Supermodel Gisele Bündchen caused an uproar recently when she reportedly asked to be paid in euros instead of U.S. dollars. It’s no surprise. With its recent sharp decline, the dollar could well be the new 90-pound weakling of major global currencies. Even a supermodel could kick sand in its face.
As any management consultant will tell you, however, opportunities often spring from crisis, and the dollar’s swan dive presents a big one for small businesses. This may be the best time in more than half a century, if not ever, to develop an export market. U.S. goods overseas have never been cheaper, but currency values fluctuate, and the pendulum will eventually swing the other way.
This rare opening is one solid reason for small businesses to investigate exporting. But another significant development is playing a role, too. A growing number of Free Trade Agreements (FTAs) with countries as diverse as Chile and Israel is leveling the global trade playing field. Unfortunately, small businesses have been underrepresented when most of the agreements have been negotiated, according to House Small Business Committee Chairwoman Nydia M. Velázquez.
“The [government] continues to lack a formal delegate as well as staff representing the small business sector at the negotiation table,” she said at a recent hearing. “This may explain why pending agreements lack a small business focus. If small businesses had a seat at the table, I believe the current agreements would have been stronger.”
While that’s a drawback, it’s only a small one. FTAs have opened some of the fastest-growing markets in the world to U.S. businesses. Since 2001, the number of FTA partners has grown to 20 from three (Israel, Canada, and Mexico). Agreements are pending with such nations as South Korea, Peru, Singapore, Australia, Panama, and a three-nation consortium (Jordan, Morocco, Bahrain, and soon Oman) that makes up the strategic “Middle East Free Trade Area.”
At the House Small Business Committee hearing, John K. Veroneau, a deputy in the government’s Office of the U.S. Trade Representative, outlined how the agreements are opening doors for small businesses. The office develops and coordinates U.S international trade policy, enforces U.S. trade agreements, and resolves problems with foreign governments.
The trade agreements provide greater transparency, and fairer, enforceable trade rules. In almost every case, they have led to an explosion in opportunities overseas. U.S. exports to Chile, for example, have risen by 150 percent since an FTA went into effect in 2004. Increases are impressive elsewhere as well: Australia (up 25 percent), Jordan (up 92 percent), and Singapore (up 49 percent).
While conventional wisdom suggests that multinational markets are largely the domain of major corporations, the contrary is true. Small businesses account for almost half of U.S. exports and the percentage is growing. Between 1992 and 2005, the number of small business exporters more than doubled to 232,612 from 108,026, according to government figures.
Wolf L&G Farms, a small family-owned independent hog operation in southwestern Wisconsin, was struggling financially in 2001. But over the last five years, a strong export market has helped turn the farm around. “Increased pork exports have contributed significantly to the profitability of our operation,” said Doug Wolf, who owns and operates the farm with his 30-year-old son.
At a time when the U.S. economy has been slowing, Wolf Farms has been expanding. It now sends more than 30,000 hogs (up from 20,000) to market annually. Its pork products go to all points of the globe, from Japan and South Korea to Russia and Mexico. That’s no small feat, considering that U.S. pork faces tariffs as high as 77 percent in non-FTA nations. In contrast, FTA agreements currently awaiting congressional approval will mean more than $300,000 in new revenue and will fund a 50 percent expansion in production, he said.
“Each agreement aggressively cuts tariffs, and all tariffs are eventually phased out completely. Additionally, the governments of Peru, Colombia, Panama, and South Korea have agreed to accept pork from all USDA-approved facilities,” Wolf told the committee. “This ensures my products will not be stopped from entering these markets because of nonscientific restrictions.”
While FTAs and cheap dollars are opening the doors to world markets like never before, small businesses still face problems. Costs can be significant and small business owners must also contend with foreign languages, foreign currency, and foreign permits and regulations. But the U.S. Export-Import Bank and the Small Business Administration have programs geared specifically to small exporters. Many states offer assistance and a number of private consulting firms specialize in helping small businesses export.
Small business groups should step up and demand a voice in FTA negotiations. After all, FTAs offer a real opportunity for growth. It’s time for small businesses to get that seat at the table and join the global economy in force.