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CFOs of companies around the world have always looked on exports to the US as the key to their business. The mighty US consumer had an unlimited appetite, paid in dollars and was backed by a strong and vigorous legal system (i.e. you could be sure you got paid).
Countries that have come through the recent global financial crisis better than the rest have been those with strong export machines, such as Germany and China. But it is no longer the US that they are exporting to: it is the fast growing emerging markets that are the destinations of choice. And now the US is catching up with these traditional exporting powerhouses, reversing years of blithe ignorance of what global consumers want to buy. Data released last week by the US Department of Commerce shows US exports up 17.7 percent in the first five months of 2010, for a total value of $739.5 billion. The countries which showed the greatest increase are those that have traditionally been massive exporters themselves of goods to the US. Taiwan increased its import of US goods and services by 68 percent followed by Korea (56 percent), Malaysia (51 percent), Singapore (45 percent) and the Philippines (45 percent). It wasn't all just Asia however. The Czech Republic increased US imports by 44 percent, while Colombia increased by 38 percent. What is interesting is that these are countries that do not generally figure very highly in the US corporate psyche. China did see exports from the US grow by 39 percent, but it was the only BRIC country represented in the top 10. Traditional trading partners in Western Europe or long time allies such as Japan and Australia do not figure. While many sectors enjoyed export growth, electrical machinery manufacturers stood out with a 27% increase. Companies such as Alamo Group in Texas saw growth in the export of their street sweeping and mowing machines to Mexico and the Caribbean, while Richmond Aircraft exported advanced wind power equipment to Brazil. Helping companies penetrate these new smaller markets is the Export Import Bank of the United States (ExIm Bank), a government owned institution that sits just one block away from the White House. It offers export credit insurance, direct loans and guarantees as well as running programs for smaller companies looking to export. The Bank is at the heart of President Obama's National Export Initiative which aims to double US exports in five years, in the process creating two million US jobs (or at least saving those which might otherwise have been lost). According the Fred P. Hochberg, Chairman of the Bank, 2010 is set to become the busiest year in ExIm Bank's 76-year history: it has already authorized $17.4 billion of new business in the first five months of the year and is easily expected to pass the previous annual record of $21 billion. While all this might be good for the US economy it nevertheless shows that things are not all right with the financial system. Government agencies step in when the private sector isn't doing its job. In an ideal world, all these new exports would be financed by the trade finance departments of the global banks. But these banks are still credit constrained and usurious in the fees they charge small borrowers (if they even extend them the courtesy of returning their calls in the first place). And exports do entail risks that selling domestically does not. Even so, it is a bright spot for US CFOs, who appear to have brushed off their passports and made it out to the smaller emerging markets that are growing so quickly. Without getting into a discussion of the politics of trade or of exchange rates versus deficit finance, a simple fact remains: globally, people want to buy US goods. Companies and their CFOs must ensure that they have the financing and management systems to meet that demand.
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