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Region struggles to increase exports

By Dan Fitzpatrick, Post-Gazette Staff Writer

To grow, Western Pennsylvania’s economy needs to go global.But after four years of trailing similar-sized regions in overseas trade, local export officials are still struggling with how to link Western Pennsylvania with the rest of the world.

"We are not making the progress we should be making," said Greg Kerr, chairman of the World Trade Center Pittsburgh. In this year’s PG Benchmarks, Pittsburgh ranks 11th out of 15 regions in exports per capita. Four years ago, it ranked 13th. In 1997 and 1998, it ranked 11th and 12th, respectively.exports.gif (8268 bytes)

Theoretically, Western Pennsylvania should be an export leader. Its strengths in industrial machinery, engineering, environmental technology, chemicals and computer software are in big demand overseas. Yet, the region still lags. Why?

Experts point to parochialism, regional apathy toward exporting, confusion about where to turn for help, misguided economic development priorities and a lack of education among local firms doing business overseas for the first time.

"I don’t see that there is going to be a quick fix," said Ted Arnn, director of the U.S. Department of Commerce’s Export Assistance Center of Western Pennsylvania. "This is just going to take a long effort."

After four years, small and medium-sized companies still worry about losing money abroad and dealing with tricky foreign currency exchanges. The right education and advice could change that, but groups that assist local firms with international trade say exporting remains a low priority with regional leaders. Funding, therefore, is scarce.

"The discussion about economic development really makes southwestern Pennsylvania sound like it’s a planet unto itself, and it’s not," said Mame Bradley, executive director of the World Trade Center, a member of the Pittsburgh Regional Alliance that uses $600,000 annually.

Others say the exporting problem stems not from a lack of resources, but from a mishmash of trade agencies that confuse rather than clarify. After four years, "we are still not glued together very effectively," said Tom Murrin, dean of Duquesne University’s A.J. Palumbo School of Business Administration.

"We are not on the same wavelength." The organizations that offer export assistance "don’t do a very good job of it," according to Cliff Shannon of SMC Business Councils, a trade association for small and medium-sized businesses that now helps exporters find capital and insurance through the U.S. Export-Import Bank in Washington, D.C. "I am definitely part of the problem. The best I can say is the shock of recognition has set in, and we are going to be committed to running programs and drawing attention to this."

Western Pennsylvania is missing a big opportunity. Exports, which track how much companies sell in foreign countries, are important to an economy because they create jobs and siphon wealth from foreign consumers. The Pittsburgh region has 80,000 jobs tied to exporting, according to the World Trade Center. If this region were to reach its potential, that number would be closer to 140,000, Bradley said.

Not all the news is bad, though. Realizing the potential that exists around the world, state and regional economic development leaders have led trade missions to Ireland, Israel, Mexico, Italy and the Far East. Gov. Ridge is planning a second trip to the Far East later this spring. What’s more, exporters and overseas market experts plan to convene May 25 in Pittsburgh for the Western Pennsylvania International Trade Fair, a first for this area.

There are local success stories, too. Tool makers Kennametal and Oberg Industries have done well overseas. Robicon Corp., a New Kensington-based maker of power electronics equipment, started exporting its products five years ago, and today, foreign sales represent almost 29 percent of Robicon’s $85 million in revenues.

To grow, "we had to do it," said Bill Thomas, Robicon’s vice president of international business development. The company now has offices in China and Brazil. Its motor drives, which run large pumps and fans in sewage plants, oil refineries and cement factories, sell throughout South America, Japan and Canada.

"We have yet to be burned," Thomas said.

Certainly, there are risks to doing business abroad. Some firms don’t get paid for their work. Others lose money when foreign currencies crash. There are cultural dangers, too.

Take gift giving. In China, it is an insult to present a host with a clock. To the Chinese, "it’s not polite to remind a person of his mortality," Kerr said. Also important in China is the seating chart at a business lunch or dinner. Each person has a certain place at the table, according to authority. If a person from Western Pennsylvania does not understand that, "you can run the risk of looking dumb or offending someone, which you don’t want to do," Kerr said.

But some companies don’t want to make the effort to learn about foreign proclivities. With memories of dilapidated steel mills and business losses to foreign competitors still fresh in Western Pennsylvania, "maybe we are still not the most receptive city in the country when it comes to foreign investment," Shannon said.

But these are all solvable problems. In the end, doing business abroad is not any more difficult than doing business in Kentucky, export officials said. Robicon executives overcame their uncertainty by taking courses in exporting and attending seminars sponsored by the World Trade Center, which can help with questions about financing, insurance and culture. "There is a lot of help out there, if you want to find it," Robicon’s Thomas said.

Is there too much help, though?

Among the agencies that provide export assistance are the World Trade Center, the Commerce Department’s Export Assistance Center, the Southwestern Pennsylvania Commission, Southwestern Pennsylvania Industrial Resource Center, SMC Business Councils and the small business development center at Duquesne University.

Turf issues are an "excuse" for companies that don’t want to make an effort to find help, Bradley said. But business school dean Murrin said it makes more sense for trade agencies to coordinate their work and eliminate any confusion. "We are still struggling to get our act together," he said.

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