]
Plus ça change, plus c’est la meme chose — Jean–Baptiste Alphonse Karr
BINGHAMTON — The epigram attributed to French writer Karr translates as: “The more it changes, the more it remains the same thing.” How apropos of America’s historical attitude toward global trade, which periodically swings like a pendulum between encouraging and discouraging multilateral agreements.
Encouraging global trade is the focus of the Center for International Business Advancement (CIBA) at Binghamton University, which sponsored its second annual Global Trade and Investment Forum of the Southern Tier on Nov. 14. CIBA is an applied-research and educational center as well as a policy forum dedicated to the internationalization of local business and academic communities in the Southern Tier. Spearheaded by the founding director, Dr. Elena Iankova, the Nov. 14 forum — focused on small business — was particularly timely in light of the recent presidential campaign, where both major-party candidates felt comfortable bashing global-trade agreements.
The entrepreneur’s perspective
The first speaker was Alex Deyhim, president of Advanced Design Consulting (ADC). Born in Iran, Dreyhim immigrated to the U.S. and earned two graduate degrees from Cornell University, one in mechanical engineering and the second in business administration. In 1995, he launched ADC (www.adc9001.com) as a custom-design, manufacturing-system prime contractor. From its modest beginnings in a small office at the Cornell Business & Technology Park, ADC now operates from a 22,000-square-foot building in Lansing, near Ithaca; employs 24 people, many of whom are engineers; and holds 14 patents with another dozen pending.
“Within the first four months [of opening our doors], I realized there wasn’t enough business in the region to support my business,” recalls Deyhim. “To survive, I had to expand my … [geographic horizons] and to think globally. Today, ADC has customers in 26 countries, and we compete successfully against billion-dollar companies … How did we do it? First, we were early adopters of the Internet, an amazing invention that provides global knowledge and lets us reach our customers directly. (ADC only uses sales brokers in two countries.) Second, we have taken advantage of government support to help us sell globally and manage the risks involved in foreign sales. Next, our global reach provides numerous suppliers who provide added bargaining power to decrease our costs. Selling globally also provides diversification and the stability that smooths out business cycles.”
U.S. trade policy
Deyhim was followed by Mitchell Ferguson, acting director of the bureau of economic and business affairs, office of bilateral trade affairs, U.S. State Department. Ferguson began his remarks discussing the current headwinds against global trade and then provided an historical perspective on America’s attitude against global trade. “The U.S. imposed its first trade embargo back in 1807 during the Jefferson administration,” said Ferguson. “The Congress enacted a general embargo against France and Great Britain for ignoring American neutrality during the Napoleonic Wars. The Britian’s Royal Navy was impressing American seamen and their cargoes as contraband. The U.S. chose to respond with commercial warfare rather than mobilization. The embargo … [flopped] both diplomatically and commercially and was revoked after 15 months.”
Congress passed the first protective tariff in 1816 and raised the rates in 1824. “In 1828, John Quincy Adams signed legislation dubbed the ‘Tariff of Abominations’ by its southern detractors,” continued Ferguson. “The 1828 tariff protected Northern industries and agriculture in the Western states, which were suffering from low-priced, imported goods. The punitive tax ended up forcing all U.S. citizens to pay higher prices for goods not produced here. The South ended up paying higher prices for goods produced in the North and the reduction of British goods exported also limited Britain’s ability to pay for the South’s main revenue stream — cotton exports. The tariff led to a constitutional crisis finally resolved in 1833.”
With the onset of the Great Depression in 1929, Congress again turned to protective tariffs to stave off a collapse of the economy by passing the Smoot–Hawley Tariff Act, which raised tariffs on more than 20,000 imported goods. Foreign retaliation was swift in coming. The effort to protect American jobs and farmers from foreign competition failed: In 1930, unemployment stood at 8 percent; in 1933 it was 25 percent.
“In 1944, at the height of World war II, 44 Allied nations assembled at Bretton Woods in New Hampshire and hammered out rules governing commercial and financial relations among the U.S., Canada, and Western Europe,” noted Ferguson. [This was the first example of independent nations joining together to govern monetary relations. The accord established the International Monetary Fund and the International Bank for Reconstruction and Redevelopment.]
“In October 1947, 23 nations assembled in Geneva and signed the General Agreement on Tariffs and Trade (GATT),” stated Ferguson. “GATT substantially reduced tariffs and other trade barriers and eliminated preferences. [The agreement was extended to 123 nations in 1994 in the Uruguay Round Agreements, which established the World Trade Organization.] The alphabet soup of trade agreements continued with NAFTA, CAFTA, KORDS, etc., generally with strong, bipartisan support.
“The pendulum has now swung back toward protectionism, putting the Trans-Pacific Partnership (TPP) agreement in jeopardy. Campaign rhetoric aside, the deal may now be a heavy lift but it’s not dead, because TPP is as much strategic as economic. Ash Carter [the U.S. Sec. of Defense] made the best case last April when he said ‘… passing TPP is as important … as another aircraft carrier … It would deepen our alliances partnerships abroad and underscore our lasting commitment to the Asia-Pacific.’” Rep. Kevin Brady, a Republican and the chair of the House Ways and Means Committee, echoed Ferguson’s opinion recently when he told a panel of the Wall Street Journal CEO Council that TPP was defensible. He urged Congress “… to renegotiate, fix any problems that exist, and move forward.”
