Global trade trends upward in the Inland Northwest
As the economy rebounds, companies here eye other marketsAugust 15th, 2013
The international business market has continued to grow in Eastern Washington and across the state over the last five years, even amid recessionary pressures, and companies here likely will engage in more trade outside U.S. borders in coming years, trade experts say.
Matt McCoy, acting director of international trade for Greater Spokane Incorporated, the chamber of commerce here, says even as the recession took its toll on many U.S. companies, some countries continued to do well, such as China and Japan.
"When one part of the world is slow, another part of the world may not be," McCoy says. "Another basic benefit of doing business globally is 95 percent of the consumers are outside of the United States."
According to the Washington Council on International Trade, the 5th Congressional District, which includes all Eastern Washington counties, sees most of its export activity stem from manufacturing and agriculture.
Data provided through the United States Census Bureau says Washington's biggest industry, aerospace-related manufacturing, accounted for $36.7 billion in exports last year, up from the 2011 total of $27 billion.
Eastern Washington was a fraction of Washington's total manufacturing exports last year at $2.7 billion, however it remains one of the region's largest export markets, the Washington Council on International Trade says. Spokane and its outlying cities and towns alone have more than 500 manufacturing businesses, according to GSI data.
Exports statewide have continued to climb since 2009, according to International Trade Administration data. In 2012, total global exports in Washington state brought in $75.6 billion, compared with the year earlier total of $64.7 billion. China, Canada, and Japan are Washington's three biggest receivers of goods.
"In the last 15 years, Washington merchandise and commodities exports have doubled," McCoy says, attributing it mostly to a growing demand for U.S. products in Asian countries.
Talking about the region's second biggest export, agricultural commodities, McCoy says between 80 percent and 90 percent of Washington's wheat is exported annually, and approximately a third of apples grown in the state are also sent elsewhere.
"We really are the world's bread basket," McCoy says. "We can't eat all these agricultural products."
Although trade in the Inland Northwest and Washington state as a whole is showing signs of health, McCoy says there are logistical problems that pose a threat.
"In my opinion, in the international business world the biggest challenge is freight mobility," he says.
To address that need, he says GSI is working to support a project called the Inland Pacific Hub, which aims to make Spokane a key player in commerce and trade worldwide. He says the goal is to work with public and private entities to iron out transportation needs across the state. Trade with Canada has increased by more than 70 percent since 2004, McCoy says, however that could be higher, and possibly on par with China's increase of 230 percent since 2004, if north-south transportation routes received more attention.
The North Spokane Corridor in East Spokane will help bolster trade with Canada here, but the Interstate 5 corridor on the West Side should be a priority as well, he says.
"If they're not at gridlock, they're approaching it," he adds.
GSI is one of a growing number of resources being tapped by Inland Northwest businesses for consulting purposes. Small Business Development Centers, started here two years ago in a joint effort between Washington State University and the U.S. Small Business Administration, aim to help small companies get involved in international trade, among other things.
Terry Chambers, Spokane-based director of the SBDC international trade program, says to date, the organization, which has 23 offices around the state including two in Spokane, has been used by more than 400 clients since it began operating. He anticipates the organization will see more than 500 companies use its service by the end of the year.
He says an SBDC team of 30 full-time advisers and trade specialists across the state work with companies to help them learn how to export or expand their export products.
"For those that haven't exported before, it's just a misunderstanding that there isn't help out there and it'll end badly," Chambers says. He says he's seeing newer companies choosing to enter English-speaking markets, such as Canada and the United Kingdom, but also continues to see businesses enter markets all over the globe.
Vern Jenkins, SBDC trade specialist, says emerging industries in other countries such as technology or tourism make many countries more appealing for U.S. companies than they were a decade ago.
"When you can find new markets outside of the area, that becomes a breath of fresh air to a company that's trying to grow and survive," Jenkins says.
Wagstaff Inc., an aluminum castings manufacturer based in Spokane Valley, has seen business in international markets outpace its domestic sales, he says. In the early 1990s, the manufacturer reported 80 percent of its revenue was in domestic markets, he says, while in 2010 the company reported its revenue streams had in essence flipped, with international business now accounting for more than 80 percent.
Meanwhile, Colmac Holding Co., the parent company of Colmac Industries, a Colville-based commercial heating and cooling manufacturer, reported late last year that approximately 25 percent of its customers are outside the U.S. In a Journal article published in December, the company said international sales likely would continue to increase as it sought out more trade shows.
Moss Adams LLP, an accounting firm here at 601 W. Riverside with headquarters in Seattle, says it's seeing more businesses seek out its services related to international trade. Jason Munn, senior manager with the firm, says Moss Adams provides consulting and accounting services to help businesses with taxes and other financial regulations when doing business outside the U.S. It also helps businesses enter new markets with an international readiness awareness program, he says.
"The international focus for our client base here has increased exponentially from where it was four or five years ago," Munn says.
The firm works with both small and large companies, Munn says, but there's more room for error with bigger companies, as they typically have more disposable income. He says what tends to make a company successful isn't necessarily dependent on how big the company is, but how well it planned prior to doing business internationally.
"That upfront planning is really key," Munn says. He adds that preparing a company to enter a foreign market can take as little as a month, but that it typically takes several months for most clients.
"Ideally, you take your time because there are a lot of issues you can run into," Munn says.
Along with cultural issues that might need to be addressed, depending on what country a company is entering, issues also can arise from a tax and legal standpoint. He says there are certain reporting requirements in the U.S. and abroad that companies need to be aware of, and organizations also run a risk of being taxed in both countries, something Moss Adams tries to keep from happening.
The firm estimates it's helped more than 30 Inland Northwest clients prepare to enter foreign markets in the last few years, and expects that number will continue to grow.
"You always think of (international business) in Seattle or LA, but there's really more going on than people realize," says Bill Braunberger, partner in the firms international tax service department.
The prevalence of high-speed Internet and high-quality phone service makes businesses that rely on technology, such as health care companies, increasingly better candidates for doing business abroad, he says.
"With the Internet, everyone is an exporter," Braunberger says. "It doesn't matter where you're located, you're going to sell it and ship it."