Tuesday, August 31, 2004


Don Gallion always knew his company would have to look beyond West Virginia’s borders to prosper, but he quickly learned that it would have to look beyond the U.S. borders as well.

“Our customer base is the world. In my eyes, anybody who is not exporting today is foolish,” said the president and chief executive officer of FCX Systems, an 85-employee company that designs and manufactures electrical and air-conditioning equipment used in aircraft maintenance.

U.S. exports grew by more than 13 percent from the first half of 2003 to the first half of 2004, and China remains one of fastest-growing markets for American businesses, buying $17.3 billion in U.S. goods through the end of June.

But many companies, especially small- and medium-sized ones, are not selling products overseas and are not tapping into the world’s hottest market.

“China is a difficult market for [small and medium-sized enterprise] penetration,” said a recent report by the President’s Export Council, an advisory group.

Companies such as FCX have managed to overcome the barriers and are exporting around the world. One of the first markets targeted by the company, founded in 1987, was China. The Asian nation now accounts for about $2 million in annual sales, roughly 10 percent of the company’s business, Mr. Gallion said.

The Bush administration is counting on more U.S. exports to help correct a huge trade deficit — $294.3 billion through the first half of the year.

The U.S. trade deficit with China has almost doubled in the past five years, according to a U.S. International Trade Commission report. From 2002 to 2003, the U.S. trade deficit increased by 20 percent to $124.9 billion, even as U.S. exports increased by 30 percent to $26.7 billion.

West Virginia companies have limited exports to China, about $132 million last year, according to the West Virginia Development Office. But some, especially mining-equipment manufacturers and forestry companies, are tapping into the burgeoning market, the office said.

Bill McHale, vice president of sales for Kanawha Scales & Systems in Charleston, W.Va., said his company’s exports to China are expected to hit $30 million this year, about half of total sales.

“The Chinese market in the last two years has really heated up,” Mr. McHale said.

It takes time to find customers, though. Kanawha made its first sales trip to China in 1986, but didn’t make a sale until 1991, Mr. McHale said. FCX needed more than a year.

“In China, you don’t do anything real fast. It took us a few years to get going,” Mr. Gallion said at FCX’s office, located in a business park on a rise overlooking West Virginia’s rolling hills.

The company had to identify airport and airline projects, government agencies, customers and decision-makers, as well as work through different languages — and make friends.

“Only after they consider you a friend will they buy a product. They believe a friend would never cheat you,” Mr. Gallion said.

That has meant about 100 trips to China since 1990, Mr. Gallion said, meaning a large investment of time and effort.

The commitment and barriers are too much for many companies. About 13 percent of small-business owners made foreign sales in the past three years, though 39 percent of small manufacturers had exported, often to Canada, according to a survey by the National Federation of Independent Business (NFIB), a trade group for small businesses.

“The American market is so good compared with the rest of the world, the first question becomes: Why should I export?” said William Dennis, senior research fellow at the NFIB.

“There are some other problems as well — how am I going to market over there, there is a language problem, how do I find a representative, how do I know who to contact?” he said.

The President’s Export Council blamed China for some barriers, such as uncertain or unclear laws and regulations, subsidies and an exchange rate manipulated to favor Chinese products. But the council, which includes business and government representatives, also said the U.S. government could help promote U.S. products.

“We should focus greater attention on the needs of our smaller businesses as they seek to become more integrated into the global economy,” the council said.

From Mr. Gallion’s perspective in West Virginia, the integration cannot come soon enough.

“When we started FCX, exporting was a choice. Now it’s not a choice, it really is a global economy,” Mr. Gallion said.

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