With tensions running high between the United States and China, trade was complicated even before COVID-19 hit. As the pandemic rages on, the World Trade Organization projects world trade could fall by between 13 percent and 32 percent in 2020.
That wide-ranged prediction reflects the volatility and uncertainty gripping economies around the world. M. Scott Niederjohn, senior vice president for cooperative education and economic development at Lakeland University, says the damage done in the early months of the pandemic is clear. The future is less so.
“The U.S. trade deficit likely widened in April during a sharp contraction in global commerce caused by lockdowns and slowing economies,” Niederjohn says. “Most think that, barring a second wave of the virus, global commerce will be revived in future quarters as lockdowns are lifted and economies begin to grow again.”
American companies that rely on exports are feeling the pain on multiple levels, Niederjohn says. Consumer demand has decreased around the world, shutdowns in manufacturing and commerce are disrupting supply chains, and challenges in moving goods around the world have arisen.
Niederjohn says the slowdown hurts many in Wisconsin, including farmers, small business owners and manufacturers. Dairy, corn and soybean farmers have few places to send their products, some small business owners are struggling to get products due to supply chain issues, and manufacturers are affected on both the demand and supply sides, he says.
Amulya Gurtu, associate professor of supply chain management at the Austin E. Cofrin School of Business at the University of Wisconsin-Green Bay, agrees that decreased demand is causing problems. Consumption declines when people are working from home and staying home more and when they are hosting fewer social gatherings, he says.
“It’s a chicken-and-egg story,” he says. “(Until) people are consuming and everything starts opening, it will be a very slow process.”
While the disruption has proven difficult, Gurtu says it may also offer a necessary wake-up call about where companies source goods. For example, the United States relies on China heavily for health care goods such as medicine and masks. The reliance on the latter has proven especially problematic these last several months.
Gurtu says it’s time for nations to re-evaluate where they get critical goods. “In terms of food, health care and defense, we should have, if not 100 percent, near 100 percent self-sufficiency,” he says.
Going forward, Niederjohn says backing off on trade wars will help speed recovery. “I’m never a fan of tariffs and quotas, but I think most would agree that even if you are, this isn’t the time to pursue such trade policies, as they risk hurting American business and consumers further,” he says.
Diversification is key
Roxanne Baumann, director of global engagement for WMEP Manufacturing Solutions, had to change course quickly when the pandemic disrupted the organization’s ExporTech program. The program, which helps participating companies develop an export expansion strategy, shifted to a virtual format for its second half.
ExporTech participants heard from expert panelists in an online format and completed their graduation ceremony, complete with caps, diplomas and a book Baumann sent to each individual, virtually.
While it’s not how the organization wanted to make the transition to offering more virtual programming, Baumann says she thinks the move will allow WMEP to reach more people for future sessions of ExporTech.
Companies participating in the program faced the difficulty of running their businesses during a challenging time while also completing ExporTech, but they also learned valuable lessons. Exporting allows companies to look at what markets are up or down and adjust accordingly, she says, and ExporTech gives them the training to do that.
“I think there’s one universal (truth) in here,” Baumann says. “Market diversification is always good business sense.”
The Wisconsin Economic Development Corp., which has also gone virtual with its Global Trade Ventures program, has co-op offices and feet on the ground in 97 countries. That can help Wisconsin companies develop proactive plans and pivot focus to other markets when necessary, Baumann says. For example, one exporter in southeast Wisconsin has seen markets for its goods open in Australia, New Zealand and Italy.
ExporTech teaches companies how to manage, motivate and monitor global markets. Once businesses do identify their target markets, Baumann encourages them to follow the news and what’s happening in their trading partner countries.
Doug Wilson, director of sales at Door County Coffee in Sturgeon Bay, participated in the recently completed session of ExporTech and says it changed his preconceived notions about exporting.
“In the back of my mind, I thought, ‘Well, there’s so much business in the United States. Why do we need to spend all this money to maybe get into another market?’”
Wilson says he worried that exporting would carry risk but says the connections and benefits the program provided won him over. Going into ExporTech, he assumed China would be the company’s most viable exporting partner, but he identified Canada as an ideal market after starting the program.
The upheaval the pandemic has caused has shown Wilson that diversification, more than ever, is vital. When Door County Coffee’s foodservice business went cold, it switched its focus to its grocery and online businesses. Moving into the future, Wilson says he would like exporting to become a part of that diversification strategy as well.
That kind of planning will leave companies stronger and more resilient, Baumann says. While unpredictability remains, Wisconsin’s strong manufacturing base, and many exporters, will help the state weather the difficulties.
“Wisconsinites always stand up to the challenge. I’m going to bet on our state,” she says.
On the web
WEDC Global Trade Ventures: wedc.org/programs-and-resources/global-trade-ventures