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Tag Archives: Free Trade Agreements
by Christopher Lynch
“If I could only sell one light bulb to every consumer in China…” I heard a Westinghouse executive tell me that in the early 1980’s before China opened to trade and while there still was a Westinghouse. We all dream about the Grand Slam homerun in the big market. But you have to be careful what you wish for. How much money will you spend to get to the market? If you have to advertise, can you afford the costs of a national exposure campaign? Could you supply the potential orders?
For small exporters, I’ve always been the fan of small markets. In those economies, personal connections are more important, making market research and entry easier. I’ve found that there is frequently less competition because the mega-multinationals are focused on the big markets.
Here are a few examples to illustrate the point:
Central American countries (+ the Dominican Republic) have a Free Trade Agreement (CAFTA/DR) with the US. That gives US exporters duty free access plus a level playing field. The US exports more than $20 billion annually to the region, but that fact rarely shows up in the press. One US electronics reseller has a warehouse in El Salvador that then reships to the Central American region, which has no internal trade barriers. Internet commerce works well in Central America and this provides the electronics reseller a profitable base of operations.
Persian Gulf Coast (GCC) countries represent a small but highly profitable market. With high per-capita incomes, this region is a favorite with Southern California nutritional and herbal supplement exporters. I met one nutritional supplement company that exporting to the region with an internet based strategy.
Central Asian countries are growing rapidly as world commodity prices, especially oil, have remained high. One Southern California exporter is representing various pharmaceutical and medical products in the region – the cost for the major companies is too great to justify a local presence. For the exporter, this is a lucrative market that is the backbone of his company.
Pacific Islands are a natural for Southern California with many residents having family ties to the region. Transportation is a major cost but that keeps out the larger companies. The bonus is that once you get in this market, there is tremendous personal and brand loyalty.
So think “small markets.” There is a lot to be said about being the big fish in the small pond. Think about these and other smaller markets when you are making your expansion plans.