Local Firms Betting on Good Year for International Business

Local Firms Betting on Good Year for International Business



Trade: Weak Dollar Makes American Exports More Competitive Worldwide

BY JULIE POUCHER HARBIN

Hugh Constant, vice president of the San Diego World Trade Center, said 2004 will be a better year for San Diego companies involved in international trade.






Local experts and international businesses agree that good trade opportunities abound for local companies in Mexico, Asia, Europe, Canada, and the Americas.






There’s also one trade milestone , Jan. 1, 2004, marked the 10-year anniversary of the North American Free Trade Agreement.






“Economies worldwide are improving certainly, and maybe the U.S. is leading the way. With the dollar being down we are much more competitive in terms of our exports this year than last year,” Constant said.






With that in mind, here’s a look at some of the tried-and-true, as well as emerging markets, for San Diego companies overseas.






Mexico Maquiladora Trends






Matthew Andersen, director of the Department of Commerce’s U.S. Export Assistance Center-San Diego, said that at least one-third of exports by San Diego companies go to Mexico, and he expects that trend to continue. He had no data on imports.






Manufacturing in maquiladoras south of the border for big Japanese companies remains active, despite the reports of many jobs going to China. And last spring, Toyota Motor Manufacturing de Baja California broke ground on a $140 million automotive plant in eastern Tijuana. The plant, which is not considered a maquiladora is expected to employ 460 people at full capacity in 2005, and will manufacture Toyota Tacoma pickup trucks.






Local experts also point to a growing trend of local small and mid-size companies moving their manufacturing operations to Mexico. A NAFTA trade show in Mexicali in February 2004 is expected to be well attended.






“There’s great interest in that, in companies looking at finding business partners in the Mexico area, especially those companies that are at the point where they realize they can’t be competitive and (still) manufacture in the U.S.,” Andersen said.






Richard Jaime, director of operations at North American Production Sharing, a customs broker, said small and mid-size manufacturing companies, employing 50 to 200 people, are especially interested in maquiladoras now. He said while these companies don’t invest a huge amount of capital or resources, they typically have logistically intensive, smaller niche product lines with quick turnarounds as opposed to large consumer production runs. Besides specialty consumer products manufacturers, he is seeing a growth in industrial and computational electronics companies moving their manufacturing to Mexico.






“I don’t see any huge projects coming down that are owned by multinationals, high profile accounts, other than the Toyota project,” Jaime said. Jaime also doesn’t see the Toyota facility being an engine for suppliers until well past the first phase of the plant completion in mid- to-late 2004.






Tony Ramirez, executive vice president of Made in Mexico, Inc., a maquiladora management service, said he’s already heard from small and mid-sized auto parts suppliers keen on increasing their value in Mexico.






He said, in a December interview, that his company had seen “a substantial amount of inquiries in the past 60 days” of various sizes looking to get into Mexico, for the first time, in order to retain sales and be more cost-competitive with China.






China may seemingly be on every international company’s lips, but it’s far from an easy market, experts warn.






David Warren Peters, vice president and general counsel of PRCinsight.com, a business consulting firm specializing in China, which is based in San Diego, spoke about the challenges to doing business there during a District Export Council conference in September.






“Some of the most successful companies in the world have privately reported poor results in (China) transactions,” said Peters, who’s a member of the Council. “A company’s best strategy remains to recognize China as a big boys game and be sure to have a thorough understanding of the potential risks and considerations.”






Andersen, whose export assistance office counsels companies on export regulations, arranges overseas meetings, and helps companies find agents and distributors, said it’s difficult for companies to get their profits out of China, and major issues for businesses continue to be intellectual property, currency controls and China’s fulfillment of their World Trade Organization obligations.






Ron Roberts, San Diego County supervisor, has already been on two trade missions to China. Roberts has actively been encouraging local companies, especially telecommunications and biotech companies, to have a long term vision towards China.






Granger Haugh, president of Cliniqa Corp., headquartered in Fallbrook, said his biotech company started selling raw materials used to make clinical test kits to Beijing in December. Cliniqa does 45 percent of their business overseas, mostly in Europe.






“We think that’s going to be a very good market for us,” Haugh said.






Andersen said the service industry end of local IT companies, from software to telecommunications companies, started to look hard at larger markets like China and India, especially over the last half of the year. He said that many companies in the range of 12-25 employees are looking ambitiously at Asia, but he advises small IT companies interested in international markets to first try Canada, then look at the United Kingdom, and then maybe look at Chile, Vietnam, or Thailand, before they try the larger markets.






Patty Z. Goodwin, a spokesperson for Qualcomm Inc., one of the county’s largest employers, and which already has a steady international presence, said “India and China continue to be important markets for us.”






Kim Benson, vice president of San Diego-based Cange International, a sales and marketing company that represents several national manufacturers of high-end consumer goods for the kitchen and bath, said Mexico remains the company’s top market, along with Brazil; but she is also looking to China.






“Mexico is being faced with a lot more (price) competition from China now and they are beginning to see that, and it’s creating more pressure for U.S. exporters who are trying to sell into Mexico,” Benson said.






She said that as a result of China’s entry into the World Trade Organization, her company is now in a better position to have its own presence there and is looking to do that fairly soon. China has a growing consumer goods sector, she said, and an influx of new wealth is creating a burgeoning upper class that will want to buy high-end home furnishings.






Currently U.S. exports to Central America are more than $9 billion per year.






A new Central American Free Trade Agreement, for which negotiations have already been completed with Guatemala, El Salvador, Nicaragua, and Honduras, will be sent to the U.S. Congress early next year. Passage of this agreement could mean even more trade barriers would come down for local companies.






Key U.S. exports such as information technology products, agricultural and construction equipment, paper products, chemicals, and medical and scientific equipment would gain duty-free access to the above-mentioned markets, according to the Office of the United States Trade Representative, if CAFTA were approved.






Guatemala, Honduras, and Nicaragua are expected to join the World Trade Organization’s Information Technology Agreement soon, which removes tariff and non-tariff barriers to IT products, according to the USTR office. Costa Rica and El Salvador are already participants.






Benson said Panama, Guatemala, and Costa Rica will be the markets with the highest percentage of growth for her international sales and marketing company over the course of 2004 due to a growing wealthy consumer class.






There’s Always Europe And Canada






With the dollar weak and the Euro strong, it’s easier to export to Europe than import from there these days.






Additionally the region’s life sciences companies, which have many partnerships with European companies, can still expect to do very well in Europe next year.






“The thing about the biotech industry, it is absolutely an international business. It’s just as easy to be working with an international company as it is with a U.S. company,” said Lee McCracken, senior vice president of Diversa Corp., a locally based biotech company that has a research partnership with Swiss-based agribusiness company Syngenta. He said that China, on the other hand, is still emerging as an opportunity for biotechs involved in research and development.






The Eastern European markets continue to be terrific opportunities for local businesses, Andersen said, especially in the Czech Republic, Hungary, and Poland, since there’s “a very high level of cooperative relations.”






And Canada continues to be a great first step for companies looking to overseas markets, especially IT and biotech companies, he said. The new Canadian consulate that opened up in San Diego in December is focusing on these two areas as part of their trade mission.






According to the San Diego Business Journal/Deloitte