It’s a challenging time for the Connecticut economy.
Though Connecticut remains a leader in finance, insurance, and real estate, it has trailed the nation in economic growth in recent years. Its gross domestic product ranked 39th out of 50 states last year, and it declined in two of the three years prior to that, according to the U.S. Department of Commerce.
While there are still opportunities for business growth in Connecticut, perhaps the best ones lie outside the state and U.S. altogether. A gathering export boom that could produce billions of dollars in business growth is being fueled nationwide by new technologies, trade policies and international banking enhancements.
According to the U.S. Department of Commerce, more than 70 percent of global purchasing power is located outside the U.S. And a full 95 percent of all global consumers reside outside U.S. borders. Our export of goods and services exceeded $2 trillion in 2011, accounting for 13.8 percent of U.S. GDP. To unlock this vast market, proliferating global trade agreements and “next generation” trade banking have increased international market access with robust economic impacts.
Companies of all sizes want to head overseas because exporting firms, on average, enjoy higher revenues, faster growth rates, higher-levels of job creation and higher salaries than do non-exporting firms. And companies that sell to global markets enjoy distinct risk advantages. For example, in recent years while the U.S. and Europe struggled economically, exporting firms could engage robust economies in East Asia, the Middle East and Latin America.
Connecticut’s economic silver lining, as it turns out, is some dramatic and encouraging growth in exporting. According to the U.S. Department of Commerce, it was one of 16 states that set new records in 2013 with $16.5 billion in total exports. That’s a recipe for job retention and growth. Every $1 billion in exports supports 5,000 jobs nationwide, according to U.S. Commerce Secretary Penny Pritzker.
According to a 2013 survey by the Connecticut Business and Industry Association, manufacturers account for 72 percent of the state’s exporters: biomedical and health devices, information technology, advanced manufacturing, electronics, and especially the aerospace industry, for whom Europe has become an essential market as it overcomes the euro crisis. But business services, wholesale trade, construction, retail and consulting firms are also having success in overseas markets.
Significantly, the CBIA found that more than a quarter of Connecticut companies not currently engaged in foreign trade would like to be.
Indeed, many more Connecticut businesses, particularly small and medium-sized firms with annual revenues of less than $50 million, would benefit significantly from engaging in global trade. The problem: They lack experience in overseas markets and in the risk management protocols essential for servicing them. This barrier to entry, however, can be overcome with an experienced team of marketing, financial, and logistical experts.
Marketing in a foreign country goes far beyond hiring a translator to adapt existing advertisements into the native language. It requires a knowledge of the local culture and customs as well as an understanding of what appeals most to consumers in the market. Contracting with a firm local to the target market or with a large international firm that has experience in the country in question is a good way to manage this. The U.S. Department of Commerce also has programs that assist companies in marketing their products abroad.
Companies that export goods almost always use a large bank with a global reach for their financial needs. International banks with multi-market expertise, worldwide offices and trading desks can overcome many of the risks associated with trade in countries where the cultures, regulations and modes of payment may seem foreign to U.S. businesses. They also provide access to experienced trade bankers who can help their clients obtain the financial products necessary for international trade: letters of credit, exports and receivables management, and the ability to navigate government guaranteed export finance programs.
Exports also need to physically get from a warehouse in Connecticut to the shops of London, Buenos Aires, or Tokyo. And that requires an experienced logistics coordinator to manage the complicated supply chains and shipping routes that connect domestic firms to foreign markets. When selecting what’s known as a “freight-forwarding firm,” budding exporters should be on the lookout for an entity with experience in moving goods around the world, a knowledge of customs and tariffs, and connections at the ports and warehouses relevant to the targeted market.
Chris Buchholz is Santander’s corporate banking market manager for Connecticut and is based in Hartford.
