Industry must move fast to capitalize on market fluxes

By Matthew French
Staff Writer

It’s true what older generations say: a dollar doesn’t buy what it used to. In the days of the global economy, where transactions take place over tens of thousands of miles in nanoseconds, the world economy is much more tightly bound together than it used to be. But one thing that hasn’t changed is the fluctuation of the dollar. Currently, the dollar has fallen to multi-year lows against competing currencies such as the yen and the euro. This is bad news for the American consumer but good news for U.S. exporters.

South Carolina’s business sectors are well suited to capitalize on the weaker dollar, particularly processed food and lumber, says Mark Condon, executive director of the South Carolina World Trade Center in North Charleston.

“There are definitely opportunities out there for some companies,” says Condon. “I’m getting e-mails now from places like Cyprus and elsewhere in the Middle East where the economies are tied to the dollar. They’ve found it’s much cheaper to get U.S. products, particularly food products.”

The problem, many economists agree, is that U.S. productivity has traditionally been geared for the domestic market and, compared with the global competition, relatively little attention has been paid to the overall exporting market. Even though U.S. companies export hundreds of billions of dollars worth of goods every year, the trade deficit is hitting record highs.

China in particular has been flooding the global market with inexpensive products. And China will likely be the largest trade partner with the United States for decades to come.

“The North American market is so big, a lot of companies don’t focus on exporting, and (the lack of international focus) is an ongoing problem,” says Condon. “We need to be ready to trade and travel and do what is necessary to get out and see these people. Exports will continue to go up because companies are importing large amounts of raw materials into the (United States), assembling them here, and driving the exports out.”

Condon says the number of American companies that export is “abysmally” low, and is a byproduct of an overwhelmingly strong domestic market for several decades.

“We at the World Trade Center are focusing our efforts on processed food, wood and any U.S.-based components, which will suddenly become cheaper and affordable overseas,” he says.

But capitalizing on overseas markets when they arise takes considerable speed. South Carolina Ports Authority spokesman Byron Miller says despite the consistently falling dollar over the past several years, the ports haven’t seen a direct impact on volume or prices. And, based on the identities of the primary shipping customers at the port, fluctuations aren’t likely, Condon says.

“The big players in the state’s ports tend to be large, multinational companies that spread out their value through many different regions and currencies,” he says. “After the West Coast port strikes, they are certainly going to spread around to many different port facilities, so currency fluctuations will have little to no impact on them.”

Countries will often tie their own currency to the currency of an economic superpower, like the United States or, with the advent of the euro, Europe, in order to more steadily weather the tumult of worldwide currency fluctuations. Countries that don’t tie their currency to that of another “float” it on the market.

“Some of these countries are cash rich with oil, but don’t produce a lot themselves,” Condon says. “They’re getting killed by expensive European products, so now marks a very good opportunity for someone in the U.S. market to capitalize.”

Playing currency requires agility

Trying to capitalize on a downturn in the dollar is not a game everyone can play, however. BMW Manufacturing Corp. in Spartanburg, the state’s largest exporter, engages in a long-term business strategy and pays relatively little attention to the ups and downs of the currency market, says company spokesperson Bunny Richardson.

“You can’t usually change and make decisions based on the currency market in mid-stream,” she says. “You have to look at currency in the long term. We went about getting our suppliers from the North American market and have gone from 20 North American suppliers when we first built the plant to 140 North American suppliers today. It certainly helps with currency hedges.”

Richardson says a company the size of BMW can’t afford to jump at every international opportunity that presents itself because of a particularly strong or weak currency.

“People have asked if we’re going to move more production from Germany to the U.S. based on the current currency market, but it’s just not something you can do quickly,” she says. “By the time you build a plant, tool it, get the suppliers lined up, the currency market would have likely swung the other way. In the end, it’s very difficult to take steps to offset currency fluctuations while moving a business forward.”

But for small businesses, playing currencies against each other could make a major dent in their bottom lines. While Richardson says a long-term strategy is probably the best route for most companies to take, a small manufacturer or producer of consumables has to take advantage of a low dollar when exporting.

Matthew French covers imports, exports and financial services for the Business Journal. E-mail him at mfrench@crbj.com.

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