Exporting represents a huge sales opportunity for many companies, including small and medium-sized enterprises.
Just one foreign market can add $375,000 to revenues, according to the U.S. Census Bureau. And companies that sell in two to four markets see an average of $1 million in new sales.
But fewer than 1 percent of America’s 30 million companies export their goods, according to the U.S. Department of Commerce, significantly less than all other developed countries.
And, of U.S. companies that do export, 58 percent export to only one country. Many could benefit from researching more about international opportunities.
A few places to start include:
Despite the low level of international involvement by most U.S. companies, U.S. exports reached$1.62 trillion in 2014, up 26 percent since 2010.
The trade deficit – exports minus imports – at the end of 2014 was $39 billion, the lowest since the end of 2013 when it was 37.4 billion, meaning the United States is gradually closing the gap that has long worried trade officials and businesses. Industrial supplies, capital goods, vehicles, food and consumer goods categories all posted exporting increases this year.
Bilateral trade agreements are in part responsible for increased exporting as reduced barriers are encouraging two-way trade. Also called free trade agreements (FTA), these contracts offer advantages and protections to companies who wish to export.
Currently, the United States has agreements with 20 countries, and it appears that one of the main purposes – the leveling of the import-export exchange – is taking place.
In November 2013, the trade differential with free trade agreement countries was 8.4 percent on imports versus exports. For non-FTA countries, imports were 43 percent higher than exports. At present, FTA countries represent just over 40 percent of all export sales but appear to be poised for growth.
One main benefit of free trade agreements is tariff reduction, which reduces the fee you must pay to export your goods into a country. Depending on the country, a drawback may be increased documentation, as you must prove that the export – or significant parts of it – did indeed originate in the United States.
Free trade agreements are vital in creating long-term, beneficial trading environments between the United States and other countries.
One major area is the protection of intellectual property. There have been cases in which businesses in foreign countries copied American products, disregarding existing patents and copyrights, and the U.S. companies were unable to stop the piracy.
The same lack of legal standing makes it difficult to prosecute such incidents. Stability of local governments is also an issue, since a change in leadership sometimes means the confiscation of American-owned property. Free trade agreements allow companies to receive adequate and prompt compensation should expropriation occur.
Another area covered by agreement is the ability of U.S. companies to work with foreign enterprises on developing product standards. An incompatibility or lack of information regarding technical requirements and specifications is considered a non-tariff barrier to trade.
This issue is regarded to be of such great importance in improving global trade that the Office of the United States Trade Representative (USTR) issued a series of recommendations in April 2013.
USTR believes that uniform product standards help ensure the compatibility of inputs, exchange of information, improvement of processes and quality, and achievement of social and environmental objectives.
The USTR is also leading a manufacturing initiative to further reduce barriers to the export of American-made products. Their primary focus areas include aircraft, automobiles, chemicals and pharmaceuticals, and technology industries.
Other major non-tariff barriers include quotas, fixed pricing, license requirements and other product specifications such as on packaging and labeling. Besides addressing trade barriers, free trade agreements also open up foreign government procurement opportunities for American businesses. Trade agreements aren’t limited to FTAs. The U.S. also has bilateral investment treaties (BIT) with about 40 countries in Africa, Europe, South America and the former Soviet Union.
The core purpose of bilateral investment treaties is to protect private investment and develop localized policies that help American companies and promote import of their goods. The six core benefits of BIT, according to the USTR, are:
Bilateral investment treaties aren’t as extensive as free trade agreements in fostering trade, but they address some concerns, especially in developing countries with unstable governments.
Countries with free trade agreements with the United States