Exports Provide Big Boost to S.C. Economy
May 02, 2017 08:44PM
By Makayla Gay
By Karen E. Thuermer
Specialized Content Sponsored by South Carolina Ports, Upstate SC Alliance and K&L Gates
Export sales are setting a robust pace in South Carolina, continuing a seven-year upswing.
Last year the state ranked 15th in the country for total export sales, posting a record $31.3 billion in export sales in 2016, up from $30.9 billion in 2015, according to the S.C. Commerce Department.
South Carolina is one of only 16 states to see an increase in export sales from 2015 to 2016.
“Not only do we produce world-class products in our state, we transport and distribute those things to customers efficiently and effectively all over the world,” says Bobby Hitt, South Carolina Secretary of Commerce.
The South Carolina Department of Commerce has increased its efforts to encourage companies to take advantage of global markets and is working more and more with small and medium enterprises (SMEs).
S.C. exporters shipped goods to 195 markets in 2016. While the top 10 export markets for those exports were China, Germany, Canada, UK, Mexico, Japan, Australia, Spain, Belgium, and South Korea, the best markets depend on a company’s product, commodity or service. And exporting isn’t limited to large Fortune 500 companies like Michelin or BMW. The S.C. Department of Commerce indicates that 85 percent of the state’s exporters were SMEs in 2016.
Goods sent to foreign markets include vehicles, machinery, aircraft, rubber, plastic, electrical machinery, optics and paper products. In fact, the state exports nearly 30 percent of American-made exported tires and ranked number one in exports of tires, ball & roller bearings, and lawn mowers. Within the state, 5,240 small and medium sized goods exporters account for 85 percent of goods exporters and 12 percent of goods export value.
Upstate South Carolina has such a strong international industry composition, much of its trade occurs within international families. While in the 1950s, manufacturing often resulted in a finished good ready for sale, today there is a lot of additive activity. This means a business in the Upstate may manufacturer a component that is sent elsewhere for an additive process to occur, then be sent back to an original equipment manufacturer (OEM) that actually places the part. For example, BMW exports some 70 percent of its vehicles, but they are often sent back to BMW Munich before being delivered to their customer/destination market.
International Trade Administration (ITA) data, as reported in the most recent Upstate Regional Export Plan written by the Upstate SC Alliance, indicates that from 2005-2009, U.S. manufacturers that exported saw revenues grow by 37 percent, while those that did not export saw revenues fall by seven percent. ITA indicates that compared to non-exporters, U.S. business service exporters have 100 percent higher sales, 70 percent higher employment, and 20 percent higher wages. ITA also found that every billion dollars of exports supports 5,590 U.S. jobs. In short, the most profitable and resilient U.S. firms are usually the ones that export.
“Access to international markets is a key component in our business strategy of being a worldwide leader in combat and pre-hospital medicine,” comments Ross Johnson, president and CEO of Tactical Medical Solutions Inc., an Anderson-based maker of medical products and customized kits for military use and first responders, law enforcement and paramedics. “We are able to accomplish this and export from South Carolina because of the business environment, export initiatives, and the leadership present in the state.”
While economic development organizations continue to seek foreign direct investment (FDI) in South Carolina, there is expanding recognition that a comprehensive economic growth strategy includes increasing export activity among established industries, as 95 percent of the world’s customers are outside of the United States.
Consequently, the Upstate SC Alliance is working to encourage existing industries to begin or grow their export activity as a means of business growth, competition and resilience in the face of global economic changes.
“Industrialization and economic prosperity in other parts of the world mean that wider populations will demand goods that Americans have enjoyed for several decades, and it presents opportunity for our manufacturers to sell their products in new markets,” says John Lummus, president and CEO of the Upstate SC Alliance.
This was the case for Greenville-based Boyd Cycling. While considered a small business, the maker of high-end bicycle wheels exports its products all over the world. It ships to bicycle shops in Spain, Australia, and Thailand and directly to consumers worldwide. The company also now has distributors in Sweden and Belgium.
