Industries

Virginia encourages companies to jump into the global marketplace

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by Paula C. Squires


That’s what Paul H. Grossman Jr. has been telling business leaders for more than two decades. Turns out Grossman was right.

As global markets continue to flatten, Virginia’s director of international trade and investment says there’s plenty of opportunity for companies to grow through international sales. 

In fact, Virginia’s exports stood at an all-time high last year. Companies exported manufactured goods worth $15.4 billion, up from $10.8 billion in 2002. Throw in an estimated $6.5 billion in services, and Grossman says the total for last year reaches nearly $22 billion and 200,000 jobs.

Exports represent just one part of the international equation. Foreign companies imported $25 billion worth of goods to Virginia last year and invested a total of $790 million in capital investments in the Old Dominion. 

Virginia’s deep water port in Hampton Roads and an international airport at Dulles are huge assets in drawing this investment, because they provide ready access to American markets.  Virginia was the first state to open an international trade office in Europe, in Brussels in 1967. And it’s the only one, according to Grossman, that offers programs and some state funding to assist companies in doing business overseas. Today, Virginia operates six foreign trade offices (in Brussels, Hong Kong, Mexico City, Sao Paulo, Seoul and Tokyo). Grossman sat down with Virginia Business to talk about the state’s trade program, a division within the Virginia Economic Development Partnership. 

In relation to other states, where does Virginia stand as a player in the global market?
The United States has been on a 60-year-long trend toward more internationalization. The percentage of our GDP devoted to international 60 years ago was about 6 percent, right after World War II. The most recent figures I saw were 26 percent … So, the U.S. is more international. Within that, out of the 50 states, Virginia is a leader of the pack. 

What is Virginia’s biggest foreign export in terms of economic value?
Computer chips, with Qimonda and Micron the biggest players. 

What services do we export?
Intellectual brain power: law, environmental, engineering. A lot of it is defense related and cutting edge.

Ahy did exports for Virginia companies grow so dramatically last year?
An overarching reason was the decline of the dollar.  It was at a record low.  What that means practically is that …your goods become less expensive.  For instance, the dollar went down 7.5 percent last year, so your product is 7.5 percent cheaper in one year. On the investment side, it makes buying U.S. assets more affordable. It’s going to advance manufacturing. If you rattle off the big announcements in Virginia in the past couple of years, you’ve got Maersk, the marine terminal in Portsmouth; Swedwood IKEA down in Danville; … the Volkswagen [of America] headquarters in Fairfax; Rolls-Royce in Prince George. All those are international, not major U S. companies. 

What about the effect on the import side?  ?
It makes imports more expensive … The yin and yang of this is that the weak dollar is good for selling, but it’s terrible for traveling.  A five-star hotel room in Bangalore, the cheapest that you can get is $500 a night. Just a few years ago it was less than $200. 

Why should companies consider exporting?
Companies that export are more productive and more profitable than those that don’t. The most recent study done in 2007 said that manufacturing firms that export are 26 percent more productive. Service firms that export are 24 percent more productive.  If we have a downturn in the U.S. or a softening in overseas markets, exporters tend to weather the storm better.

How long does it take to become profitable as an exporter?
On average, it takes 18 months to get your first sale and a couple of years to see an actual return.

Can you give some recent examples of companies that have grown by exporting?
One company, Virginia Transformer Corp. in Roanoke (which makes industrial-grade transformers) was doing $6 million worth of export business two years ago. Today, that’s up to $18 million.

Does Virginia help companies with export development?
Yes, our international trade group runs two programs. There’s AIM [Accessing International Markets], a one-year introductory course for first-time exporters and VALET [Virginia Leaders in Export Trade], a more intensive two-year program for experienced exporters. [For more information about these programs, go to ]http://www.ExportVirginia.org]

During your long career in international trade, what are the some of the biggest changes you have seen?
If you go back … companies were excited about doing business internationally. They saw nothing but potential. Beginning about 1992, when NAFTA [North American Free Trade Agreement] was signed, there’s been a lot of unfortunate and not fair criticism that international trade is taking away U.S. jobs. So, I think there has been an angst associated with the global economy … It’s not the international that’s causing you to lose the job. It’s the fact that you’re no longer competitive.  We saw what happened in the textile industry … You need to look at the opposite side of the coin and how much we export. There are companies that are benefiting and getting $16 billion dollars worth of sales overseas. Why? Because there’s open markets … If we start shutting down our markets, their door closes just as quickly … So you want to keep those jobs in textile and furniture? Great. Give up $16 billion dollars a year. You want to go to Wal-Mart and not buy an imported product? There’s nothing on the Wal-Mart shelf. You want those low prices?  It’s not going to happen. You’re going to pay four times as much. So you benefit from the global economy, which people never point out. You benefit as a consumer and you benefit as a company selling into the global economy. The last projection I saw was that exports added one percentage point to the GDP last year. That’s significant. That’s a huge
impact. 


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