U.S. Must Focus on Exports – back by popular demand

As calls for American companies to increase their exports are continuing to dominate the headlines, we have been repeatedly asked to reprint one of the pioneering articles on the topic “U.S. Must Focus on Exports”, which appeared in the Industry Magazine a few months ago. Since its publication, leading numerous academic, government and business figures have opined on ways for the U.S. to strengthen and expand its position as one of the world’s leading export nations. The movement has been gathering force and the subject has finally been receiving some of the attention it deserves. Yet more needs to be done.  Need to export is not yet ingrained into our nation’s business psyche, as it is in Holland, Sweden, China or German just to name a few countries where exports are not an afterthought but a way of life. With recession at home forcing our exporters to look abroad for business, we must do more to provide the infrastructure, and educational platform, which will support efforts already on the way.

Thus, we are pleased to present a both full text and color reprint of the article in this week’s posting. To get Complimentary full color paper reprint(s) of the article for you and your colleagues(limit 20 per company), please contact rsigalus@broadstreetcap.com.  As always, I hope you enjoy the post and welcome your comments.

Tsunami and earthquake in Japan, armed rebellion in Libya, civil unrest in Egypt, Yemen and Tunisia – these calamities impact millions and occur just as the United States struggles to overcome the most severe economic contraction in recent memory.

For U.S. businesses to rebuild and thrive, they must take advantages of new opportunities often found under their noses. Opportunities for growth of export of services and manufactured goods have been woefully neglected, yet they are a well-established and effective way of rejuvenating economic health.

About a year ago, President Obama unveiled an export initiative that called for the doubling of our country’s exports in five years. This initiative has already shown early signs of resounding success despite a disturbing figure from the Small Business Administration: only one percent of all U.S. companies currently export.

CRUNCHING THE NUMBERS
Let’s look at some figures.

In 2010 the total American exports of goods and services was $1.834 trillion – $1.289 trillion in products, $545 billion in services. Those numbers represent an impressive growth of 21 percent and 8.6 percent respectively over the previous 12-month period.

Financing of exports also grew significantly, with the Export-Import Bank of the United States (U.S. Exim), the Federal agency charged with financing U.S. made goods and services exported out of the country, having completed a record fiscal year. The U.S. Exim financed $24.5 billion, an 11.7-percent increase over 2009, which had been a record year. Those numbers are on track to hit the President’s goal of doubling U.S. exports by 2014. But more must be done.

Although the recovery is projected to continue for the next several years and the U.S. dollar is likely to remain low for some time – which is a stimulus for others to buy our goods and services – our country will not be among the global export leaders, as measured by the percentage of total exports to GDP. Instead, we will need to fight for a greater market share among the world’s exporters. The way I see it, the United States must make cardinal changes, not only to how we think about exporting but also to our basic approach. We must make exports a strategic priority to our nation’s businesses, learning to approach exports more strategically and cultivating exporters as a recognized part of our economic landscape.

FOUR FUTURE CORNERSTONES
I believe that our next wave of national export expansion must be built on four cornerstones:

• Comprehensive education of exporters

• Enhanced export infrastructure

• Increased national focus on exports

• “Securities” market approach to exports

Let’s consider each.

Education – The United States must establish an educational system where exports and international business are taught not as a byproduct, but as a core economic discipline at all levels starting with middle school. In our country talented people who shape industries and professions such as science, sports, music, law, art and architecture are allowed to develop their skills, starting early in childhood.

Existing infrastructure helps weed out both promising and weak candidates. In sports, farm team systems exist and thousands of hours are invested in training and practice. Commitment by families, coaches and teachers to produce a travel team athlete or a budding marching band member often borders on fanatical. Debate teams exist to shape lawyers, and terrific science camps and competitions exist to spur innovation and identify our best and brightest scientific minds. We identify stars in these fields by training and preparing millions of students who are better prepared to succeed in certain aspects of life. Yet, when it comes to exporters with potential to create long-term financially rewarding benefits that will produce for decades, we simply leave things to chance. We offer our support late in the game, after mistakes have been made. As a nation, we do offer export advice and some training, but we don’t cultivate exporters through intensive training or formal education. Also, we have no system for measuring and standardizing the quality of export organizations.

If we are to succeed in exports, education is key.

