Small businesses: Exporting to Extend Reach

Chicago Tribune
April 12, 2010

By Ann Meyer

At the first signs of a slowing U.S. economy a few years ago, Karen Eng, president of CSMI in Schaumburg, cast her eyes on new markets.

"When the recession started to come, I diversified my clients, then my capabilities. Now I'm trying to diversify economies" by tapping potential customers in China, Eng said.

Eng traveled to China three times last year to make sales calls and push advice from her consulting company, which serves Fortune 500 food and beverage, pharmaceutical and personal-care companies. She worked with the U.S. Commerce Department's commercial service to find translators and drivers in China and asked her domestic contacts to open doors for her across the Pacific.

"I was leveraging my relationships," she said.
While America long has been considered the land of opportunity, there is clearly some promise to foreign markets. In 2009, Illinois companies exported $41.5 billion in merchandise to Canada, Mexico, China, Germany, the United Kingdom and other markets, according to the Census Bureau's Foreign Trade Division.

"If small businesses can sell more, they'll produce more, and more people can find work," U.S. Sen. Dick Durbin, D-Ill., said at a small-business export promotion forum he hosted last week with the U.S. Small Business Administration. "American consumers can't be counted on to lead our economy back to recovery. We need to look to demand beyond the United States."

With Illinois' unemployment rate at about 11 percent, Durbin said, "We need the jobs now."

But the jobs won't come easily. In many cases, small exporters say, they are lucky to add any new positions, let alone in large numbers. Skokie-based ProMark Associates, which won an Export Achievement Certificate at the forum, has added two jobs related to a $611,000 contract to supply its proprietary clean-air-filtration system to a new airport terminal in New Delhi, said Bernice Valantinas, chief operating officer. The contract also will support workers at contract manufacturers in the United States, she said.

The customer found ProMark on the Internet, Valantinas said, and the Commerce Department's Commercial Service helped with the bidding. Next, ProMark is expecting to secure a $6 million contract to outfit other new terminals at the airport, scheduled for construction next year, Valantinas said.

Sawmill Hydraulics, a Farmington, Ill.-based manufacturer of sawmill equipment that employs 25 workers, has added five workers in the past two years and is hiring two more, due partly to growing international sales, said Chris Helle, vice president.

Sawmill's products are priced 30 percent to 50 percent lower than similar equipment made overseas, he said. A weak dollar on the international market adds to the savings.

If U.S. companies doubled their export volumes, 2 million new jobs would be created, President Barack Obama's administration estimates. But others point out that exporters often end up hiring workers overseas or moving production there entirely.

Promoting exports "looks good as a headline, but it's not a real, executable opportunity," said Dan Brown, adjunct associate professor at the Segal Design Institute at Northwestern University's Robert R. McCormick School of Engineering. "If they really wanted to (promote) it, they should focus on making the playing field more fair."

When companies include value-added taxes imposed at many foreign borders, plus protectionist measures, U.S. manufacturers are at a disadvantage, said Brown, who is also president of LoggerHead Tools in Chicago, which produces its wrenches in the United States.

"We struggle exporting because we don't have subsidized costs like in China, and labor is higher," he said. "The price difference is so great, buyers won't do it."

Brown would like to see a reciprocal open marketplace solution, rather than protectionist measures, so that U.S. companies wouldn't have to move their manufacturing offshore to compete. LoggerHead exports to Canada because the North American Free Trade Agreement has leveled the playing field.

Philos Technologies in Wheeling hopes to add 10 workers by growing international sales of its surface treatment technology, President Samuel Ko said.

"Initially, we will be exporting. But as we go on, we may set up satellite manufacturing in China," said Ko, who employs 40 workers at four facilities in the U.S. and four in South Korea. Philos Technologies recently received its first Chinese contract.

Meanwhile, ProMark contracts with U.S. manufacturers but has not ruled out moving some production overseas, particularly because the New Delhi airport requires that a certain portion of the filtration system be built in India, Valantinas said. "It's not a level playing field in so many ways."

Still, American-made products can compete on value, said Benjamin Shaw, president of United Printing Equipment & Materials Corp., a Skokie-based distributor of U.S.-produced Mark Andy printing presses to China, Hong Kong, Vietnam and Taiwan.

"In my business, made in the U.S.A. means value, reliability and durability," he said.
Even so, Shaw said, his equipment sales were slow in 2009.

"Our customers are dependent on exports to the U.S.," which declined, he said. But over time, as the standard of living increases, Shaw said, "China will be a huge market for consumable goods."

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Government programs for exporting
•U.S. Commerce Department's Commercial Service, which provides assistance and counseling, export.gov, 800-USA-TRADE
•U.S. Export Assistance Centers, U.S. Small Business Administration, which provides technical assistance and loan program, sba.gov
•Export-Import Bank of the United States, which provides credit insurance, loan guarantees, working capital, http://www.exim.gov
•International Trade Administration, trade.gov