Ferguson concluded his remarks by noting that U.S. trade policy is a “long game’ in which soft power plays a leading role. “It’s pretty simple,” he averred. “You can’t have global trade without rules that everyone agrees to and follows.”
Federal government support
The next speaker was Dan Rickman, district international trade officer for the Syracuse district office of the U.S. Small Business Administration (SBA). The Syracuse office covers 34 counties in Central New York, ranging from the Southern Tier to the Canadian border and east to the Massachusetts and Vermont state lines.
“The SBA is the federal government’s lead agency supporting small business, which we generally define as companies with fewer than 500 employees or less than $7.5 million in annual revenue, depending on the industry,” Rickman stressed. “Our office offers financing, guarantees, counseling, training, and even opportunities for government contracting. Small business is really big business when it comes to exporting: it represents 30 percent of all U.S. export dollars. In New York state, small business provides 55 percent of all export sales. In 2010, that amounted to $34 billion. Nationwide, 70 percent of all exporters have fewer than 20 employees, and 97 percent of all companies that export are … [categorized] as small businesses.”
Rickman emphasized that the SBA was not a direct lender. “Our office provides guarantees up to 90 percent of the loan amount to area companies that want to borrow money from a bank,” he intones. “Our limit is $5 million. The purpose of the loan must support exporting to qualify for the maximum guarantee of 90 percent … It’s important to remember that the borrower does not have to export directly to qualify for a guaranteed loan. If a company manufactures something for a customer, and the manufacturer’s product or assembly is used in another product that is exported by the customer, the borrower qualifies under SBA rules as an exporter.”
Rickman also explained that other federal-government services are available to help exporters, for example in the area of mitigating risk. Getting paid is a concern of every exporter. The U.S. Export-Import Bank offers trade-credit insurance, which can also allow the exporter to extend credit terms to foreign buyers. In addition, the SBA works closely with the U.S. Department of Commerce, which offers marketing tools for small businesses to identify new markets for their products.
New York State government support
The forum next turned to Jinshui Zhang, director of international business development at the New York State Small Business Development Center Central Administration. Zhang has held the position since 1997. He ran through a litany of services offered by the Empire State: export information; market evaluation; matchmaking of distributors, suppliers, manufacturers, partners, and agents; identifying the export process, sourcing, joint-ventures, and investment opportunities; explaining government regulations and taxes; training; leading missions to foreign countries; and hosting foreign delegations. Zhang spent a large portion of his presentation on one effort as an example of what his office does.
“In 2012, New York led a five-day mission of state winery executives to Shanghai, which is a free-trade zone, to see the New York State Wine Outlet,” he asserted.
“The outlet serves as a gateway for state wine products to be introduced into the Chinese market, a launching pad to showcase and promote state wine products for year-round display and sale. This effort is a collaborative led by the state’s Small Business Development Corp. in coordination with the state’s Department of Agriculture and Markets and the state’s Department of Economic Development. [In effect,] … the outlet has combined the functions of exhibition, promotion, trade, and sales. It’s a low-cost way for New York wineries to enter the Chinese marketplace with little risk and without the need to set up an independent distribution network. Thirty-two wineries participated in the mission and … [garnered] 12 orders totaling 313,000 bottles of New York State wine. Our success led us to open another wine center in Tangshan, located in North China. New York State is currently negotiating for three more centers in North China … Products manufactured in New York have a special … [cachet] with the Chinese.”
The entrepreneur’s perspective redux
Patrick Doyle, sales and marketing director for the Pleasant Valley Wine Co., was the final speaker at the forum. Located in Hammondsport, Pleasant Valley, founded in the same year President Lincoln was first elected to office, is known for a variety of its brands, including Great Western, Gold Seal, and Widmer. In addition to producing wines, the company crushes grapes and stores wine at its 420,000-square-foot facility for other grape/wine companies.
“We shipped a pallet of our wines to Shanghai six weeks before the mission started,” Doyle intoned. “The wines arrived in time to be displayed, and the Chinese were delighted with our products. The Shanghai outlet made it easy for us to enter the Chinese market and expose our brands. I would say the mission was a success. Today, we continue to sell into the Chinese market through a broker located in Rochester, although in the short term, most of our attention is focused on penetrating more U.S. states to expand our distribution.” Doyle also informed the audience that more missions were scheduled in 2017 and support for exporting was also available from the U.S. Department of Agriculture Trade Office.
The forum concluded with a question-and-answer segment followed by lunch and networking. Those in attendance seemed to take the long view that, despite the current swing toward protectionism, the trajectory of global trade is toward expansion and not contraction. The history of U.S. trade agreements over the past 72 years supports a long-term trend toward the globalization of trade. Iankova says that CIBA is committed to encouraging this trend in the Southern Tier. The center’s challenge is to convince more small businesses that there is plenty of opportunity for growth in expanding into international markets and help available to overcome the obstacles to exporting. CIBA’s role is to educate and encourage the region’s business community. CIBA’s director calls the Southern Tier a “sleeping beauty with a lot of potential for growth through internationalization … To unlock this potential, CIBA relies on a [wide] network of strategic partners [in business, government, and academia].”
According to the story of “Sleeping Beauty,” it only took one kiss from the prince to awaken the heroine. Iankova has no illusions that awakening the Southern Tier business community for expansion into global markets requires a little more effort.
Contact Poltenson at npoltenson@cnybj.com