Enhanced Export Infrastructure – To stand a chance at reaffirming our global position, we must refine and enhance our export infrastructure to better focus our formidable resources on assisting and preparing promising companies to export effectively. We must seriously consider expanding the reach of small federal agencies such as the U.S. Trade and Development Agency (USTDA), which delivers $47 in exports for every dollar it spends in funding project feasibility studies and reverse trade missions. We should explore leveraging government resources with Private Public Partnerships, wherein selected private non-profits are charged by U.S. government agencies with developing and funding nothing but export-related projects, transactions and initiatives. We must involve more banks and private finance companies in funding exports. Currently, only a handful of large banks finance export transactions guaranteed by the U.S. government through the U.S. Exim Bank.

Increased National Focus on Exports – Exports must become an important part of our national focus, on par with issues such as healthcare, housing, real estate and education. Media reporting and advertising, direct outreach by the U.S. Government and NGOs, grass roots outreach, union outreach – in short, every possible opportunity – should be utilized to preach the economic benefits and need for exports. This should be done not only during bad economic times when our domestic output shrinks, but at all times, on a consistent and sustainable basis.

If asked to name the top three initiatives that are going to improve our economy, the majority of Americans should be able to name exports as one of them.

“Securities” Market Approach to Exports – To attain the next level of economic growth, the U.S. export machine might have to borrow some pointers from the way the securities industry is structured. Specifically, I refer to information and analysis, which provide almost real-time updates as to how changes in the world affect given securities, alter opportunities and highlight changing risks.

Think about how well our export industry could be served if, for example, in the wake of Japan’s nuclear crisis, an export analyst covering the nuclear sector could highlight new opportunities to U.S. exporters for the sudden need of containment materials. Export opportunities opened up, as Japan called on Ukraine nuclear specialists after the devastating tsunami. But these specialists in Ukraine did not have the necessary equipment, worth tens or hundreds of millions of dollars, to effectively provide services to the Japanese. American providers of these required goods needed a way to quickly be apprised of the opportunities.

Another example of coverage would be a broader dissemination of pending project opportunities, which have export potential, such as those developed with USTDA’s funding. Overseas Private Investment Corporation or private developers could reveal export opportunities to U.S. providers of goods and services early, thereby allowing them the chance to respond quicker.

Having an actionable analytical/informational platform for the industry vs. the current platform for reporting past deals and transactions will provide a strong forward-looking base of transaction flows for U.S. exporters. Such a “securities type” platform can be developed on the basis of information from banks and insurance companies currently financing exports, EMCs (export management companies) and independent private analytical services. Self-policing and self-regulation should probably be the model for such a platform. Yet regardless of the model, the need for immediate and current information and analysis is critical to help exporters in their decision-making and business development.

MOVING FORWARD
As a nation trying to combat economic conundrum and to rebuild its prosperity, the United States has started on the correct path to growing its exports. With improved education of exporters, enhanced export infrastructure, increased focus on exports as a national priority, and the addition of a forward-looking information and analytical platform to aid exporters in growing their business, the country is certain to secure its rightful place among the leading exporter nations in the world.

Happy Thanksgiving and a call for help

On behalf of the entire Fluent In Foreign Team, I would like to wish all the readers of this blog a very happy Thanksgiving and a wonderful Holiday Season!

I also would like to thank everyone who has supported my family and me during the very difficult year, as we lost my mother to a vicious cancer.

In honor of my mother and other cancer victims and survivors, yesterday I have committed to support Childhood Leukemia Foundation https://www.clf4kids.org/.  To help raise money and demonstrate solidarity with kids who lose hair as result of cancer treatments, I have pledged to shave my head (those who know me personally realize the magnitude of that decision:).  Today, first donation of $500 has already been submitted and we are looking to raise $9,500 more before the end of this calendar year

I hereby ask all of you to help me in this undertaking and pledge either donations money, or hair to https://www.clf4kids.org/index.php/donate . Once you donate, please send a copy of the confirmation notice to rsigalus@broadstreetcap.com and we will be recognizing your contribution as part of the total contribution goal. It is a worthy cause and I thank you in advance for your support.  Oh, by the way, once we reach our goal of $10,000, I will be posting the picture of my shaved head on this blog:). Once again, thank you in advance for your help. Let the giving begin!  Sincerely, Alexander Gordin

 

Does your company plan to expand internationally in 2012?

