When California wine makers singled out Japan for increased exports, they found the competition as stiff as a double scotch. The Japanese consume some 1.25 billion gallons of beer a year and 355 million gallons of sake -- but far less wine.
But the combination of an aggressive advertising campaign, a negotiating blitz to lower forbiddingly high tariffs, and the weakening of the dollar against the Japanese yen boosted the exports of California wine to Japan last year to 1.2 million gallons -- still a drop in the bucket, perhaps, but more than double what the Japanese bought in 1984. "They have gone crazy over white zinfandels," said Sam Folsom of the Wine Institute in San Francisco.
After spending most of this decade suffering the effects of a strong dollar that made many American products too expensive to compete in foreign markets, the tables are now turning. American companies that are trying to reestablish market presence abroad -- or expand the beachheads they already have -- finally are finding some success.
"The decline in the dollar has made U.S. goods very cheap," said Bruce Steinberg, a senior economist with Merrill Lynch & Co. "It also has made them more competitive in third markets where we compete with Europe and Japan."
For American manufacturers, the about-face in the relationship of the dollar to major European currencies and the yen hasn't come any too soon. From export giants such as Caterpillar Inc. to small, privately held companies that market their products abroad, the trip back up from the bottom has been a long, painful one.
"I would like to think the bottom was 1986," said William Ferretti, president of the Ferrex Group, a New York-based export trading company. "It was pretty low."
Economists call it the J-curve. It is expected that when a currency depreciates things get worse before they get better, since imports become more costly and exports lag. The process, said David B. Yoffie, an associate professor at the Harvard Business School, usually takes up to a year. In this case, the process of the curve turning upward has taken considerably longer.
"But the optimistic part of the story is we can expect improvement for some period of time," said Yoffie. In fact, economists at Data Resources in Lexington, Mass., predict that the value of exports will grow steadily to $253 billion this year, a 15 percent increase from 1986. Meanwhile, domestic demand for imports is slowing as they rise in price.
The brightening picture also bolsters the Reagan administration in its efforts to short-circuit provisions of proposed trade legislation that it considers too restrictive. "In many respects, Congress is correcting yesterday's problem," said U.S. Trade Representative Clayton K. Yeutter.
Similarly, many business interests -- even though they continue to support a bill that eliminates certain abuses but does not restrain trade -- are more aware than ever that legislation with punitive effects might cause foreign retaliation and erode the progress U.S. manufacturers have made on the trade front.
Bolstered by the effects of a lower dollar, many companies are seeing a dramatically different picture in international sales from only two years ago. For some, it's simply an increase in the level of inquiries from foreign buyers. For others, it's a noticeable uptick in orders.
Caterpillar, the Peoria, Ill.-based manufacturer of construction equipment, struggled through the bad times to hang onto its considerable export market. Though it lost $1 billion in foreign sales between 1982 and 1984, the company -- in an effort to hold market share -- decided not to raise prices.
The long-term strategy worked, said Caterpillar governmental affairs representative William Lane. Export orders have crept steadily upward and the company expects a further acceleration this year.
"The weaker dollar definitely is having an impact, particularly with Japan," said Lane.
Beating out the yen also counts in a market such as South Korea, to which Caterpillar started shipping for the first time this month. Though the dollar does not have a pronounced advantage against the South Korean currency, Caterpillar believes it will have a competitive edge because Japanese components used in South Korean-made machinery will rise in price.
Caterpillar expects that the previously restricted South Korean market will yield $15 million in sales in the next year. The effect of those export sales, Lane noted, will be 150 Caterpillar jobs in the United States and 300 jobs for suppliers.
General Electric Co., which has experienced a sluggish market for capital goods and strong competition, has seen some export improvement in jet engines, engineering plastics and medical systems such as CAT scanners. The fall in the dollar has played the biggest role in the sale of medical systems, said Jack Batty, a spokesman.
The rising yen also is working its magic on the U.S. economy by allowing "import substitution," or the manufacture of goods here that otherwise would be imported from Japan or elsewhere.
But probably the biggest boost to American competitiveness and confidence comes from foreign manufacturers with domestic plants, which are finding for the first time that it is cheaper to make and export goods from the United States than from their home markets.
Honda, which appears to be embarking on a sizable export program from the United States, announced last week that it would ship motorcycles that it builds in Marysville, Ohio, to Japan next year. The U.S.-built Accord already is being shipped to Taiwan, and the company is analyzing whether to go ahead with exports to Japan at some point.
In short, the atmosphere is allowing many companies to feel much more optimistic as they go up against foreign companies that were trouncing them soundly a few years ago. "We feel we are extremely competitive even though we are paying duties," said Richard Snyder, chairman and chief executive officer of SnyderGeneral Corp. of Dallas, which makes heating and air conditioning systems.
The company lost about half of its export market because of the strength of the dollar. But it has rebounded, and is busy reestablishing distribution networks abroad.
In fact, two orders have rolled in over the last two weeks. Snyder is still savoring the victory of snaring contracts in Sweden worth close to $2 million -- the air conditioning for the arena that will be used for the world ice hockey championships in 1989 in Stockholm, and the heating and air conditioning system for a railroad station and shopping arcade there.
Even companies in industries that have been battered by low-cost imports have seen some justice, landing foreign orders in countries that are their trade nemeses.
Since the beginning of the year, there has been a small increase in exports of the steel industry. Though the amounts being shipped are small, industry experts said they are significant more for what they symbolize than for their size.
One of the beneficiaries has been Bethlehem Steel, which shipped arch-competitor Japan a 15,000-ton load of hot-rolled sheet from its Sparrows Point plant in Baltimore. The company attributed the unusual order to an increase in world spot prices for some kinds of steel, the effects of the declining dollar and less import competition from South Korea, Taiwan and Brazil.
There appears to be something of a consensus that raising prices would be a mistake and that ignoring the demands of foreign customers for quality products would be fatal.
National Association of Manufacturers economist Jerry Jasinowski also pointed out that improvement in the trade picture will be a critical factor in avoiding recession as other sectors of the economy weaken. But some of the progress in reducing the nation's giant trade deficit will be made more difficult by slow growth abroad, selective barriers to trade in some countries and the uneven effect of the dollar's decline in markets around the world.
But considering just how long its been since American companies felt able to stand up to foreign competitors in many markets, any prospect of export flows helping dent the nation's giant $166 billion merchandise trade deficit is a satisfying one. "This is no time to rest, but you can see a more positive future," said Caterpillar's Lane.