International Trade Overview

International Trade Overview
Importing
Exporting
Taking the Overseas Plunge: How to Make Exporting Pay Off
Import/Export Books
International Import/Export Resources

International Trade Overview

Trade exists because one group or country has a supply of some commodity or merchandise that is in demand by another. International trade, though nothing new, is one of the hot industries of the new millenium. Although trade between cultures and countries has existed for millennia, advances in technology have made international trade more accessible. According to the US Department of Commerce, importing accounts for an annual $1.2 trillion in goods, and American companies export $772 billion in merchandise to more than 150 foreign countries. And it's not just a business for the big guys - they make up only about 4 percent.

According to the U.S. Census Bureau, the top 10 countries with which America trades (in order of largest import and export dollars to smallest) are:

• Canada
• Mexico
• Japan
• China
• Germany
• United Kingdom
• France
• Republic of Korea (South Korea)
• Taiwan
• Singapore

The Internet has opened a new door to international trade. You can now reach and sell to virtually anyone in the world through your Web site. As wonderful as this is, it does come with a few challenges.

Language. Everyone doesn't speak the same language. You may need to offer different language options on your Web site, and may need to translate marketing materials, instructions and warranties for your products, correspondence, etc. Hiring a person who actually speaks both the language you're translating to and the one you're translating from will provide the most accurate translations, but translation software is also available for purchase and free translation services are available on the Internet. Go for the best you can afford. You want to avoid misunderstandings as much as possible. How many restaurant menus or instruction manuals have you read that contained bad and often comical translations? You want people buying from you, not laughing at you.

Payment. How will your customers pay for your product? Although you can require that all transactions be made using US dollars, you'll probably be dealing with different currencies. You'll need to know current exchange rates. A daily update can be found on the Federal Reserve Web site at www.federalreserve.gov/releases/H10/Update/, and there are several sites that will calculate exchange rates for you. You may want to use a service that offers global payment options such as PayPal (www.paypal.com) or the Federation of International Trade Associations Global Payment Services (http://www.fita.org/payments.html) to ensure smooth and timely transactions.

Shipping. Not all carriers ship to all places, and some have weight and size limitations. Some have attractive rates to some areas but not to others. Do your research to find the best options for your needs.

One big difference between doing business domestically and internationally is culture. According to Hilka Klinkenberg, founder of Etiquette International in New York City, less than 25 percent of U.S. business ventures abroad are successful. "A lot of that is because Americans don't do their homework or because they think the rest of the world should do business the way they do business," she says. Klinkenberg offers the following tips to avoid making costly mistakes in international business meetings:

Build a relationship before you get down to business. "That entails making small talk and getting to know one another without [immediately] getting into business discussions," she says.

Don't impose time limits. Says Klinkenberg, "Keep [the meeting] as open as possible because it adds strength to your negotiating position."

Do your research. Learn at least a few pointers and facts about the country; it shows you respect your potential partners' cultural heritage. Also, get comfortable with the basic words in their language.

Bring your own interpreter. If they provide the interpreter, warns Klinkenberg, "the interpreter is going to have the other person's [interests] at heart, not yours."

Understand body language. "People think [body] language is universal-it's not," she says.

Dress with respect and authority. This should be self-explanatory. If it's not, seek the help of an image expert.

Expanding your business to global markets can be rewarding, profitable, and challenging. Entering the international arena can protect you against the risk of decline in domestic markets and, most important, significantly improve your overall growth potential. According to Entrepreneur Magazine, there are six basic steps to going global:

• Start your campaign to grow by international expansion by preparing an international business plan to evaluate your needs and set your goals. It's essential to assess your readiness and commitment to grow internationally before you get started.
• Conduct foreign market research and identify international markets. The Department of Commerce is an excellent source of information on foreign markets for U.S. goods and services.
• Evaluate and select methods of distributing your product abroad. You can choose from a variety of means for distributing your product, from opening company-owned foreign subsidiaries to working with agents, representatives and distributors and setting up joint ventures.
• Learn how to set prices, negotiate deals and navigate the legal morass of exporting. Cultural, social, legal and economic differences make exporting a challenge for business owners who have only operated in the United States.
• Tap government and private sources of financing-and figure out ways to make sure you are getting paid. Financing is always an issue, but government interest in boosting exporting and centuries of financial innovation have made getting funding and getting paid easier than ever.
• Move your goods to their international market, making sure you package and label them in accordance with regulations in the market you are selling to. The globalization of transportation systems helps here, but regulations are still different everywhere you go.