Exporting Americana one Smashburger at a time (part 3 of the Expanding Abroad via Franchising series)

Expansion of U.S. companies abroad via franchising has become a very hot topic.  As part of our franchise expansion abroad series, we continue to highlight the issues and opportunities franchisors encounter as they expand internationally.  Internationally recognized franchisors such as McDonalds®, KFC®, Subway®, Pizza Hut® have been expanding globally for decades and continue to do so at very healthy rates, serving as examples of successful transfer of both the American way of life and successful business concepts.

What is interesting, however, is a growing number of small and medium franchisors who have begun to craft serious international expansion plans.  Undoubtedly, the main driver of such expansion is the economic slowdown here at home.  That trend, combined with explosive growth rates of emerging markets, availability of local seed capital. emergence of the middle class in multiple countries and insatiable demand for western goods and concepts, created a very fertile ground for the export of franchise business concepts.

Although I think that international franchise development is one of the most interesting and potent ways for U.S. companies to expand abroad, I have certain reservations and see certain risk factors, some of which I would like to raise in this post.  These are being covered in depth in the upcoming book Fluent In Foreign Franchising™, to be published in 2012 by the Princeton Council on World Affairs.

Commitment – International expansion requires significant commitment of management’s time, as well as administrative and financial resources. This is not something that should be taken lightly, or as a band-aid for slowing unit sales during the recession at home. Granted, the recession may have been a catalyst to explore expansion abroad, but deciding to expand internationally is a very, very serious decision that has to be carefully weighted and planned.  It is better not to do it, then to do it half-heartedly.

Every international franchise consultant talks about adaptability of the concept to the target market, need to protect the IP, develop a plan and to find good partners. Very few actually go beyond advise and help carry out the expansion.  Thus the franchisors wishing to go into foreign markets must either commit their resources to develop in-house expertise or hire an experienced firm to completely manage the international operations as a profit center. I would be happy to discuss how the franchise development division of the Fluent In Foreign™ organization can power international expansion efforts for your franchise regardless of the expansion approach selected.

Compliance – Few franchisors going abroad consider compliance issues such as export controls, or implementation of the Foreign Corrupt Practices Act (FCPA) policies. Granted, when one sells a fast food franchise, which primarily caters to consumers, FCPA is probably not the first thing one thinks about. Yet, consider the risks to the corporate franchisor when one of you prospective franchisees in an emerging market offers a bribe to a government official to get prime land to build several drive-through outlets. Further consider that this franchisee is part of the opposing political party (happens much more often in emerging markets than you may think)  and the local press sniffs out and picks up the story. This will end up on the internet and will cross the desk of the local U.S. Embassy official.  It then will travel through the U.S. government’s  email network and wind up at the SEC, which decides to go after the entity, as it has roots in the U.S.   I will leave the rest of this scenario to your imagination and will not discuss its legal ramifications as I am not a lawyer.   Yet the risk of such a scenario replete with stiff financial penalties, criminal persecution and negative publicity are more real now than ever before.

Risk Management  – This brings me to my next point – risk management.  International expansion is difficult and fraught with peril. Yet, it is possible to drastically improve the odds of success by managing a number of risks.  Structuring franchise agreements in a way that allows the franchisor to disengage cleanly from the failed relationship, keep absolute control of the IP in country, minimize risk of circumvention and copycatting, assure payments from the franchisee for open account shipments, and mitigate the risk of damage to the global brand name. These and multiple other factors can be addressed as part of the comprehensive risk management program each franchisor should consider and incorporate into its offering process.

Education – training and education is an integral part of every good franchise offering.  Prospective franchisees learn how to follow the company’s operating manual, market their franchise, set up books and hire staff.  To increase the odds of success (or to mitigate the risk of failure, if you will) a comprehensive education program consisting of introductory instruction on FCPA, brand protection, international account receivable and working capital financing should be added as part of the initial training process. As the franchisees grow their respective businesses, they should be offered instruction on available growth financing, leasing, political risk insurance,  management, along with strategic management and multi-unit operations training.

Financing – financing international franchises is an interesting topic. Oftentimes, international franchise buyers come to the table with readily available funds to buy a first unit or two.  Since financing through local banks is generally very onerous and expensive, very little or no leverage is used and many franchisees seek to expand through retained earnings.   Many do not realize that very inexpensive financing programs exist to help franchisees ramp up their operations more quickly to achieve economies of scale and protect their competitive market positions.

