(MARCH 26, 2019) When Monte Galbraith was providing input on the “new NAFTA,” he simply had one request from the federal government: Don’t disrupt supply chains that have just now settled from the shockwave sent by the initial trade agreement more than 20 years ago.
“We were just asking do no further harm, basically,” said Mr. Galbraith, who runs DNA Textile Group, a mill in in Columbus, Ga., that recently pivoted from consumer denim to protective fabrics.
U.S. President Donald Trump’s approach, meanwhile, has seemed to favor disruption over continuity — and not just in North America.
Dealing with the uncertainty resulting from real policy changes (and threats issued by tweet) was a key theme of Global Atlanta’s Export Stories: Trade War Edition, a reception and forum hosted March 6 at the law firm of Burr and Forman in Midtown.
The annual event was held in partnership with Orbatl, which runs the Atlanta Metro Export Challenge, to help local companies understand both the hurdles and opportunities of selling abroad.
Speaking during a panel discussion, Mr. Galbraith said that tariffs weren’t the problem for producers who stayed home after the original NAFTA sent their customers scrambling across the border to reassemble as Mexican maquiladoras, Mr. Galbraith said. It was the loss of job losses and the abrupt compliance hurdles that came with cross-border sales.
“That ‘giant sucking sound’ you heard 25 years ago was our industry going out the door first, so we had to learn how to export in a hurry,” Mr. Galbraith said. “You talk about a panic — none of us had ever done this before.”
That supply-chain argument was one used by proponents of NAFTA amenable to updating the agreement between the U.S., Canada and Mexico but wary of upsetting the fragile cross-border equilibrium in industries like textiles and the all-important auto sector. The jobs were gone and not coming back, and competitive landscape had shifted.
“We have transformed so much that we don’t even think of ourselves as being in the U.S. We see ourselves as being in the Western Hemisphere. The only way you’re going to survive in this business is if you have a supply chain that stretches from tip to tip. This is East versus West, not North versus South,” Mr. Galbraith said.
Firms in other sectors have seen a shift from the sentiments unleashed by the Trump administration, if not the policies themselves.
Brandon Hall School, a private, non-profit boarding school in Sandy Springs, has begun to see a negativity creep into the mindset of international students and their parents — an issue of critical importance to a school where two-thirds of the 145 students hail from 20-plus countries.
Immigration has been a key challenge as visa denials have risen, particularly from China, said Aaron Brazelton, director of global engagement at Brandon Hall.
“The global school market is an international market. We are a boarding school without borders. The entire world is our market, but in the same sense, there are competitors in almost every single country, and people are going to go where they feel safe and feel welcome, so (rhetoric) has definitely affected us in many different ways,” he said.
Of course, these self-imposed problems come on top of the general challenges with exporting, from finding customers and establishing distribution to the simple aspect of getting paid or dealing with currency fluctuations.
LivFul, an Atlanta-based insect repellent manufacturer, didn’t have much choice. The company hasn’t been affected so much by the trade war, but it lacks approval by the Environmental Protection Agencyfor its formulation.
“We’ve taken a very safe and good-feeling insect repellent that doesn’t last very long and added our technology to it to make it last twice as long as anything else that’s on the market,” said Andy Mahler, a co-founder and the chief operating officer. “Because we can’t distribute it here in the United States, we have to go outside.”
Of course, that’s where the market is: LivFul hopes to become, if not a household name itself, a powerful force for preventing mosquito- and other insect-borne diseases in developing countries, with a goal of impacting 1 billion lives.
To do so, the company has changed its business model. After testing out its own house brand in the Bahamas, LivFul pivoted toward exporting barrels of its chemicals, working with local partners (including some non-governmental organizations) to white-label the product and handle local packaging and sales. It leaves the local knowledge up to partners on the ground, while creating jobs in the production process. Singapore and Hong Kong are among the first markets being approached, along with Ghana and South Africa. Latin America is on the company’s long list of eventual sales regions.
Mr. Mahler said the startup company has benefited from export resources geared toward helping smaller firms, from the Georgia Department of Economic Development’s overseas representatives to the local Small Business Development Centers, along with many others.
LivFul is a winner of a $5,000 grant from the Atlanta Metro Export Challenge and is using the funds to pay for market research and the Gold Key meeting service offered by the U.S. Commercial Service in markets like the Philippines and Malaysia.
Brandon Hall is also a grant winner, as is another company represented on the Export Stories panel: DataSeers, which provides fraud prevention for banks through a software platform.
Adwait Joshi, the CEO, started to see the value of such resources when he attended a Singapore trade show with the Metro Atlanta Chamber last year. He spent about $5,000 and came back with a $1.8 million customer.
“Last year we got a 360x return; this year our goal is much higher,” he said, thanking the chamber and Orbatl for this year’s reimbursable grant. “No matter the size of a startup, whether large or small, they’re always using that last bit of money for marketing or sales.”
Mr. Brazelton from Brandon Hall agreed, adding that assisting small companies also has the effect of helping Atlanta. The city is the “packaging” for the school, which has adapted its “product” by launching summer English and global leadership programs. Brandon Hall in a sense is “selling Atlanta” in an industry where the dominant players are in New England, he said.
“When we bring a family to Atlanta and they decide to invest in our school, pay the tuition and send their child here, a lot off times these families also want to expand their business here,” Mr. Brazelton said, pointing to more than $900 million in foreign student spending onuniversity tuition in Georgia.
Those kinds of investments were a bit tougher in the last year, as the dollar climbed against many other foreign currencies with the rise in interest rates pronounced by the Federal Reserve.
A stronger dollar means more expensive American products or services, said John Doyle, vice president for dealing and trading at Tempus. That should moderate this year as the Fed takes a more cautious approach in light of headwinds to global growth, said Mr. Doyle.
“The dollar will continue to be strong, but probably will get a little reprieve in 2019,” said Mr. Doyle, whose firm sponsored the event as it aims to deepen ties with businesses in Atlanta operating globally.
Before the panel discussion, Aprio accountants provided an overview of how tax reform changed the calculation for exporters of manufactured goods.
Export Stories has become an annual event where Global Atlanta announces its special report of the same name profiling the international sales operations of Georgia-based companies. View the 2017 report here; the 2019 issue is forthcoming.