Newsletter – September 7, 2018
After spending many years surrounded by Beltway partisanship in Washington, D.C., it is refreshing to work in a state with such strong economic fundamentals, innovative capital investments and wise stewardship from stakeholders. I wrote about Utah’s exciting environment in a recent op-ed in the Salt Lake Tribune. But as I noted in the op-ed, it is not all rainbows and unicorns in the Beehive State. I am concerned about a cloud descending on many Utah companies as they grapple with the real costs and uncertainties that come with the ongoing trade dispute.
Fortunately, Utah leaders aren’t willing to let a cloudy forecast determine their destiny. This proactive mindset was typified during our Thought Leader Symposium featuring Sen. Orrin Hatch which was co-hosted with the Salt Lake Chamber in early August, and then again last week in a follow-up luncheon at the office of Kirton McConkie in Salt Lake City.
Sen. Hatch spoke about the role free trade has played in Utah’s economic development from the time the Utah territory was created in 1850. He spoke about the importance of free trade to Utah today, and the dangers of protectionist trade policies.
As Sen. Hatch noted, the symposium’s gathering of business and community leaders echoed the mission of World Trade Center Utah: to promote prosperity across the state by attracting investment and increasing exports. “That outward-looking mission – which is also at the heart of the Salt Lake Chamber – matters not because success in global commerce is an end in itself; it matters because success in the global economy is essential to prosperity at home,” he said. “The ability to freely exchange goods and services with people around the world was a key part of our independence. It’s revealing that in the Declaration of Independence, among the grievances the Founding Fathers levied against the Crown was, ‘cutting off our trade with all parts of the world.’ ”
During the luncheon hosted by our friends at Kirton McConkie, we focused on how Utah businesses can mitigate the effects of the tariffs imposed on Chinese imports and China’s subsequent countermeasures. Barbara Banasacco briefed the nearly 80 companies that attended on the ongoing trade dispute, and Joseph Brubaker shared five strategies companies can use to soften the bumps of a protracted trade dispute. You can read media coverage of our event in the Daily Herald.
Here at WTC Utah, we are committed to attracting foreign investment to Utah and empowering Utah companies with the resources, research and data to compete in the global marketplace. Over the coming weeks, we will embark on a strategic review to ensure we are maximizing the value we and our members create for Utah. I look forward to engaging with you through this collaborative process. Keep an eye out for next month’s newsletter where I’ll provide an update on this strategic review. Until then, I encourage you to stay part of the ongoing conversation via our events, newsletter, and social media.
Going Global: MADSEN Cycles
Load up the kids and head to the market. Not in your car, but on your bucket bike built by Utah-based MADSEN Cycles, a family-owned company inspired by the idea that a bicycle can do more. To that end, the MADSEN team has worked diligently to bring to market the most beautiful and well-made cargo bikes available and the company is enjoying new-found success in Europe.
Earlier this year MADSEN Cycles received one of 23 Utah Export Acceleration Grants from World Trade Center (WTC) Utah. The grants are administered by WTC Utah, but made possible through a generous contribution from JPMorgan Chase & Co. The MADSEN team used its grant to help pay for participation in the ExporTech Program and an export-led trip to the Netherlands in May.
President and CEO Lisa Madsen says that through the assistance of the Utah Export Assistance Center, the company was introduced to Glenn van Polanen, U.S. Ambassador in the Netherlands. “He helped us tremendously, setting up a meeting for us with Stan de Caluwe, of the Holland International Distribution Council,” she explains. “Stan drove us all over the Netherlands to meet with four different third-party logistics companies (3PL). He had thoroughly researched which 3PL companies would be a good fit for our needs.”
Those meetings, and a meeting with an attorney that specializes in export/import, fiscal representation, and business licensing, were invaluable for MADSEN Cycles, which came away with an understanding of the extensive services available and a feasible plan for exporting to the Netherlands. The company was also connected to a marketing influencer who is helping the MADSEN team determine the product changes necessary for marketing in the Netherlands.
“The face-to-face time is a necessity in order for us to set up relationships with business contacts,” says Lisa. “We look forward to expanding those relationships and partnerships for future business in the Netherlands.”
MADSEN Cycles got its start in 2008 through a family passion for bicycles, a knack for creation and design, and a fierce entrepreneurial spirit. “After visiting the Netherlands in 2007, we had the vision of making cycling more accessible to families in the U.S.,” she explains. “We worked long hours in the garage and basement, testing and tweaking the design of what is now nicknamed the ‘Bucket Bike’.”
Master Mechanic Jared Madsen’s attention to detail and demand for perfection in design, plus his attitude that there is ALWAYS a better way – along with Lisa’s natural love of the customers and desire to create a delightful experience for each one – have created the essence of what MADSEN Cycles has become today. What’s more, the tight community of MADSEN cargo bike owners around the world has become a highlight of their lives and work.
Since its inception in 2008, MADSEN Cycles has expanded from its garage location to a facility in Murray from which it sells its cargo bikes to a loyal domestic customer base and to markets all over the world – Europe, Japan, Australia. Shipping single bikes to these countries is cost-prohibitive to international customers, which is why MADSEN Cycles has decided to set up logistics in the Netherlands, as a “gateway to Europe”. They plan to launch MADSEN Europe in the first quarter of 2019.
For more information visit madsencycles.com or call 800-206-0941.
Market Highlight: Gulf Cooperation Council
In May 1981, the countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) formed the Gulf Cooperation Council (GCC) primarily to enhance external security. The six-member countries now represent an important region for trade, with the UAE and Saudi Arabia being the two largest markets for U.S. goods.