Financing through these programs also carries a hidden benefit of requiring franchisees to keep accounting records, which will stand up to the scrutiny of the U.S. government, thus strengthening the chances of the franchisor of receiving more accurate royalty payments.

To aid franchisors who have either recently started their international expansion efforts, or who are considering expanding abroad, succeed, Fluent In Foreign Franchising has developed its proprietary D.I.C.E. & Finance™ (Develop, Insure, Comply, Educate & Finance) methodology.  Delivered by world-class legal, financial and international development professionals, D.I.C.E. & Finance™ provides a comprehensive strategic business development and risk mitigation platform upon which day-to-day operations of the oversees franchisors will successfully strive.

I hope you enjoy the article below and as always, welcome your comments.  You can reach me at agordin@broadstreetcap.com .

Smaller Franchisers Expand Their Horizons

A Smashburger in Kuwait? Here’s why it makes sense

By ANGUS LOTEN    as seen in the Wall Street Journal, November 14th, 2011

Over the past month, a Smashburger outlet in Denver has had some unusual help in the kitchen: a group of Kuwaiti entrepreneurs.

The burger flippers were prospective franchisees looking to open Smashburger outlets back home—and the fast-food chain hoped the hands-on experience would help them better serve customers.

Kuwait might seem a remote target for a franchise that’s not anywhere near the size of, say, McDonald’s. But Smashburger Chief Executive Dave Prokupek has big plans for international expansion—not only across the Middle East but also Asia and Central and South America.

Why? Those regions were largely unscathed by the recession, as well as being places where middle-class consumers have a growing appetite for American goods and services. “Western premium brands have done extraordinarily well in the Middle East and elsewhere,” Mr. Prokupek says.

It’s a Small World

Before the downturn, small U.S. franchises typically wouldn’t stray far from an original location. Now economic uncertainty at home, and in other Western economies, has prompted a growing number of franchises to look farther afield. They’re turning to markets in the developing world where credit continues to flow, franchise buyers face fewer barriers to financing, and American goods and services are in high demand.

Magnolia BakeryA Magnolia Bakery outlet in Dubai—far from the small chain’s New York home

“Five years ago, few smaller brands would have considered these markets,” says William Edwards, CEO of Edwards Global Services, an Irvine, Calif., global franchise consulting firm. “The big challenge now is that in the U.S., it’s very difficult for new franchisees to get financing. Money is not a problem in emerging markets, and there’s a lot of demand.”

Steve Abrams, co-owner of Magnolia Bakery, is seeing that firsthand. Two months ago, the New York cupcake maker made famous by “Sex and the City” received state approval to sell franchises. Today, it’s fielding hundreds of queries from prospective owners across Asia, the Middle East and South America.

“We got requests from all over the world, but it’s heavily weighted to emerging economies,” says Mr. Abrams. He expects to close up to a half-dozen deals by the end of the year, citing interested buyers in Lebanon, Saudi Arabia, Kuwait, China, Thailand and Brazil.

In a recent survey by the International Franchise Association, nearly 85% of more than 150 U.S. franchisers—including chains with fewer than 50 locations in the U.S.—said they planned to start or accelerate international operations within the next few years. Like Magnolia, most were led by direct inquiries from abroad, the attractiveness of global markets and an opportunity to turn a profit.

“Younger and smaller franchise companies are jumping into the global market,” says Scott Lehr, vice president of international development at the IFA. “They’re looking at markets where it’s possible to grow sales in double digits. That’s pretty enticing.”

Knowing the Territory

Still, setting up global operations is a “big financial and operations commitment,” especially for smaller chains with limited resources, he says.

Smaller brands can face unexpected challenges in these regions, where a business system developed back home can be difficult to reproduce with limited infrastructure and an unfamiliar business culture.

“Nothing is easy in this,” says Mr. Edwards, whose firm has shepherded dozens of U.S. brands into foreign markets over the past decade.

For starters, franchisers can expect heavy training costs for franchisees and partners who know the local market but might be less familiar with the American approach to brand awareness or customer experience, Mr. Edwards says.

That’s what Pinkberry has discovered. In just six years, the California frozen-yogurt shop has grown from a single location to more than 175 stores in 17 countries—including Bahrain, Jordan and Peru.

