As a source of business growth, foreign markets are hard to resist; but the world of international trade can be daunting.
For insight into exporting, El Paso Inc. spoke with the U.S. Commercial Service’s trade specialist in El Paso, Robert Queen. It’s his job to help U.S. companies do business in other countries.
Mexico is the second largest export market for U.S. products, behind only Canada. So much of what Queen does is help U.S. companies do business south of the border. But the El Paso Export Assistance Center will help any sized business connect with markets anywhere, Queen said.
Queen is the director of the local export center. Established in El Paso in 2009, the center is one of 109 across the country that are operated by the U.S. Commercial Service, which is the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration.
The export center covers El Paso County and all of New Mexico and offers a number of export assistance programs, some for a fee. But the export centers are not well advertised, and the International Trade Administration is trying to do a better job promoting them.
For businesses interested in exporting, the place to start is Export.gov, Queen said.
Queen grew up in western Oklahoma and New Mexico, near a small village called Wagon Mound, where his family has operated ranches for generations.
On the farm, what happened to economies overseas could have a direct impact on the family economy. So international markets were never far from Queen’s mind, even when he was a 12-year-old driving a combine.
“And as we were harvesting wheat, I’m listening to the radio and hear the Russians are in the market buying American wheat and I’m thinking, ‘Wow. That’s what I’m doing here on the combine,’” Queen said.
Queen graduated with a bachelor’s degree in agriculture economics from Oklahoma State University and joined the U.S. Commercial Service. In 2009, he was sent to El Paso to open the office here.
Queen sat down with El Paso Inc. and talked about the challenges companies face breaking into new markets, what the export center does to help and why manufacturing is booming on the border.
Q: Do you have a sense of how many businesses in the region export globally? There’s a lot of trade that happens between Juárez and El Paso, but what about beyond that?
There’s a very high percentage of companies here that are engaged in selling material to Mexico. Companies here know border trade and trading with Mexico, but when you go beyond Mexico, the number probably takes a pretty steep nosedive.
Few companies here are looking at markets in countries in Asia, Europe, and Africa. Mostly, it’s just border trade.
Q: It seems like there might be an opportunity there since many companies in this region are already comfortable navigating borders.
They’re very comfortable with trade – logistics, documentation and exchanging currencies. But what’s going on here, it’s not just trade – it’s co-manufacturing.
They’re part of a supply chain here that is critical; and for them to export to Germany, for example, they would need that same structure set up there and interaction with the companies there.
We don’t have many companies here that produce the finished product that can just be taken and put on a shelf. Many are a link in the supply chain.
Q: The companies you’ve worked with that are operating overseas, how are they breaking into other markets?
They set up distribution networks and have partners in each target country. That’s how you do it. It sounds very simple, but there are a lot of details involved.
Q: What are some of the barriers faced by U.S. companies trying to export?
Each country has health and safety standards that companies have to comply with. That’s what knocks many out right away. Maybe the company cannot meet the quality certification or health standards in Europe, for example. That can require a huge investment.
You have to have certain certifications, and it’s also very costly to do that. Another challenge is pricing – maintaining price competitiveness in a foreign market.
Q: Because you’re competing on a global scale against companies around the world?
You are competing with other competitors around the world, but you also face currency fluctuations. If the U.S. dollar gets stronger, for example, suddenly your product is more expensive in that other country.
Q: That all sounds daunting. Why should a company consider world markets?
Companies are always looking for quality growth, so it depends on the amount of risk a company is willing to take on to receive that growth.
It also helps you diversify. If all of your customers are in Mexico, and Mexico takes a downturn, your business probably is going to also.
Q: How many companies does your El Paso office work with? What’s your impact?
We’re actively engaged with probably 250 companies now, and we reach probably another 300.
Q: The general idea is to encourage U.S. companies to think globally and consider foreign markets?
Not necessarily to think more globally, but to develop specific projects to sell material into foreign markets. It’s more than thinking about global markets or something soft; it’s a hard approach to targeting foreign markets and selling material into those markets.
Q: How does that work in practice?
The International Trade Administration has about 1,400 people stationed around the world, mostly in our U.S. embassies. We’re in 80 countries. We have a set list of services, which is primarily a lot of matchmaking.
Most companies, when they go into a foreign market, need some sort of partnership in that foreign market – either a logistics company or a marketing representative or a distribution center – someone on the other end who’s going to take their product the last mile or stock it on the shelves or deliver it to the customer.
