Exporting to America

How do you approach the massive US market? Is the FTA really helping? Is our strong dollar really eroding our advantages? Joe Parkes examines the big picture and looks at how successful exporters are working around problems

To Australian exporters, America often beckons like the biggest and most bountiful apple tree in the international trade orchard. While it can be, there are many issues to consider.

Two-way trade between the two countries now stands at $47.4 billion, or 11 percent of Australia’s total import and export account. The United States ranks third, behind Japan and China, among Australia’s top two-way trading partners and destinations for exports.

And Australia has scored some excellent export wins in America, according to Austrade, in areas such as US Government procurement—everything from defence equipment to services (especially architecture), beef, wines, power boats, space navigation instruments, motor vehicle engines, sailboats, books and health care equipment.

Unfortunately, this heroic export effort begins to pale when you discover that our successes are overwhelmed by Australia’s massive shopping list for American imports—part of a national trade deficit that Craig James, chief economist at Commsec, believes is likely to continue for at least the next five years. In the simplest terms, our trade deficit means Australia is spending more money overseas than it is making at home.

It doesn’t help that some of our smaller exporters admit they find the idea of pursuing the US market a bit daunting—attractive and beckoning but, hey, a bit too tough to tackle. They’ll argue that America is okay for big, strong operators like Westfield and News Corporation but what chance does a small, family-run business have against those canny Yanks?

Austrade’s chief economist, Tim Harcourt, understands where they’re coming from. He blames uncertainty about the US market on Australia’s ‘historically poor’ export culture. When it comes to exporting, it seems, Australians have traditionally presented only low levels of ‘intention’. Even the Free Trade Agreement (FTA) signed between Washington and Canberra is sometimes viewed as being a bit dubious.

Since the two countries signed the bilateral trade deal, Australia’s yearly trade deficit with the US has blown out by more than 35 percent, fuelled by our increasingly muscular dollar and sliding consumer demand in America.

There’s no doubt the US dollar—once the backbone of international trade—is showing signs of distress, encouraging talk that America’s massive market is loosening its grasp on the global economy.

But Harcourt believes things aren’t as gloomy as they seem. He says research is showing that the FTA is beginning to have a beneficial impact on our export trade and may be delivering additional benefits by raising awareness of trade opportunities among Australians.

“The US is so big and so diverse that both big and small Australian exporters can establish themselves there,” says Harcourt. “And there are a lot of small businesses doing well in America—a reflection of the fact that an estimated 90 percent of Australia’s 42,000 exporters are SMEs.

“There’s been a noticeable increase in the number of Australian SME exporters selling to the US and most trade experts believe that free trade agreements

are evolutionary and need time to take hold. The FTA with America is a framework for closer economic integration.”

New Rules

If the FTA comes as a bonus, there are some surprises that aren’t quite as welcome. A prime example is the raft of new rules and laws—some specifically affecting American food imports—that have been introduced as part of America’s ‘War on Terror’. America’s Bioterrorism Act has prompted its Food and Drug Administration to adopt interim rules under which foreign food and beverage exporters now must designate a US agent whose main purpose is as a communication link with the FDA. In addition, the FDA now requires advance notice to the Bureau of Customs and Border Protection (CBP) of incoming food shipments at least five days before arrival.

Pam and Martin Brook’s small family-run business, Brookfarm in Byron Bay, sells macadamia products to the increasingly health-conscious US market and has been affected by the changes but insists that, once you have registered with the FDA and worked out how the system works, it doesn’t cause problems.

“The new rules delay courier samples sometimes, but for normal shipments it’s not a problem because, like other food manufacturers, we use an importer to take care of the issues,” Pam Brook says. “Business in the US is tough at the moment because of the Aussie dollar strength and we have had to trim costs because of our strong dollar.”

A company for whom the US market is certainly working is innovative Darwin-based Aerosail, which designs and manufactures shade and tension membrane structures for use in homes, school grounds, swimming pools, playgrounds, car parks, cattle sale yards, car yards, aircraft hangers, and open-sided workshops.

According to managing director, James Taylor, the FTA has helped make a difference in Aerosail’s sales to America which now account for 25 percent of all the company’s exports. In pre-FTA times, they amounted to ‘zip’.