For 125 years, some small portion of America’s fire trucks have come from Columbus, Ohio. That’s where the family-owned Sutphen Corp. produces shining red masses of steel and aluminum, loaded with ladders and tanks, the kind of vehicle that towns buy as a promise to keep citizens safe.
“We saw that we were totally dependent on the U.S. economy, especially municipal funding,” says Ken Creese, the company’s director of sales and marketing. Sutphen’s orders had dropped by some 40 percent, and they were starting to lay people off. They needed new markets, stat.
To find them, the company looked to a country better known for selling stuff to America rather than buying it: China. They hired a vice president for international relations, began responding to solicitations by local governments, and quickly started filling orders. Now, about 11 percent of the 250 trucks Sutphen makes per year sell overseas — not only in China, but Venezuela, Colombia and Peru. Just last week, the company signed a $3.8 million deal with a Chinese fire department.
“It’s a major part of our growth strategy,” Creese says. “We know that if we’re going to be around for the next 100 years, we’re going to have to be more global. You don’t globalize the business, there’s probably no chance.”
Sutphen’s story sums up exactly what the Obama administration wants us to believe can happen everywhere in America, even in towns like Columbus, where manufacturing has long ebbed away overseas or to cheaper states in the South.
In part to boost exports, the Obama administration is pushing a massive trade deal — the Trans-Pacific Partnership — with 11 countries on the Pacific Rim. Without support for exports, the argument goes, America risks losing even more jobs when barriers to investment in places like Chile and Malaysia are town down.
The issue has taken on greater urgency lately, as getting the deal done has become a top priority and rare area of agreement for President Obama and Republicans in Congress. So at news conferences and conventions and op-eds, administration officials and business associations trot out plucky little companies who’ve done it successfully, to demonstrate that it’s not just multinational companies packing those container ships.
“By expanding exports, you are expanding business opportunities, allowing you to grow your business here, to create jobs, and to buy more Made-in-America product,” U.S. Trade Representative Michael Froman said back in June, at a brewery in Denver that had started selling beer in Europe.
But that’s also the rosiest part of the picture, painted by an administration facing skeptical voices within his own party. Progressive groups have all sorts of reasons to oppose the TPP — they worry it will give big corporations more power to undermine health and safety regulations, for example — and offer up their own sad stories of jobs lost when companies used trade deals to shift production overseas.
“We’re not talking about mom and pop on the main street that are being taken care of,” said Rep. Raul Grijalva (D-Ariz.), on a news media call with a collection of small businesses in a “pre-buttal” to the trade talk in the president’s State of the Union address. “I think the thing about this trade deal has been that it lowers the bar for the American people, so we’re competing with 50 cents an hour wages in Vietnam.”
So who’s right?
Both, kind of. Trade agreements have allowed some American companies to sell more overseas. But imports usually grow much faster, which means that other companies can’t compete.
That might keep happening anyway, though — which means it’s worth thinking about how people who still make stuff in America can sell it around the world.
It wasn’t inevitable that Sutphen would succeed in its bid to start exporting overseas. It almost didn’t — and realistically, not all companies can do the same.
Selling stuff to China became a lot more feasible after the U.S. normalized trade with the communist country in 2000; commerce between the two nations exploded. But that didn’t make it easy — especially with something as large and as specialized as a fire engine.
Sutphen’s trucks had to pass a battery of inspections, which required sending engineers back and forth to iron out problems. Once, while two trucks were on their way over to China, and they heard that China had changed its standards, and the trucks had to come home — at times, they thought about bagging the international strategy altogether.
“We weren’t paying attention, and it bit us pretty good,” Creese says. “When it costs you a couple hundred thousand dollars to get one truck certified, you have to start thinking about, do you have enough money to even do it?” Markets like India and Brazil are huge, but also confusing and unpredictable, and it’s very easy for the casual exporter to get burned.
That’s rule one of exporting: Make sure you’re ready, and bring on actual expertise to get it done, with the right partners overseas. Otherwise, you could end up in a worse place than you started.
“You have to follow up and make a market,” says Deborah Scherer, who as director of global markets at Columbus’s regional economic development organization has been trying to help more businesses sell internationally. “A lot of the companies don’t dedicate resources to it, they don’t follow through, because other stuff gets in the way.” That’s why truly small businesses sometimes aren’t the best candidates for exporting — you have to have a certain size and level of sophistication to figure things out.
Now, Sutphen made a lot of the right decisions in putting together an export strategy. But it’s also lucky, to be making something that isn’t easily replaceable by overseas competitors. Sutphen’s trucks are still a premium product, costing between $300,000 and $1.5 million each, in a business with high barriers to entry. Cities don’t like cutting corners when it comes to safety, and Creese says that fire services are still “a very nationalistic thing,” where the American-made label carries weight — which isn’t true of all widgets.
But that won’t necessarily last forever. Manufacturers in China and Mexico aren’t far behind. “They’re getting better every year,” Creese says. “There will probably come a day where we can’t win on technology and quality, and we’ll have to compete with them.”
That’s rule two of exporting: If you’re making a commodity product, you’re pretty terribly positioned in the global economy, since someone in Asia or South America will probably be able to make it cheaper. The United States still has an edge in technology, but keeping it takes work.
“They have to have a unique offering,” Scherer says. “American-made products still are very much appreciated and desired around the world. So it’s not like we don’t have a chance at exporting, we just have to put the effort forward to do so.”
As Creese puts it: “You have to have a lot of guts to go into it. Or a lot of money.”
The most important question for many communities, of course, isn’t who’s buying the products made in their town. Rather, it’s whether the local factory actually employs anybody, and pays them enough to make a living.
Sutphen has a pretty good answer for that. It employs 385 people — which has been pretty steady for years now — and pays at least $20 an hour, up to much more for the most experienced engineers. Each truck is customized, so the assembly line can’t be totally automated. Although manufacturing jobs don’t always pay what they used to when unions were stronger, they still tend to be higher-quality for the amount of education you need to get one.
“It’s the kind of business you want in your city, because the employees can buy houses,” Creese says. Sutphen gets calls from states all over the country, Creese says, offering incentives for them to move.
But that isn’t necessarily true of all export-intensive businesses. The number of jobs created per billion dollars of exports is falling fast, because many companies have managed to keep costs on par with overseas competitors by substituting robots for people. Textile mills, for example, have decreased their employee headcounts dramatically over the past decade, while stabilizing production. The United States also exports a huge amount of agricultural goods, like wheat and soybeans, that take very few humans to produce.
That’s why, sometimes, it doesn’t appear that exporting helps local economies much at all.
“We feel like the exports were looked at as a quick jobs generator, post-recession,” says Brad McDearman, a scholar at the Brookings Institution who’s been helping metro areas on their export strategies. “In that case, we don’t think that’s true … the goal of firms is not to increase their employment.”
So why try so hard to make exports work? According to McDearman, it’s better than losing even more of the jobs you do have down the line.
“People are realizing that globalization is the reality, and a lot of the growth is coming from around the world,” he says. “If we’re only looking at the amount of jobs created because of it, we’re not looking at the fact that companies are now more sustainable and competitive to maintain what they have.”