In the global competitive market, U.S. companies are often up against other foreign exporters supported by strong financing from their governments. How can American manufacturers be more competitive when they export? What will it take to succeed?
Chairman Fred P. Hochberg of Export-Import Bank of the U.S. outlined "the unprecedented challenges facing our nation's exporters" in a keynote address on July 30 at the Center for American Progress that accompanied the federal agency's Competiveness Report.
The Export-Import Bank of the U.S. (Ex-Im Bank) is a member of Organization for Economic Cooperation and Development (OECD), an international organization helping governments tackle the economic, social, and governance challenges of a globalized economy.
Hochberg highlighted key findings from the report -- none more sobering than, "U.S. exporters compete in many markets and sectors that other countries have targeted as a 'national interest,' either explicitly as part of their national policy, or implicitly by making available a range of official financing tools intended to maximize the flow of national benefits."
To make matters worse, U.S. companies are going head-to-head with non-member OECD countries like India, China, Brazil, Pakistan, and Russia. Phil Cogan, a spokesperson for Ex-Im Bank, told IMT that this creates a "race to the bottom" when non-members offer terms on their export finance products that undercut other countries.
The Ex-Im Bank attempts to take the financing off the table, "so American companies can compete on the basis of the quality and innovation, the service after sale, the attributes that they're selling, rather than a low market stance," said Cogan.
Maryann Stein, director of International Programs for the Erie County Industrial Development Agency in Buffalo, N.Y., told IMT the two biggest problems or obstacles that U.S. exporters face are how to get working capital in order to sell products overseas and how to get paid.
Stein explained that Ex-Im Bank solves the first problem of securing working capital via The Working Capital Guarantee Program, which essentially guarantees that if for some reason a loan made to an exporter gets defaulted, Ex-Im Bank will come in and guarantee repayment so the lending bank doesn't have to take the risk.
Ex-Im offers an export credit insurance product to protect foreign account receivables. The American product is more attractive to a foreign buyer if the seller can offer 'open account terms,' rather than demanding cash up front.
Cogan pointed out that Ex-Im Bank Chairman Hochberg refers to this product as "sleep insurance," because it allows U.S. company owners to sleep at night and not worry about being paid. "All or the vast majority of what [the U.S. company] is owed is paid by Ex-Im Bank," he explained. The bank then goes after the buyer to recover payment.
"The bank's loan loss rate is currently below three tenths of one percent, which is widely acknowledged as an admirable loss rate," said Cogan. The profit the bank pays to the U.S. Treasury is after all claims are paid out. Over the past five years (from Fiscal Year 2008), utilizing only a staff of approximately 400 people, Ex-Im Bank has earned for U.S. taxpayers nearly $1.6 billion above the cost of operations
Ex-Im Bank offers export financing services, but that is obviously not the only element that contributes to export competiveness. The U.S. government has been consolidating the services and products offered by a number of export-related agencies in order to make it easier for companies to access them.
Companies can take advantage of U.S. Export Assistance Centers (USEACs). These centers are listed on www.export.gov. Additionally, there has been a further online consolidation that has been developed in the past six months, called U.S. Global Business Solutions.
Assistance finding and identifying buyers and good markets are available from the Department of Commerce. The Small Business Administration does some export lending, and Ex-Im Bank can usually pick up where their limits take off.
The U.S. Commercial Service is also able to help American companies identify good markets for their products and services. It organizes overseas trade missions and also reverse trade missions where foreign buyers are brought to the U.S.
The Foreign Commercial Service has representatives of the Commerce Department based in U.S. embassies at foreign countries and is a source of information about those countries and opportunities that may exist.
"The assistance is there...the help is there," emphasized Stein, who is also chairwoman of the Ex-Im Bank City/State Partners. The bank teams with regional economic development groups that are familiar with local businesses.
"Unfortunately what sometimes happens with smaller companies is that they are not yet ready to use Ex-Im products," said Stein. As such, she devised the Export to Canada program that brings companies to seminars to learn from experts and then assigns MBA-level students from the University of Buffalo (N.Y.) to work with companies to set up their export strategies.
"Only 1 percent of American companies export in a world that is becoming more and more globalized," said Stein. She insisted that by exporting a company can grow and sustain its viability.