Ron Graves, the company’s chief executive, says its business systems are stringently maintained through a full-time global team and a network of handpicked global partners who have experience working with U.S. brands and who share the company’s core values.

“We do our homework,” Mr. Graves says of the process of whittling down thousands of franchise applications to just a handful of capable partners who oversee dozens of outlets across a given region. “We’re not in the business of selling franchises, we’re in the business of finding partners,” he says.

Mr. Edwards says better communications systems and Web-based business applications are making it easier for franchisers to keep a close eye on far-flung operations. Still, he says it’s essential for companies to have boots on the ground in these regions to make sure that a brand is being successfully duplicated and maintained.

Smashburger’s Mr. Prokupek says after the Kuwaiti franchisees are finished training here, company officials will follow them back to the Middle East to oversee the new restaurant, which he expects to launch in late March.

“We want to hit the ground running,” Mr. Prokupek says.

Mr. Edwards, who isn’t affiliated with Smashburger, says that sort of exchange between smaller U.S. chains and international partners can be a boon for the global economy.

“What we’re really doing is exporting American business know-how,” he says. “And that’s exciting.”

Mr. Loten is a small-business reporter in The Wall Street Journal’s New York bureau. He can be reached at angus.loten@wsj.com.

USTR.gov November 18, 2011

USTR.gov APEC Business Spotlight: SKAI Ventures Export to the Asia-Pacific Region November 17 – SKAI Ventures is a Hawaii-based venture accelerator-a company which seek out new ideas and innovations with biomedical and biodefense applications to invest in, develop, and market as a finished product. Currently, SKAI Ventures portfolio companies include Eyegenix, TruTag Technologies, CBI Polymers, SKAI Vision Institute, Hawaii Endoscopy Institute, and the Eye Surgery Center of Hawaii. The three largest companies, Eyegenix, TruTag Technologies, and CBI Polymers, all export significantly to the Asia-Pacific region. Read more here.  ___________________________________________________________ “Ambassador Kirk Updates the President’s Export Council on 2011 Trade Updates and Initiatives” November 17 – Yesterday, Ambassador Kirk participated in a meeting of the President’s Export Council (PEC).  He updated the PEC members on recent trade successes and initiatives. He wrote a guest blog post for WhiteHouse.gov about the meeting. You can read the post below: “Earlier today I had the opportunity to participate in a meeting of the President’s Export Council (PEC) at the White House. Members of the PEC gathered to strategize and discuss ways to reach the President’s goal of doubling our nation’s exports by the end of 2014. In addition, the private sector members of the PEC presented Administration officials with letters of recommendations on topics such as expansion of the Information Technology Agreement (ITA), Middle East/North Africa commercial engagement and workforce readiness. We thanked them for their ideas, and underscored the importance of their input to the Administration’s efforts to boost exports.” Read more here. ___________________________________________________________ U.S.-Sri Lanka Trade and Investment Framework (TIFA) Council Meeting  November 16 – Yesterday, senior U.S. and Sri Lankan officials met at the Office of the United States Trade Representative for the ninth meeting of the United States-Sri Lanka Trade and Investment Framework Agreement (TIFA) Council. The TIFA was signed in 2002, and is now the primary forum for bilateral trade and investment discussions between the two countries. The TIFA process has been the focal point of a sustained and multi-faceted high-level engagement between the United States and Sri Lanka on trade and investment issues, including impediments to greater trade and investment flows between the countries. The parties discussed a full range of investment climate issues, including market access, the U.S. Generalized System of Preferences (GSP), trade promotion efforts, intellectual property rights, and sector-specific challenges to investment. Discussion also included the importance of considering gender issues in setting trade and investment policy, and in expanding technical cooperation between the two countries. Exporting more machinery, optic and medical instruments, plastic, cereal, and wheat could result in more jobs for businesses, farmers, and workers here at home. Read more here. ___________________________________________________________ What They Are Saying: 2011 APEC Ministerial and Economics Leader’s Meeting November 14 – This week, The Office of the United States Trade Representative concluded the 2011 Asia-Pacific Economic Cooperation Ministerial and Economic Leaders’ meetings. Click here to see what people are saying about the important initiatives announced during the meetings. ___________________________________________________________  Trade with the Asia-Pacific Region Benefits Indiana’s Businesses and Workers  November 13 – In a world where 95 percent of consumers reside outside our borders, APEC comprises 40 percent of the global population. The Asia-Pacific region offers tremendous opportunities for U.S. exporters. The Asia-Pacific region is the largest market in the world for U.S. exports and receives over 70 percent of U.S. agricultural exports. Many of these dynamic economies are growing faster than the world average and together generate 56 percent of global GDP in 2010. Indiana’s goods exports in 2010 totaled $29 billion. Of Indiana’s total exports, $18 billion, or 63 percent, went to markets in the Asia-Pacific region. The top three product categories to APEC member economies exported in 2010 were transportation equipment, machinery, and chemical manufactures. Indiana Exported $18 Billion in Goods to Asia-Pacific Countries in 2010: Read more here. _________________________________________________________  APEC Business Spotlight: Oceanit Hopes to Find Success in Asia-Pacific RegionNovember 13 – Oceanit is a small business located throughout the Hawaiian Islands. Founded in 1985, Oceanit is one of Hawaii’s largest and most diversified science and engineering companies. The company owns state of the art facilities for nanotechnology, biology, laser/optics and electronics. Focusing on innovation, Oceanit employees work primarily in the aerospace, life sciences, engineering, and information systems fields. Read more here.

