Mississippi catfish for Left Bank dining - US gives a hand
Mark Freeman wants to sell Mississippi farm-raised catfish - in Paris and Singapore. He is one of many business people eager to sell the products and services of small to medium-size American companies overseas. And Uncle Sam, faced with a chronic and growing international trade deficit, is helping them.Skip to next paragraph
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Business executives and bankers are starting to take advantage of the 1982 Export Trading Company Act, Congress's answer to what it regarded as two major barriers to United States export trade: lack of export capital and fear of antitrust suits blocking cooperative efforts to market American products abroad.
For the most part, American export trade has been the province of corporate giants. By one estimate, 85 percent of the country's exports of manufactured goods are made by just 1 percent of its manufacturers. Most smaller businesses have not been able to spend the time or money locating customers in distant and unfamiliar markets. Independent trading companies have tended to be small, highly specialized, and unable to undertake expensive campaigns overseas.
By contrast, in countries such as Japan much export trade is conducted through huge trading companies which purchase indigenous products and resell them abroad, taking advantage of marketing leverage and economies of scale derived from their size.
Perhaps the most important section of the Export Trading Company Act authorizes bank holding companies (but not individual banks) to invest up to 5 percent of their consolidated capital and surplus in export trading companies (ETCs). Such investments had been prohibited by federal laws restricting the extent to which banks could engage in nonbanking commerce.
In permitting bank holding companies to acquire ownership or interests in ETCs, Congress hoped to encourage the development of generously capitalized export concerns having the wherewithal to take title to the products of small to medium-size businesses and market them overseas. As of recently, the Federal Reserve Board had permitted investments in 16 ETCs, with other applications pending.
Among the bank holding companies that have invested or plan to invest in ETCs are the parent companies of New York's Citibank and Bankers Trust Company, San Francisco's Bank of America and Crocker National Bank, Boston's Shawmut Bank, and First National Bank of Chicago.
Ron Wakeford, executive director of the Council for Export Trading Companies, a trade association, says he expects to see banks' interest in ETCs ''accelerate'' in the months ahead.
''Banks move cautiously, especially into nontraditional areas,'' says James Dadmun, executive vice-president of Tech Export, Shawmut Corporation's ETC. ''But over the long run, many banks will move into export trade, and I believe the act will have a very favorable impact on US exports.''
Most of the bank holding companies have started from scratch, forming new ETCs and recruiting experienced export traders to manage them. In a couple of cases, however, bank holding companies have acquired existing trading companies, such as Shawmut's Tech Export, which has been operating since 1971.
Some holding companies have joined forces with other investors. First Chicago Corporation has entered into a joint venture with Sears World Trade, a subsidiary of Sears, Roebuck. Bancorps' International Trading, of Somerset, N.J. , is owned by three New Jersey bank holding companies and several private investors.
The bank-related ETCs are adopting a variety of strategies regarding the products they will handle, the way they'll aim at foreign markets, and the complementary services they will offer. Crocker Pacific Trading Corporation, a subsidiary of Crocker National Corporation, plans to concentrate on selling metalworking machinery in the Far East, particularly China, while Shawmut's Tech Export is seeking to serve primarily the emerging high-technology companies around Boston. Other ETCs, though, hope to distribute a wide range of American products throughout the world.
ETCs and other exporters now enjoy limited protection from lawsuits under federal and state antitrust laws. This enables competing companies to work together to develop foreign markets. A new ETC receives a certificate from the Commerce Department, with Justice Department concurrence, specifying overseas marketing, distribution, and price-setting practices that will be immune from antitrust challenge. The government issues the certificate only after determining that the described practices will not restrain trade or affect prices in the US.
More than 40 applications for certificates have been submitted and a dozen certificates issued to date, says Charles Warner, director of the Office of Export Trading Company Affairs of the Commerce Department's International Trade Administration. Mr. Warner's office has established a Contact Facilitation Service, a kind of ''computer dating service'' for participating producers and export companies.
One of the first ETC certificates was issued to US Farm-Raised Fish Trading Company of Jackson, Miss. Mark Freeman, executive vice-president of Catfish Farmers of America, one of the owners of the trading company, believes the certificate ''will be very useful'' to the producers in cooperatively introducing catfish to Europe and Asia.