Smaller Firms in U.S. Find Exports Can Bail Them Out

Looking over his order books in 1982, Larry Denny saw nothing but disaster for his small Oklahoma City tool company, whose only customers were in the severely depressed American oil and gas exploration industry.

Denny had no choice but to look far beyond Oklahoma, seeking new customers overseas for the drilling rig equipment sold by his Den-Con Tool Co.

He succeeded so well that exports now account for 85% of Den-Con’s $3 million of annual sales, with most of the sales to India and China, two giant countries whose development strategies meshed perfectly with what Denny had to sell.

Den-Con’s success story was cited last week by William A. Maus of Oklahoma’s Department of Commerce as an example of how states are finding nontraditional markets overseas for their companies’ products.

“Everyone is marketing in Japan. Everyone is marketing in Europe. Everyone is marketing in Canada,” Maus told the Southern Growth Policies Board, which devoted its annual meeting here last week to an exploration of new export markets for southern states.

“Let’s look around to find where the real niche is for the future in this world. . . . The future lies in expanding to the developing world,” Maus said.

With a new export boom, trade is now fueling America’s economic growth instead of dragging it down as it did during the past six years of record U.S. trade deficits. Commerce Secretary C. William Verity told the conference that manufactured exports have risen 30% in the last year.

Many Ignore Market

“That meant 500,000 new jobs in the sector and a 6.4% rise in manufacturing production--a very strong increase,” Verity said.

Companies in the United States traditionally have paid little attention to selling overseas, prospering instead by dominating one of the biggest, richest domestic markets in the world. But that strategy ended in the 1970s, when foreign competitors began challenging American companies in the United States and abroad. Even now, with the new emphasis on exports, only 1% of the nation’s companies account for 80% of U.S. overseas sales.

Virginia Gov. Gerald L. Baliles, who served as chairman of the conference and who has been pushing export growth in his own state, said this has to change, for the United States as well as for the South. “We have no choice but to trade or perish,” he said.

The dictum is especially true for the South, where the economy is split between poor rural areas and the more affluent metropolitan regions prospering with new industrial growth, much of it in the sectors of high-technology and service.

Part of the aim of the Southern Growth Policies Board is to end what remains of the South’s “Gone With The Wind” image and to convert the region’s exports from the agricultural commodities of the antebellum days to the high-technology products of today. Before the Civil War, the South was the leading export region of the United States, a position it would like to regain.

“We in the South have a history of trying to sell low-wage, low-skill jobs,” Mississippi Gov. Ray Mabus said. “We can’t compete that way anymore.”

Major Sales to India

In the case of Oklahoma, Maus said the state was forced to find overseas markets after the collapse of oil and gas exploration in the 1980s seriously eroded the manufacturing base. More than a third of Oklahoma companies had catered to the needs of that industry. The state found a perfect match in India and China, whose governments wanted increased domestic exploitation of oil and gas resources to give their giant economies a degree of energy independence.

Over the past three years, Maus reported that Oklahoma companies sold $300 million in products to India, a figure that drew gasps of surprise from his audience of government officials, businessmen and academics from the 12 southern states and Puerto Rico that make up the Southern Growth Policies Board.

“We went in there to save our skins with oil and gas and all of a sudden we’ve found a variety of products that can be sold in India,” Maus said. “It started as a matter of survival. Later we found India was a great trading partner.”

The sessions dealt with three areas: India, the Soviet Union and Argentina and Brazil, where U.S. sales have been hit hard in recent years because of the heavy debt burden carried by those countries.

“While these are not well-established or profitable markets today, they are countries where significant social, political and economic changes are setting the stage for the markets of tomorrow,” Baliles said. “And we want to be ready for new customers.”

So Rockingham Poultry Co. of Broadway, Va., sells the chicken feet it used to grind for bone meal as a delicacy for Chinese restaurants in Hong Kong. And Lakewood Industries of Hibbings, Minn., sells 1 million wooden chopsticks a day to Japan and plans to increase daily production to 7 million chopsticks by January to crack the South Korean and Taiwanese markets.

Found New Markets

From Oklahoma, a Tulsa manufacturer of automobile water pumps has set up a collaboration with a partner in Madras, India, casting the metal for the pumps in the United States and shipping them overseas for assembly, Maus said. And in Enid, Okla., W. B. Johnson Grain Co. just completed the first U.S. sale of mung beans to India. The sale brought in just $300,000, but the company expects to sell more in the future.

Commerce Secretary Verity, who has made “Export Now” his goal for the department in the last year of the Reagan presidency, referred to a manufacturer in Metairie, La., who found the U.S. market for radio telephones drying up under the pressure from the technically superior cellular phones. With help from the Commerce Department, Harrell Freeman of Freeman Engineering Associates Inc. found new markets in China and New Guinea--countries whose rural areas are not well suited for the more-advanced cellular phones.

The Chinese use the phones for highway construction work in rural locations where it would be too expensive to build either a cellular phone network or a regular telephone system. Freeman said his company recently made another sale in Manchuria.

These are small sales and, by themselves, are not likely to turn around last year’s record $170 billion U.S. trade deficit. Nor are most of the products on the cutting edge of technology. But five governors at the conference said the sales mean profits and jobs for companies and workers in their states.

“Whether we like it or not, we are in a global economy and we have to compete worldwide,” Mississippi’s Gov. Mabus said. “Over the long term, businesses will not survive in the world economy if they do not start to compete globally.”