Wednesday, October 15th, 2014
By Michael Taylor, SPI Senior Director, International Affairs and Trade
More than 70 percent of the world’s purchasing power and more than 95 percent of the world’s population is located outside of the United States. Your competitors are increasing their global market share, and you can too. According to a study published by the Institute for International Economics, U.S. companies that export not only grow faster, but are nearly 8.5 percent less likely to go out of business than non-exporting companies.
Less than 1 percent of America’s 30 million companies export—a percentage that is significantly lower than all other developed countries. And of U.S. companies that do export, 58 percent export to only one country. Many businesses could benefit from learning more about these international opportunities and resources available to help.
When evaluating a possible export market opportunity, there are a number of factors you should keep in mind. Here is a list for consideration:
- Economic growth (GDP growth rate)
- Per capita income
- Income distribution
- Size of consumer demand
- Inflation rate
- Currency fluctuation
- Economic and political stability
- Ease of doing business (World Bank’s ranking)
- Tariff and taxes
- Non-tariff barriers
- Cross border transfer of goods
- Banking system
- Culture and business practices
- Infrastructure, ease of moving products, communication, roads, ports and airports
In reference to evaluating ease of doing business listed above, the World Bank has developed an Ease of Doing Business Index. Economies are ranked on their ease of doing business, from 1 – 189. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm. This index averages the country’s percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. Countries are given an overall “Ease of Doing Business” rank (out of 189 economies) and rankings by each topic.
Although the index is not plastics-industry specific or exclusively regulatory in its focus, the index provides an excellent benchmarking tool to assess the general business climate/environment over time and in comparison to other export markets. Here is an example of what the World Bank produces.
Of course, special attention should also be given to existing free trade agreements (FTAs). The U.S. has free trade agreements in force with 20 countries. U.S. exports to FTA partners are up 57 percent since 2009. Forty-six percent of U.S. goods exports go to its trade agreement partners. U.S. export growth to FTA partners (57 percent) has grown more rapidly than exports to the rest of the world (44 percent). The U.S. has a $15.2 billion trade surplus in non-oil products with its FTA partners, nearly 70 percent higher than the 2009 value. In 2013, plastic resin and products manufacturing (Harmonized Schedule Chapter 39) had a $17.6 billion surplus with its FTA partners.
So the reasons for exporting are many, and the benefits go beyond just increased sales. If you are interested in exploring what market opportunities exist specifically for you, then contact SPI’s Washington office at 202-974-5200.
This piece is an excerpt of an article that appeared in the Fall 2014 edition of The SPI Magazine. Click here to read the full version online, or download the SPI Magazine and SPE Magazine mobile app, available free in the App Store and in Google Play.