“Exporting allows us to scale our business,” reports Nicole Johnson, co-owner and vice president of sales for Boyd Cycling. “Cycling can be a seasonal, or weather can be a major factor impacting this business. By exporting, we are able to sell to different markets at different times of the year. After all, it’s summer somewhere in the world. Now we do not slow down.”
Likewise, Diana Pet Food, a French company that has 19 manufacturing plants around the world, operates in Greenwood County to be close to sources for raw materials and customers. From this location, its biggest operation outside of France, the company can optimize its ability to manufacture quality ingredients. Not only does Diana Pet Food sell its ingredients to U.S. companies that export, it helps its clients be compliant for international markets, and exports itself.
Diana Pet Food participates in networking opportunities with the Greenwood Partnership Alliance to share best practices in exporting.
“Some companies are in the same situation, and have resources, knowledge,” says Laurent Barbotin, general manager of Diana Pet Food. “We connect with people who are also exporting. It’s a good network. It helps a lot.”
Excel Products, a small Greenville company that makes industrial processing chemicals for textiles, wallboard, and construction products, started its export business to Central America largely because of a personal connection that helped them set up shop in Honduras. Phil Patrick, president and owner of the company, says Excel has been exporting for 10 years and largely has not utilized state or federal programs.
“The biggest challenge has been the language barrier, which we overcame,” Patrick says. “A huge part of being successful is establishing relationships in Latin America.”
Logistics can also be a challenge, although Patrick says this has improved greatly between the ports of Charleston and Miami to the Port of Cortes in Honduras.
“From Honduras, we can ship from our warehouse and manufacturing location to other Central American countries such as Guatemala, Nicaragua, and El Salvador,” he says.
A particular benefit, he adds, is exporting has expanded his company’s customer base.
“Customers like the quality and reliability of American products,” Patrick says. “With us being closer to the Central America manufacturing area, we can compete with other foreign competitive such as those in Europe. Most are happy to source American products that can be shipped to them quickly.”
In 2015, the Greenville-Anderson-Mauldin Metropolitan Statistical Area (MSA), which encompasses Anderson, Greenville, Laurens, and Pickens counties, was the 22nd largest exporter in the United States, according to ITA data. Mexico was Greenville’s top foreign market in 2015, accounting for seven percent of its total goods exports. Machinery, except electrical, was the area’s top export sector, accounting for nine percent of exports.
That year the export value of Greenville area manufactured goods totaled $14.9 billion and accounted for 49 percent of total South Carolina goods exports. The Greenville area has experienced an 89 percent export growth rate since 2009.
In 2014 (the latest data available), 1,007 SMEs exported, accounting for 81 percent of the Greenville area’s exports. Ninety-five percent of Greenville goods exporters shipped manufactured products overseas.
Going forward, the Upstate SC Alliance maintains that prospects for exporting for the region remain strong. Its 2015 Upstate Regional Export Plan suggests: “By aligning existing resources and mainstreaming exports into the traditional economic development framework, the region will be able to multiply the value of its resources to the local economy.”
It concludes that by recognizing that the Upstate’s future prosperity and competitiveness is tied strongly to its global connectivity, the region will build on its shared global heritage, expertise in advanced manufacturing, world-class clusters, strong business climate, and quality of life to establish a distinctive regional identity as a leading location for international business, trade, and investment – thereby completing its transition from global player to global leader in the world economy.
In late 2013, Upstate South Carolina was selected for the Global Cities Initiative (GCI) through a competitive application process. Launched in March 2012, GCI is a $10 million, five-year project of Brookings Institute and JPMorgan Chase aimed at helping the leaders of metropolitan America strengthen their regional economies by becoming more competitive in the global marketplace economies by leveraging assets and focusing on key indicators such as advanced manufacturing, exports, and infrastructure.
As a result, Upstate Alliance has set for the following objectives to reach this goal: Maintain the region’s strong export intensity-equal to or greater than 20 percent as the region’s economy continues to develop and diversify; increase exporting activity by 75 percent for domestic companies and small business, including actively developing new international markets; and foster a strong, export-oriented business culture while building its reputation as a competitive trading region.