Small businesses need to take advantage of every opportunity to increase sales. In a rare display of bipartisanship, the President and the United States Congress worked together to enact several free trade agreements that had been stalled for years. These agreements will be implemented over the next few months and will give U.S. businesses direct access to markets—in South Korea, Panama and Colombia—with eliminated (or in some cases significantly reduced) tariffs, greater intellectual property protection and streamlined regulatory procedures. While this sounds great, how exactly does a small business in Oklahoma or New Mexico take advantage of these new opportunities? Let’s take a closer look at each country and specific opportunities for U.S. companies to sell more.
According to U.S. trade representative Ron Kirk, the free trade agreement with South Korea is the largest we have signed since NAFTA in 1994 and should generate nearly $11 billion in new export sales for U.S. companies during its first year in effect. That's a significant increase to the $35 billion currently being exported. So what exactly are South Korean companies and consumers buying from the U.S.? Here are the top 10 exports that make up that $35 billion.
- Semiconductors: $3.1 billion
- Industrial machines: $2.4 billion
- Corn: $2.2 billion
- Organic chemicals: $1.5 billion
- Civilian aircraft: $1.3 billion
- Steelmaking materials: $1.3 billion
- Testing instruments: 977.4 million
- Petroleum products: $941.9 million
- Telecommunications: $791.2 million
- Electric equipment: $744.6 million
Colombia has been a staunch U.S. ally for many years and the country has experienced consistent economic growth for decades. The free trade agreement is expected to increase U.S. exports by $1.1 billion annually. The two main areas that U.S. companies should consider expanding into are agriculture and services.
The U.S. is the world’s largest exporter of wheat and wheat-based products. Five years ago Colombia bought 70 percent of its wheat from the U.S., but this changed when Canada signed a free trade agreement with Colombia which led to plummeting purchases from U.S. companies as Canadian firms were able to offer better pricing and terms. This agreement now opens the door for U.S. agricultural companies to retake a market they once dominated.
An even greater opportunity for U.S. businesses exists in the area of professional services. Colombian companies and consumers spend over $10 billion per month on professional services with local and regional companies dominating the market. American companies will now have open access to these services sectors, including IT services—which is expected to grow to over $3 billion annually by 2014.
Panama may have a reputation as being the trade hub of the Americas, but up until now the U.S. did not have a free trade agreement with the South American country. Even though Panama is a small country that buys less than $5 billion a year worth of U.S. exports, this free trade agreement provides a unique opportunity to U.S. suppliers: the Panama Canal expansion project. The expansion of the canal alone is estimated to cost $5.25 billion. It creates the possibility of an increase in equipment sales, machinery sales, engineering services, consulting services, financing services and much more.
Over the past 10 years, many European and Asian companies have opted to setup their regional headquarters in Panama instead of Miami because of tightening immigration restrictions for executives imposed by the U.S. As a result, doing business in Panama can also open the door to export opportunities with other countries that have offices there.
Don’t waste the next several months
The U.S. has only 17 free trade agreements in place, despite its conducting business with nearly every country in the world. So implementing the new agreements will take some time. Use this as lead time to get your company ready by establishing relationships with key parties. All three countries have embassies in Washington and consulates across the country. Contact your nearest consulate and see when they will be hosting an event to promote trade. That would be a good first step towards taking advantage of new expert opportunities.