Greg Bachmann hopes the time for a South Korean free trade agreement finally has come.
The president and CEO of Torrington adhesive manufacturer Dymax Corp. has grown tired of waiting for the U.S. Congress to act on a pending free trade agreement with the Asian country. Without a deal, Bachmann is left to fight against competitors from other countries who have better trade arrangements.
“This is getting discouraging. It is taking so long,” Bachmann said. “Now we have to have a lower profit or sell at a higher price than other companies.”
The United States created free trade agreements with Colombia in 2006 and with South Korea and Panama in 2007. The deals would eliminate or significantly reduce tariffs and fees on exports and imports with those countries. However, Congress has been slow to approve the agreements for a number of reasons, including details of what goods can be trade freely, concerns over human rights abuses and aid to domestic workers whose jobs could be put in jeopardy.
Bachmann was hopeful at least the Korean agreement would get congressional approval last December when the two sides renewed their commitments, but the deal was ultimately left on the table.
“A lot of our products wouldn’t be as expensive as they are now if Congress acted,” Bachmann said.
But talk for the three free trade agreements is heating up again, and Congress could take up the issue sometime in October or November.
That’s good news for Bachmann and other Connecticut companies looking to export, as free trade agreements historically lead to boosts in overseas sales by an average of 70 percent.
The United States has free trade agreements with 17 countries, and the passage of each has led to an increase in exports from Connecticut.
In the past 10 years, the U.S. approved seven free trade agreements with individual countries, as well as the passage of the Central American Free Trade Agreement, which includes countries such as the Dominican Republic, Costa Rica and Guatemala.
Looking at the seven free trade agreements with individual countries — Australia, Chile, Singapore, Bahrain, Morocco, Oman and Peru — the average annual export from Connecticut to those countries increased to $124.3 million from $73 million in the years following the agreement, a 70.3 percent increase, according to the U.S. Department of Commerce
In the five years preceding the 2004 agreement with Singapore, the exports from Connecticut to Singapore averaged $327 million annually. In the years following, Connecticut’s exports rose 75.8 percent to $575.6 million annually, making the Asian country Connecticut’s No. 7 biggest destination for exports.
Increases in other countries were more drastic. Before the U.S. approved a free trade agreement with Peru, Connecticut’s exports to that South American country averaged $6.3 million annually from 1999 to 2006. After the agreement in 2007, exports rose to $45.6 million annually, a 623.8 percent increase.
But the agreements with other countries didn’t mean as much for Connecticut. Before the agreement was implemented with Australia in 2004, the average annual export from Connecticut was $147.6 million. Following implementation, exports rose 9.5 percent to $161.6 million annually.
How exactly Connecticut exporters will benefit from a free trade agreement with Korea, Columbia and Panama will vary, but there will undoubtedly be a trade benefit, said Anne Evans, the U.S. Department of Commerce district director for Connecticut.
“The direct benefit for our small manufacturers will be enormous,” Evans said. “What we sell is precision products, and we are competing directly in Korea against Japan and Germany, and they have free trade.”
South Korea ranks as Connecticut’s No. 11 importer, with $335.9 million in 2010 state exports. Colombia is No. 42 with $54.2 million, and Panama is No. 74 at $7.9 million.
The Korean trade agreement will have the most obvious benefit to Connecticut exporters, Evans said. Plenty of Connecticut companies already ship to Korea, and the agreement will cause that number to jump significantly.
Bachmann said Dymax’s growth in the Korean market is averaging 40-50 percent annually, and that would jump to 60 percent following a free trade agreement. The company could better compete on cost against foreign competitors, particularly those from Japan.
As manufacturing continues to shift overseas, Dymax has seen its foreign sales outpace its domestic sales, Bachmann said. Dymax had 33 percent of its revenues come from exports in 2010, and that percentage could rise to 50 this year.
At the same time, those foreign markets have fueled an overall growth in the company which sells adhesives, largely to the personal electronics industry. Total revenues rose 33 percent from 2009 to 2010, with a similar increase expected for 2011, Bachmann said.
“We’ll see how much people spend on consumer electronics for Christmas because that will increase our business in Korea and other countries where those things are made,” Bachmann said.