July | August 2017

Export Markets Can Help States Grow Jobs

By Mary Branham
Not many people use a scythe to cut grass anymore; modern-day weed whackers have replaced those historical tools.
But Carol Bryan knows some people like the old-fashioned tool. She sees evidence of that fact every day with the number of orders her small company, Scythe Supply in Perry, Maine, gets from around the country.
She also knows that things might be a little more difficult without help from the Maine International Trade Center. Scythe Supply, though small, regularly deals with international trade—importing blades from Austria, and sharpening equipment from the Czech Republic and Slovakia. But the core of the business—the Maine white ash for the handles—comes from a long-standing business in Eddington, Maine.
“Our livelihood depends on someone in Kansas or Florida or Oregon waking up and saying, ‘I’m going to cut the weeds with a scythe and I wonder who sells them,’” said Bryan, owner of the Internet-based business. “We bring all that money here and it definitely goes back to this community.”
Though Scythe Supply deals primarily with international imports—just a few of its customers are overseas—
it’s one of many U.S. businesses that have found a home in today’s global economic structure. And there, say economic experts, is where the future for American jobs lie.
Wade Merritt, vice president for the Maine International Trade Center, said 95 percent of the world’s consumers are outside the United States.
“Companies really need to be looking at international for a number of different reasons—whether it’s to replace U.S. domestic consumption that has gone away or to go forth and look for new customers of their products in other countries,” Merritt said.
In fact, President Obama in his 2010 State of the Union address set a goal for American companies to double their exports in five years. And this year, Congress passed the Small Business Export Enhancement and International Trade Act, increasing the annual appropriation for the State Trade and Export Promotion, or STEP, program. Every state can apply for competitive grants in the program, said Sasha Sutcliffe-Stephenson, director of the State International Trade Organization, known as SIDO, an affiliate of The Council of State Governments.
“There’s a lot of money to be made out there,” said Merritt, the SIDO vice president. “If you’re going to expand on the sales you’re already making in the U.S. by looking at Canada or Europe or Asia, that’s really a job creation strategy.”


Global Economy

Economist Zachary Karabell, speaking during CSG’s Growth and Prosperity Virtual Summit in April, said states should be tapping into the global potential.
“While the U.S. is as challenged as it has been in our lifetimes, we are living globally in a period of the most immense wealth creation and the most middle class emergence that the world has ever seen. … That’s an immense opportunity,” Karabell said.
It’s an opportunity many states aren’t willing to pass up.
Take Florida, which has seen its traditional industries of tourism and construction hit hard during the Great Recession.
The Sunshine State has long touted the benefits of international trade to its businesses. But Manuel Mencia, senior vice president/chief operating officer for Enterprise Florida and president of SIDO, says Florida could export more. About 95 percent of Florida’s exports are from small and medium-sized businesses.
The state estimates about 1.3 million Florida jobs depend on international trade—1 million from trade and about 300,000 from direct investments. That’s one out of every six jobs in the state.
“The best way to remain competitive is to be a world player, to be competing worldwide,” said Mencia. “U.S. companies can no longer afford to stay in the domestic market to avoid competition because competition will come and find them.”
Plus, said Mencia, U.S. companies that export grow 50 percent faster than those that don’t, pay 18 percent higher wages and are more profitable. “Not only does international business create new jobs, but it retains a significant number of jobs that otherwise would be lost,” he said.
Now, only a fraction of U.S. companies with a viable, exportable product are taking advantage of the opportunities that lay globally, Mencia said.
“I think it behooves the states to make an effort to get more companies into the export business and to get companies in the export business to expand and diversify,” he said.
That’s sometimes a challenge, said Mary Regal, director of the Bureau of Export Development in the Wisconsin Department of Commerce.
“I think a lot of companies don’t think they have a product that can be exported,” she said. “They don’t know where to turn. They don’t want to travel. They may be pretty busy with their domestic sales and they’re afraid to invest in more people or spend more.”


International Profile Growing

Regal said more local economic development organizations around the state are starting to realize the importance of exports. But in tight budget times, she said, it’s sometimes difficult to maintain the investment in international trade.
What draws attention, said Mencia, are the announcements of manufacturing plants locating in a state, bringing with them hundreds of jobs.
“Putting a shovel in the ground and saying you are bringing in 200 jobs, … that doesn’t happen all that often,” Regal said. “For some states, it doesn’t happen hardly at all.”
That’s why it’s important for policymakers to understand the role of international trade offices, those who head them say. The Obama administration has pushed for increased participation in trade, and Congress last September passed the State Trade Export and Promotion—or STEP—program. The three-year trade and export pilot program makes competitive grants to states to enhance export promotion. It appropriates $30 million a year for the next three fiscal years.
Mencia and Merritt, in their positions with SIDO, said in a letter of support for the STEP legislation that as fiscal crises have deepened, states have made cuts to their trade offices.
In fact, state support for trade development and investment attraction dropped from $103 million in 2008 to $70 million in 2009—a decrease of 30 percent. Most states had made cuts in their international trade budgets and were facing more cuts, ranging from 2 percent to 65 percent.
“The STEP program would be a much-needed support for state trade offices—but most importantly, it would positively impact the nation’s small businesses by enhancing the services they receive through their state trade office,” Mencia and Merritt wrote to Sen. Mary Landrieu and Sen. Olympia Snowe.
Merritt said states should not consider funding as a trade versus investment battle—both are equally important.
“A vibrant exporting economy helps lead into investment,” he said, “and a vibrant investment economy, whether foreign or domestic, bringing in new companies, leads to more exports for the state.”
States would qualify for STEP grants based on their plans to increase the number or the value of exports for eligible small businesses in the state. SIDO was instrumental in working with federal partners and Congress to craft the language in the legislation, as well as with the Small Business Association to craft the guidelines for the program. The president’s official report named SIDO a key partner in the legislation.
“We do live in a world where the marketplace of activity for companies is truly global,” Karabell, the economist, said. He points to the iconic American companies like IBM and General Motors. “Both of those companies are now seeing most of their growth and most of their dynamic growth outside the United States.”
While state and local governments have seen that truth more than the federal government has, Karabell said looking abroad is a key to continued job growth in states.
“Thinking of yourselves as part of that global nexus and not simply one of 50 distinct components of this nation called the United States is likely to create opportunities far more than not,” he said.
Just ask Carol Bryan.
While Scythe Supply employs just four people throughout the year, Bryan sees that employment grow in the summer months. And it’s all because the Maine International Trade Office has worked with her to understand the international marketplace and work through the maze of rules of international trade to get the materials she needs for her product.
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