In China, the Pen Is Mightier When It’s Pricier

One of the greatest benefits of globalization is ability to resuscitate and recycle entire markets.  As countries develop, certain markets mature and fade, thus losing their luster and revenue.  Over the last 20 years, markets for such products and services as pagers, pumps, movie theater designers, luxury watch purveyors and a number of others enjoyed their second wind in emerging markets.  As the story below illustrates, fountain pens are a great case in point. Long on the decline in the U.S. the market for high-end writing instruments is enjoying a rebirth in China and other emerging markets.

Besides being an entertaining read, this story should serve to prompt any U.S. CEO, whose current business is stagnating during these difficult economic times, to examine the possibility of taking the business abroad and regaining the growth mojo there. More often than not, it is possible to inject new life into existing businesses by crafting a comprehensive international strategy.

If you have any other examples of companies, or entire market being reborn as the result of international expansion, or would like to explore taking your company abroad, please write to me at agordin@broadstreetcap.com

I hope you enjoy the article and welcome your comments.

Parker Writing Instruments Find a New Prestige Market for a Category That’s Been Fading in the West

as published in the Wall Street Journal  November 2, 2011

BEIJING—Fancy pens are writing a new chapter for themselves in China.

Smartphones and tablets have made expensive pens passé to business executives in many parts of the world. But Chinese professionals are increasingly snapping them up—including some that cost thousands of dollars—as a display of their new wealth.

Enlarge Image

Laurie Burkitt/The Wall Street JournalA shopper in China looks at upscale pens, which are selling briskly there.

A design team in China for Parker Pen Co., one of the world’s largest producers of writing instruments, has darkened its pens’ ink to appeal to writers of Chinese characters and added to the pen’s head a special Chinese character that says “Fu,” meaning prosperity and good luck. Parker has launched several special edition pens, including a “Golden Dragon” pen costing 39,888 yuan, or about $7,500.

Such moves have helped make China the top-selling market for Parker, says Penny McIntyre, head of the office products division of Atlanta-based Newell Rubbermaid Co., which owns Parker. Sales of Parker have surged 30% to 50% within the past three years in many of the nearly 500 department stores in China, where Parker sells its Chinese-inspired collection at special kiosks, she says.

Enlarge Image

Parker PensParker’s Golden Dragon

The office products division, which includes Parker, is Newell Rubbermaid’s most profitable, and in 2010 accounted for about 40% of operating profit and 30% of sales at Newell Rubbermaid, which had 2010 revenue of $5.76 billion. The company does not release specific sales figures for its individual units, but a company spokesman said fine pen sales in China now contribute “substantially” to sales growth for the company. A restructuring and 500 layoffs announced by Newell Rubbermaid on Friday won’t affect the Parker division, in which the company plans further investments, the spokesman said.

Parker is one of many companies attempting to gain a second wind in China, where pre-existing images can be recast for a brand new set of consumers. Best Western International Inc. launched in China in 2009 as a three-star hotel instead of maintaining its budget image in the U.S. General Motors Corp. positioned Buick in China as an upper-class brand and it has largely become a status symbol in China, a sharp contrast to its image in the U.S. Similarly, French fashion brands Pierre Cardin and Cerruti also came to China in hopes of reviving their luster.

