Exports: Rocket Fuel of US Economy
Selling Sandpaper's 'Sticks' to India: Even small firms now sell abroad, a trend that may change politics of free trade.
WASHINGTON AND TRAVERSE CITY, MICH. — In the mid-1980s, only about 10 percent of Keith Blanford's Traverse City-based abrasives business was outside the United States. And most of that "exporting" was to Big Three automakers' factories located just across the Detroit River in Windsor, Canada.
This year, 60 percent of Mr. Blanford's business is overseas. And more than half of Bromide Engineered Abrasives' overseas orders come from the Pacific Rim.
Bromide remains a small firm compared with Detroit's industrial giants. But its success in finding foreign markets - success matched by some of its neighbors at the Traverse City Airport Industrial Park - represents a big story for the US.
Simply put, the global economy now reaches into every corner of America, even the edge of Michigan's northern pines-and-sand-dune country. Export growth has become one of the major engines of the country's long economic expansion.
And as more workers experience the benefit of trade first hand, support for tighter export-import ties with the rest of the world could increase. Short term, whether that helps President Clinton in his fight to expand the North American Free
Trade Agreement (NAFTA) remains to be seen. Long term, it could profoundly alter US attitudes toward protectionism and foreign competition.
"Now that I see how overseas trade can help the company and create more jobs, I'm stronger on free trade than I used to be," says Eric Birgy, a Bromides Engineering machine operator.
"Competition - bring it on," adds co-worker Rich Helfrish. "Personally, I think trade is better now than it was a few years ago. From what I see, it is more of a two-way street than a one-way street."
If US trade is a street, then traffic is increasing. Exports and imports of goods and services accounted for a record 28.4 percent of gross domestic product (GDP) in the second quarter of 1997, according to US Commerce Department figures. Five years ago, the comparable figure was less than 21 percent.
Phones from Norway
It isn't just an appetite for imports of Norwegian phones and Japanese cars that's driving that figure. American firms are selling more and more things to the rest of the world. Exports of US goods have increased 24 percent since last fall. It's a surge that accounts for almost half of the overall growth in the US economy over that time period, say economists.
Exports alone still account for a relatively small slice of the overall GDP, about 12 percent. But "at the margin they are growing faster than the rest of the economy," says Robert Z. Lawrence, professor of international trade and investment at Harvard University's Kennedy School of Government in Cambridge, Mass.
Agriculture and capital goods remain the nation's dominant export categories. Boeing, IBM, and other high-tech manufacturers account for much of the US export dollar figure.
But an increasing number of small businesses, facing stiff competition and saturated markets at home, are discovering the opportunity of foreign markets.
Consider the case of Bromide Engineered Abrasives. Bromide employs 35 people to manufacture, sell, and ship what owner Blanford calls "little sticks." These 6-inch-long sticks are used like a file or whetstone to polish and fine-tune the metal molds for plastic parts. To obtain a glossy-smooth finish on your phone, for instance, phone manufacturers have to be fussy about maintaining their steel or aluminum plastic-injection molds. That's where products like Bromide's come in.
For Bromide employees, the benefits of rising US exports are as tangible as their last paychecks. The pros and cons of NAFTA and Mr. Clinton's proposal to expand the agreement to include more countries, however, weigh on these workers' minds about as much as an NFL quarterback thinks about the physics behind a football's flight during a game.
According to Bromide workers, their firm's growing export business has helped produce changes on the shop floor and new attitudes about America's trade relations.
"I think about the competition," says machine operator Eric Birgy. "We have to constantly cut costs and find ways to work more efficiently because labor is so much cheaper over in China or Mexico."
Improvements aren't motivated so much by concern for losing existing customers. Rather, the firm needs to lower the price of its product to enter new markets. Shop workers have formed teams and found ways to reduce waste and improve productivity on the cutting tools used to slice the "little sticks" from larger blocks of abrasive material, for instance.
Mr. Birgy says he never has held strong protectionist views on trade, but he had some general concerns about NAFTA's effects on the economy when presidential aspirant Ross Perot predicted a "giant sucking sound" of American jobs going to Mexico.
Bromide employees say there is no big secret to their company's success overseas. They attribute the export growth to a high-quality product, "boring reliability" in filling orders, and a guy named Heinz.
Carol Danly, the customer-service representative who handles international orders, said retired vice president Heinz Gfroerer - a German-born Canadian - set up all the distributors overseas. The current sales staff isn't multilingual. Business is conducted in English, and overseas customers aren't treated much differently than domestic ones.
Because of the time differences, international transactions are mostly done by fax.
Overseas customers in 27 different countries buy Bromide's "little sticks," in spite of high tariffs and duties erected to keep American and other foreign products out.
Customers in India, for example, are not allowed to write checks for more than $5,000 to non-Indian companies. Ms. Danly says the customers get around the restriction by asking her to split orders into two or more boxes.
The story of AlcoTec
Bromide isn't the only Traverse City firm with foreign customers. AlcoTec, an industrial-park neighbor that makes aluminum welding wire, has had similar success.
Exports accounted for about 6 percent of AlcoTec's business five years ago, says co-owner Bruce Anderson. Today they account for 30 percent.
Mr. Anderson says much of AlcoTec's overseas growth is the result of its dominance in the US market. But the company has had to develop new tactics to take business abroad, he adds.
"We Americans are fine-tuned business machines, which is not always advantageous," Anderson says. "Before you go overseas, you need to have a full appreciation of their attitudes towards business, and then you have to develop relationships in their comfort zone."
Despite Anderson's international marketing success, reasons for the day-to-day complications of selling overseas are still a bit mystifying for AlcoTec import-export coordinator Cindy Piotrowski. "It's hard to understand why [foreign governments] have so many restrictions," she says. "But the world ... does seem to be working together better."
Does this developing sea change in US attitudes toward exports herald success for Clinton's attempt to expand NAFTA?
Some polls indicate that it might. Fully 78 percent of Americans now favor expanded trade on a reciprocal basis, according to one recent survey.
But it's not clear that such a general attitude translates into support for specific political proposals. Even the president's allies admit he may have a tough time attracting enough Democratic votes to garner the expanded negotiating authority he needs for NAFTA expansion. "It's not going to be easy" to pass so-called "fast-track" trade negotiating authority, says Senate minority leader Tom Daschle (D) of South Dakota.