Antitrust Restraints Eased Overseas : Uncle Sam Aids in Quest for Foreign Markets
Three years ago, Luke W. Dru and his partners started a company in Irvine to make lap-top personal computers. But then the market caved in and extra capital was impossible to get.
Now, as they get by on consulting work and manufacturing computer add-ons, they think they see a future for their computer--overseas.
“We may be able to attract foreign investment and sell overseas as well,” said Dru, vice president of Personal Integrated Computers. “The Commodore (personal computer) was first introduced in Europe before it came here, and we might be able to do the same thing.”
Dru was one of 150 business executives who came to Irvine Thursday for a daylong conference on the Export Trading Company Act.
Helping to cut the trade deficit--$49.7 billion with Japan alone last year--was the reason Congress adopted the Export Trading Company (ETC) Act of 1982. Overseas competition by U.S. businesses had been crippled by U.S. antitrust laws prohibiting concerted action among competitors, exclusive contracts and territorial monopolies.
The new ETC law freed American businesses from many of the restraints of antitrust laws. But the U.S. Department of Commerce found after trumpeting the act in a 1983 tour of more than two dozen cities that few companies were taking advantage of it.
While about 5,000 firms and individuals export products and services from the United States, few have used the ETC Act to form business combinations or to carve up territories in their efforts to compete against foreign cartels on foreign soil.
However, with a slumping dollar, the federal government expects exports to increase. California in general--and Orange County in particular--is ready to rocket into the export field.
Orange County, transformed from a bedroom community in the 1950s and 1960s to a broadly based economic region in the 1970s and 1980s, is now set “to emerge as an important international trading center in the 1990s,” James Doti, dean of the School of Business and Management at Chapman College, said at a meeting last month of the International Consular Corps.
High-Tech Exports to Jump
In the county’s aerospace industry, he said, exports already account for 35% of the non-defense goods produced.
The decline of the dollar, Doti predicted, also will spur strong exports of high-technology goods--microcomputers, telecommunications, process control equipment, office automation and biomedical and biotechnological products.
“Given the tremendous growth potential of the Pacific Rim nations, this next stage has the greatest growth potential of all” for Orange County he said.
And the Commerce Department wants the Export Trade Company Act to be a major catalyst.
Under the act, the Justice and Commerce departments provide each export trading company with a certificate of review, giving them antitrust immunity for export activities. But to date, the federal government has approved only 63 export trading companies, representing combinations of 263 firms and individuals nationwide.
In Orange County alone, more than 300 companies and individuals now selling only domestically probably could be exporting their goods or services, said Ottavio A. Angotti, chairman and chief executive of Consolidated Savings Bank in Irvine. The bank, the Irvine Chamber of Commerce and the Department of Commerce sponsored Thursday’s Irvine conference.
In this second tour--Irvine was the only West Coast location--the Commerce Department is putting on a show in eight cities, inundating current and potential exporters with a wide range of information about things such as tax benefits, alternatives for financing exports and insurance against non-payment for goods or against changes in monetary values.
“I didn’t even know credit insurance was available,” Dru said.
His firm recently got a purchase order from the University of Oulu in Oulu, Finland, for the company’s Picdisc floppy disc add-on.
Cash in Advance Only
The university wanted to pay for the unit within 30 days after receiving it. But the company had to notify the university that it did not accept foreign purchase orders. It was cash in advance only.
“If we had insurance, we would have shipped the unit already,” Dru said. “Now there’s a three- or four-week delay--unless they cancel the order.”
Besides forming export trading companies or using the benefits of some of the new laws, smaller companies also can use export management companies, particularly to complete transactions in which foreign buyers simply don’t have the cash to pay for the goods. In effect, export managers barter goods.
For instance, an Oklahoma company that makes ultrasonic pipe inspection equipment has an order pending from China for five of its units.
Finding Third Parties
But the Chinese company that wants the equipment is strapped for cash and can only pay in quartz, silk, tin or solder, said Stanley Schultz of Amertrade in Long Beach.
Schultz said he was asked by the Oklahoma company, which wants cash, to find a third company that is willing to buy enough silk, for instance, to pay for the equipment. The testing tools would go to China, the silk to the third party and the cash to the Oklahoma company.
“It’s not a new idea, but it’s come to the forefront recently because many countries simply don’t have the hard currency,” Schultz said.
Small businesses also could go through one of the 40 banking consortiums formed under the ETC Act. These consortiums, with a combined $85 million in capital, can provide trade finance, act as brokers or agents for exporters and can take title of goods in the United States for export.
Demystifying Foreign Trade
Steve Farinha, an Auburn contractor, and his aunt, Lorie Adams of Long Beach, think they may end up going to Security Pacific Trading Co., a wholly owned subsidiary of Security Pacific Corp., to send prefabricated houses and commercial buildings overseas.
Adams, who has had 18 years of experience in helping importers through customs, said the Irvine conference helped to demystify “things that scare the average person.”
The sources and materials the government provided at the conference made the long trip from Simi Valley worthwhile for Maurice Sweiss, president of Parks Optical.
Parks Optical has been selling telescopes, binoculars and other equipment for more than three decades, but its market had been limited to universities, government agencies and hard-core astronomers, primarily in the United States. Only 5% of its revenue came from overseas.
Now the company, which had sales of $3 million last year, plans to capitalize on the consumer interest sparked by Halley’s comet with an effort to sell $12 million worth of products this year--and as much as 40% of the revenues likely will come from exports.