The GCC countries share historical and cultural ties and aspire to develop a more diversified economic bloc. The World Bank Group says the GCC has “evolved well beyond a focus on free trade in goods to embrace high levels of cross-national labor and capital mobility, and the progressive opening of many sectors within each economy to all member states.”
Similar economic policies among the GCC countries largely reflect their common circumstances. These commonalities include open economies with free trade and capital movements and an exchange rate either directly or indirectly tied to the U.S. dollar. Nonetheless, the degree of trade openness varies, and each country maintains an important role in economic activities. GCC countries also have a common structural dependence on expatriate labor, which poses a long-term challenge. Hence, all GCC countries have open immigration policies for temporary workers.
In 2003 the GCC countries signed a Customs Union Agreement, which aimed to remove restrictions on internal trade and establish common, low external tariffs. The member states also agreed to eliminate the use of tariff escalation for industry protection, switching instead to exemptions for imports of intermediate inputs and equipment for domestic production and export industries.
Earlier this year the Khaleej Times reported that the GCC countries are marking a turning point as their economies overcome two difficult years of low oil prices and various austerity measures. The combined Gross Domestic Product (GDP) of the GCC countries is expanding at the fastest rate since 2015 and the overall economic outlook is positive into 2019, thanks to a combination of rising oil prices, expansionary fiscal policy and relative improvements in the overall security conditions of member countries.
According to the National U.S.-Arab Chamber of Commerce, Kuwait experienced U.S. import growth of more than 50 percent in 2017, while Saudi Arabia and the UAE experienced 10 percent drops – totaling $4.12 billion in year-over-year losses. Kuwait is becoming a major player for U.S. imports among the GCC countries.
As noted by the National U.S.-Arab Chamber of Commerce, GCC countries accounted for 79 percent of the U.S. goods exported to the Arab world in 2017, totaling $47.5 billion in sales, and take the top four spots in the 10 best destinations for U.S. exports to the Arab world. Security requirements and major infrastructure projects continue to drive U.S. exports to the region. On the other hand, intra-GCC quarrels that festered in 2017 are hampering some U.S. exports to the region, according to the Chamber.
Foodexport.org reports that U.S. exports of consumer food products to the GCC members increased three percent to nearly $1.7 billion in 2017, and the GCC is a solid importer of U.S. processed foods, totaling $1.1 billion. Top U.S. processed food exports to the region in 2017 included:
- Food preparations
- Fats and oils
- Condiments and sauces
- Processed/prepared dairy products
- Snack foods
- Processed vegetables and pulses
- Chocolate and confectionery
- Non-alcoholic beverages
The UAE and Saudi Arabia are now the 14th and 19th largest markets respectively for U.S. consumer foods and are frequently in the top 10 of most major processed food export categories.
Toolbox: Tip #9 Part 1 – Limit the Culture Shock
World Trade Center Utah’s “10 Tips to Help you Think, Act and Succeed Globally” provide a deeper dive into topics that will help as you pursue international business opportunities.
Experiencing Cultural Differences
Upon entering a new country, you might notice differences in the way people talk, think, dress and act. Culture is more than a country’s history or its current events; cultures are made up of all institutions, techniques, artifacts and beliefs of a group.
Remember that geopolitical boundaries do not perfectly line up with cultural boundaries. Within one country, there may be distinct cultural groups that require different approaches to be successful. Likewise, one cultural group may span multiple markets. Take care to learn the cultures of the markets you are working with. Familiarizing yourself with the Country Commercial Guide of your prospective market is a good first step.
The Hofstede Culture Dimensions
The Hofstede cultural dimensions describe how individuals in a society behave and in what manner they prefer to communicate. It is a useful index to think about how your international business communication might be affected by cultural differences. An online comparison tool can be found here.
Individualism – If a country is considered high in individualism, people are concerned mostly with their welfare and their immediate family. Individual freedom and achievement are valued.
Power Distance – Describes the extent to which differences in power are accepted. If a country is high in power distance, people are more accepting of unequal power hierarchies.
Uncertainty Avoidance – Is the extent to which a culture accepts uncertainty and risk.
Long Term Orientation – Describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future.
Dealing with Cultural Differences
No one culture is better than the next; they are just different. Consider incorporating the following tips to successfully navigate other cultures:
- Build Trust – Take the time to develop trust in your business relationships. Take social cues from others and dress appropriately for your location.
- Study Foreign Cultures and Current Events – Learn about the culture you are visiting to avoid getting caught off guard by not knowing basic tenets.
- Never Assume You Know it All – Even if you are a seasoned traveler, there is always more to learn. Rely on locals for information even if you have visited a country before.
- Gestures and Etiquette – There are many sources online, including the U.S. Commercial Service country guides referenced earlier, to help avoid embarrassing situations.
For more information, or for any other help with your international expansion efforts, please contact the WTC Utah Trade Services Manager Jim Porter at email@example.com.
|Sept. 14||Diplomatic Luncheon – The Ambassador of the Philippines|
|Sept. 14||Foreign Corrupt Practices Act (“FCPA”) workshop|
|Sept. 17-21||Taiwan & South Korea Trade Mission|
|Sept. 18||Utah Food Innovation Summit|
|Sept. 27-28||Building on Success 2018 Operational Excellence Conference|
|Sept. 26 – Dec. 5||Executive Certificate of Global Business Management Course|
|Nov. 8||Utah Global Forum|
|Jan. 7||Registration closes for the 2019 WUSATA Pavilion at SIAL China Trade Show|