The Truth About International Trade

From importing exotic fashions to exporting light fixtures, international trade will take you all over the world. It's one of the hot industries of the new millennium and as the world becomes more and more technologically advanced, international trade becomes more and more rewarding, both in terms of profit and personal satisfaction.

It's big business these days--to the tune of , an annual $1.2 trillion in goods according to the U.S. Department of Commerce. Exporting is just as big. In one year American companies exported $772 billion in merchandise to more than 150 foreign countries. And these products are bought, sold, represented and distributed on a daily basis.

But the import/export field is not the sole purview of the corporate trader, according to the U.S. Department of Commerce, the big guys make up only about 4 percent of all exporters. Which means the other 96 percent of exporters-- are small outfits like yours will be.

Why are imports such big business in the United States and around the world? There are lots of reasons, but the three main ones boil down to:

• Availability: There are some things you just can't grow or make in your home country. Bananas in Alaska, for example, mahogany lumber in Maine, or Ball Park franks in France.
• Image: A lot of things, like caviar and champagne, pack more of an "image," if they're imported rather than home-grown. Think German beer, French perfume, Egyptian cotton. Even when you can make it at home, it all seems classier when it comes from distant shores.
• Price: Some products are cheaper when brought in from out of the country. Korean toys, Taiwanese electronics and Mexican clothing, can often be manufactured in foreign factories for far less money than if they were made at home
  
• Countries typically export goods and services that they can produce inexpensively and import those that are produced more efficiently somewhere else. A country with extensive oil resources and the technology of a refinery, for example, will export oil but may need to import clothing.

Types of Import/Export Businesses

First off, let's take a look at the players.

• Export management company (EMC): An EMC handles export operations for a domestic company that wants to sell its product overseas but doesn't know how The EMC does it all--hiring dealers, distributors and representatives; handling advertising, marketing and promotions; overseeing marking and packaging; arranging shipping; and sometimes arranging financing. In essence becoming its own distributor. EMCs usually specialize by product, foreign market or both, and are paid by commission, salary or retainer plus commission.
• Export trading company (ETC): An ETC attacks the other side of the trading coin. It identifies what foreign buyers want to spend their money on and then hunts down domestic sources willing to export. An ETC sometimes takes title to the goods and sometimes works on a commission basis.
• Import/export merchant: Is a sort of free agent. He has no specific client base, and doesn't specialize in any one industry or line of products. Instead, he purchases goods directly from a domestic or foreign manufacturer and then packs, ships and resells the goods on his own. This means he assumes all the risks (as well as all the profits).

The Trade Channel

Now you'll need to take a swim in the trade channel, the means by which the merchandise travels from manufacturer to end user. A manufacturer who uses a middleman who resells to the consumer is paddling around in a three-level channel of distribution. The middleman can be a merchant who purchases the goods and then resells them, or he can be an agent who acts as a broker but doesn't take title to the stuff.

• Manufacturer's representative: a salesperson who specializes in a type of product or line of complementary products; home electronics: televisions, radios, He often provides additional product assistance, such as warehousing and technical service.
• Distributor or wholesale distributor: a company that buys the product you've imported and sells it to a retailer or other agent for further distribution until it gets to the end user
• Representative: a savvy salesperson who pitches your product to wholesale or retail buyers, then passes the sale on to you; differs from a manufacturer's representative in that he doesn't necessarily specialize in a particular product or group of products
• Retailer: the tail end of the trade channel where the merchandise smacks into the consumer.
  

The Trade Hit Parade

According to the U.S. Census Bureau, the top 10 countries with which America trades (in order of largest import and export dollars to smallest) are:

• Canada
• Mexico
• Japan
• China
• Germany
• United Kingdom
• France
• Republic of Korea (South Korea)
• Taiwan
• Singapore

You needn't, of course, confine yourself to trade deals with importers and exporters in these countries--there are many other intriguing possibilities available, including the member countries of the Caribbean Basin and Andean pacts and the former Soviet Union countries.