Many of our services are aimed at helping companies find those partners.
Q: So you’re in the dating business.
It’s like matchmaking for businesses. If a company here wants to find a partner in Kansas, well, that’s no problem. They just pick up the phone. It involves the same economy, same currency and same legal system.
But when you do that in, say, Egypt everything changes. It’s a different language, a different culture and a different legal system.
In addition to the matchmaking services, we also lead trade missions. We certify foreign trade shows, and then we encourage companies to participate.
The International Trade Administration identifies lots of trade shows all over the world – maybe a hundred trade shows a year. We do maybe 45 trade missions to different regions of the world every year.
A major project for us right now is the Hannover Messe foreign trade show that will take place in Hannover, Germany from April 25 to 29. It’s one of the largest trade shows in the world, and this year the United States is a partner country.
Q: Why did the trade administration open an office in this region? It makes sense given Juárez is one of the largest manufacturing centers on the U.S.-Mexico border, if not the largest.
It probably was long overdue. We had 109 offices in the United States, but we didn’t have one in El Paso and they were trying to cover it from New Mexico. That’s just too far away. Now it’s switched, and the office here covers New Mexico.
Q: Working with companies in this region, what is your sense of how the manufacturing sector is doing?
It is probably stronger than ever.
Q: What is driving that?
A big part of it is recovery in the auto industry. A lot of the companies here make automotive components.
Also, there is a small growing aviation cluster that seems to be adding some strength. This region is invested heavily in manufacturing, and it is paying off.
Q: Companies in the region, where are they finding markets for their products overseas? What are the hotspots?
This region is fortunate because this is the hotspot. Everyone else wants to come here.
I get a lot of calls from companies all over the United States looking at how they can make connections with marketing representatives in Juárez or how they can establish inventory here in this area.
Q: Are more companies returning manufacturing to North America, or specifically to Juárez?
I have seen several sections of assembly lines moved here from Asia, but not companies wholesale – the entire plant coming over. Maybe the Borderplex Alliance sees more of that.
Q: What is driving the “reshoring” trend?
Probably the rising cost of logistics. Also, it’s not easy for companies to predict costs in Asia. Even though they’re very competitive and low, they don’t know what it’s going to be next year.
Also the lead times are very destructive for some companies. If there is a defect in your product coming from Asia, by the time you receive the first one you know you’ve got many more containers already on the ocean behind it. Here, if there is a defect, you go, “Oh, here’s a problem. Stop the line.”
Q: What kind of businesses do you work with? Small businesses?
Well, really any kind of company. We do work with a lot of small companies, some with five or six people. Some are pretty active in shipping product all over the world.
You’d be surprised how many small companies we work with, but by and large, I’d say most companies are probably 100 to 200 people.
We don’t work on commission; we don’t pick and choose companies based on their size or if they’re famous. The trade administration will work with anyone and everyone.
Q: So small businesses are engaging in international trade, too.
Small companies are using e-commerce more than anyone else, and e-commerce is a major trend that’s taking place in international trade.
Q: Selling things over the Internet – websites and that sort of thing?
Yes. You may have a website and think, “OK, I’m open to China.” But no one in China is looking at your website. You need to be on a platform or in some sort of search results so someone in China can find you, otherwise there’s no connection.
Q: You also do webinars?
We do quite a few. A lot of them are free, but some have a small fee.
To me, webinars are kind of old technology; it was something we used to do. I think we’re moving to new forms of technology in the way that we communicate with our clients or customers.
Q: Like what?
We’ll, we’re using all forms of social media, like LinkedIn and Twitter, and trying to beef up our website, Export.Gov.
Q: Are you getting a lot of inquiries from companies about the big Trans-Pacific Partnership trade agreement?
We’re starting to get a lot of interest.
Q: What kinds of inquiries?
There’s a general curiosity. People are still educating themselves on what it means.
What I tell them is you can read about the TPP in a general way, but to really find out how it impacts your company, we need to identify your product, and it’s tariff code, and then we can look at what your tariff is in those countries today and how that would change under the TPP.
Q: Do you have a sense of how the TPP would impact the region if it were approved?
It’s going to reduce tariffs across the board. Simply, that’s what trade agreements are – agreements to reduce import taxes. Anything that is being made here if you want to ship it to those 11 partner countries, the tax burden should be lower and eventually go to zero.
But there are a lot of details. It’s more than 1,000 pages.