Balance trade by boosting exports through government promotion

The Trump administration is attempting to lower imports in order to rebalance trade after decades of U.S. neglect toward economic relationships around the world.

Rebalancing should not only be done by applying the stick of import reductions, but also by export promotion. 

{mosads}Exports make a firm’s markets grow and change its home nation’s currency value. When U.S. exports increase, the dollar typically goes up in value.

Shrinking exports tend to weaken the dollar. Exports also shape public opinion of globalization and offer the opportunity for economies of scale.

Higher production volume often means a lower cost of production.

Since high exports also make imports cheaper, a firm may achieve lower costs and higher profits, both at home and abroad, through exports.

Exporting also allows firms to learn from their competition and improve their ability to survive in a changing environment.

Domestic firms typically have an advantage in their home countries due to familiarity, connection, and local government support.

Any firm that survives the burden of foreignness already has demonstrated exceptional performance.

Finally, exporting may well lead to additional international corporate strategies, such as joint ventures, franchising or licensing.

All of these strategies together contribute to the economic strength and security of a nation.

The United States has many exporters. Thousands of smaller-sized U.S. firms send a growing proportion of U.S. GDP abroad.

They do so because of their new ability to compete. In the past, the government was able to help with the profitability of exporting, but the contemporary foreign buyer considers more than price when making a purchase decision.

Consumers also expect an excellent product fit, high levels of corporate responsiveness, full integration into the global value chain, a substantial service orientation, and unrelenting corporate commitment. 

New and growing firms must offer direct lines of accountability and be more responsive throughout the ribs and fabric of the merchant umbrella.

Most importantly, small firm owners are more committed and integrated once they go international. Increasingly, millennial means global awareness, interest, and understanding.

Yet, there are also substantial export problems for U.S. firms, particularly the small and medium-sized ones.

Logistics are a big concern, particularly in reverse channel activities, like coping with consumer complaints, product adjustments, and returns.

Legal procedures and government red tape are also of concern where there are substantial differences in government restraint of innovation.

The servicing of exports is also complex, where the firm needs to provide parts availability, fit into a supply chain, and offer forward-looking technical advice.

Foreign market intelligence is another problem area that covers information on trade restrictions and competition overseas. These obstacles, both real and perceived, often slow down export efforts.

As U.S. firms are on the path to export, they encounter rising risk accompanied by decreasing profitability.

There is typically a market gap for small firms, where you spend more but earn less, which discourages managers from starting, or continuing, to export.

Government export assistance can help firms bridge this gap by getting them to a stage where profits increase and risks dwindle. 

Export assistance must either reduce the risk to the firm or increase its profitability from export operations.

For example, government negotiations to open markets abroad are likely to decrease the risk of the firm. Offering low-cost credit is likely to increase profitability.

Our new export assistance needs clarity of purpose, including what export assistance needs to achieve and in what time frame.

Export assistance needs to achieve either a reduction of risk or an increase in profits for firms. It should be concentrated in those areas where profits and risk inconsistencies cause market gaps. 

Export assistance must be closely linked to domestic industries to ensure U.S. benefits for U.S. negotiations.

Negotiators must pivot around government strengths, such as contract renegotiation and prowess in opening doors abroad.

All this requires boldness of vision. Today is the day to ensure that things are done right and to check whether one can do more of the right things.  

Professor Michael R. Czinkota works both at Georgetown University’s McDonough School of Business and the University of Kent at Canterbury. He served as deputy assistant secretary for trade under Presidents Reagan and George H.W. Bush. He is the author of “International Marketing, 10^th ed.”

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