The number of Pennsylvania companies doing business in foreign markets continues to grow each year, in part through help from the state's programs that assist those companies.
But companies that might be waffling about growing their foreign business shouldn't wait, said Peter C. O'Neill, executive director of the Center for Trade Development in the state Office of International Business Development.
More companies must look at international markets to prevent themselves from becoming obsolete in an economy that's increasingly global, he said.
O'Neill, a seven-year veteran of the trade offices in the state Department of Community and Economic Development, recently spoke to the Rotary Club of Carlisle about the importance of small and medium-size companies doing business abroad. Afterward, he spoke to the Business Journal about international business and state
programs helping companies set sail for foreign lands.
Q: What is the rate of growth for state international business programs?
A: Seven years ago, we recorded about $60 million in (company) sales. Last year, we recorded $525 million in sales. So it's been rather dramatic growth of the sales that we're able to report.
The number of companies using the program, whether they're able to sell or not, has been fairly steady between 1,100 and 1,200 in any given year. Really consistent. I think that's because we only have so much human capital. There's only so much human time that we have to go and sit down and talk with companies, because we've had a fairly flat budget for a couple years, so we can't field any more people. And we've tried to automate as much as we possibly can. …
But at some point you have to put a face to a face. You have to talk to people. And I think we're hitting a critical point there that we can't reach any more companies in a critical manner. Similarly, the number of companies reporting sales is very constant, between 250 and 285 over the last five years. That's some concern to me that we've hit that (plateau).
You mentioned earlier that federal money will end after this year. What money, how much and what will it mean to these programs?
The U.S. Small Business Administration had rolled out a program last year called STEP, State Trade Export Program. It was a $30 million fund. The intention was to help state trade programs like our own either get started — because some states didn't have any — or juice them up, get them moving better.
It was competitive. Every state competed for the funds. Pennsylvania got $1.7 million of the $30 million fund, which was disproportionate. We did well, we wrote a very good program. We added more trade shows, made our grant program more generous, we're bringing all of our overseas office representatives to Pennsylvania in September. They'll be here in Harrisburg.
This year, we've applied and tentatively been awarded $2.35 million, which again is a disproportionate amount of the $30 million fund, but I think the SBA sees us again as a very credible program. We don't have to build infrastructure, we've already got it in place. So our argument to them is, we don't have to build the house, we just have to populate it. I think they saw that as a very efficient use of the funds. ...
Unfortunately, the program was authorized for a third year, but it wasn't funded. So we assume that, worst case, we're out of those funds come next year.
What countries are the fastest-growing destinations for companies?
You have to be careful when you look at those numbers. Every small country that didn't import anything two years ago all of a sudden has a 1,000 percent increase because they bought an aircraft or one expensive piece of equipment. …
But we anticipate Europe might be tough this year, given what's going on. … Canada's always been number one as long as we can remember. Mexico was number two until a couple years ago, and then China just came roaring through and became number two. We never would've predicted it. But the rate of growth in exports to China is phenomenal and a lot of states are experiencing that.
Middle East. Saudi Arabia, the oil-rich countries. The high oil prices are allowing them to purchase.
Saudi Arabia is of interest to me because I lived there for a time, and we have an office in Riyadh. We just brought a group of companies back in May. Some of them were a little nervous because they'd never been there before, they read a lot of stories, believed what they read in the paper. But after five days of being there, visiting two different cities, their comfort level went way up. And the opportunities they saw were phenomenal. They were giddy.
Saudis buy a lot of stuff. They don't make a lot, but they're inclined to buy American. So if you can get over there and find the right people to work with — and sometimes that's the hardest part — you know the market's there.
What are the most common excuses you've heard about why companies don't export?
Time and money. Time is money. I don't have the time. I'm trying to keep my head above water, trying to make payroll. I don't have the money. Even if you showed me the market, I don't have the money to get on a plane and go over and investigate that.
Well, I have a little money for you. It's going to cost you something, but I can make this a little cheaper for you. Not just through the grant, but by setting things up for you from the time you step off the plane. And then there's just the hurdle of education. It's not easy, that's why we're here. We're supposed to be helping you because you can't do this on your own.
What's your best piece of advice for companies on international trade?
Don't wait. The world really is collapsing, in terms of ability to find information, identify suppliers, identify competition. Don't you know, your foreign competitors are doing the same thing, looking to get into the U.S. market, and you have to be conscious of that.
I try to instill a sense of urgency here. That, if you don't engage internationally now and figure it out, I worry about the fate of many companies in four to five years that have just decided it's not worth their time and effort. Well, in some cases, without being overly dramatic, it may be a question of survival.
You have to be globally aware of what's going on, the trends that are going on in your industry. You have to be.