Yu Liang, a 37-year-old personal trade consultant, visited a Parker kiosk in the northern port city of Tianjin recently and spent 3,688 yuan ($573) on his sixth Parker pen. Mr. Yu started buying Parker pens a few years ago. “Some people collect handbags, some people collect jewelry, and I collect pens,” Mr. Yu said.

The number of affluent citizens earning a household income of more than one million yuan (about $156,000) jumped about 20% last year, and they accounted for 45% of China’s luxury buyers, according to consulting firm McKinsey & Co.

Pens are selling well because they’re an affordable accessory and useful in China’s gift-giving business culture, says Shaun Rein, managing director of China Market Research Group and author of “End of Cheap China.” Pen sales in China, including non-luxury brands, jumped to 7.8 billion yuan, or $1.2 billion, in 2009, up nearly 17% from a year earlier, according to the most recent data available from market research company Euromonitor International.

Parker isn’t the only maker of pricey pens building a business in China. Montblanc, owned by Cie. Financière Richemont SA, has opened up standalone stores to sell pens and other products, and says sales are growing quickly.

Parker, and a small brand, Waterman, also owned by Newell Rubbermaid, command about a 25% share of the global market for fine writing implements, according to company estimates provided to analysts in 2010. Montblanc has about a 28% global market share, according to the same report. Montblanc wouldn’t comment on its market share.

Parker’s success in China is essential for the brand’s survival. Founded in Janesville, Wisc., in 1888, Parker was the most popular fine-writing pen in the U.S. for generations. U.S. Gen. Douglas MacArthur used a Parker pen when he signed Japan’s surrender ending World War II.

Newell Rubbermaid bought Parker as part of a package of companies in 2000. The company gradually lost prestige—and profits. Sales slumped in North America and Europe, though those markets still make up about half of the company’s sales.

So Parker turned to China. Jean-Charles Hita, Newell Rubbermaid’s Geneva-based president of fine writing, came to Parker about four years ago from Bulgari, and found lots of work to do to rebuild the pen’s reputation as a luxury item.

The chance to restore sales, Mr. Hita and others saw, was in China, where an expensive pen remains a status symbol that climbing middle-class consumers can aspire to own.

Parker dispatched its design team to the country in 2009. The company also priced the pens to make them aspirational—unlike in North America, where it had cut prices as sales lagged.

“They went for volume,” Ms. McIntyre said of previous Parker management teams in the U.S. “That’s fine, I guess, but you denigrate your brand in the luxury space. We saw what happens if you don’t pay attention to a market. It’s called North America.”

Zhao Lin, a 40-year-old trade director at a state-owned enterprise in the northern port city Tianjin recently went to the local department store to buy a 1,518 yuan ($236) Parker Sonnet Ladies’ Fountain Pen and a 528 yuan ($82) Sonnet Rose Gold as birthday gifts for a co-worker in the human-resources department.

“She’s always having people sign papers and she can’t just pull out any pen for them to use,” Ms. Zhao said.

Write to Cameron McWhirter at cameron.mcwhirter@wsj.com and Laurie Burkitt atlaurie.burkitt@wsj.com

USTR.gov November 4th, 2011

Announcements for the Week of Oct. 23-28, 2011 U.S. Trade Representative Ron Kirk and U.S. Commerce Secretary John Bryson to Convene 22nd Session of U.S.-China Joint Commission on Commerce and Trade in Chengdu, China November 4, 2011 – U.S. Trade Representative Ron Kirk and U.S. Secretary of Commerce John Bryson will co-chair the 22nd session of the U.S.-China Joint Commission on Commerce and Trade (JCCT) with Chinese Vice Premier Wang Qishan on November 20-21, in Chengdu, China. U.S. Secretary of Agriculture Tom Vilsack will also take part in the discussions to address key agricultural trade concerns. “The JCCT is a key venue for ensuring that our bilateral trade relationship moves in a positive direction to provide maximum benefits for American workers and businesses,” Kirk said.“Through this year’s JCCT, we are pressing China for concrete and measurable results on a number of significant issues including China’s policies on intellectual property rights, investment and innovation, as well as a range of sector-specific industrial policies.” “The JCCT is an important opportunity to address and resolve key trade concerns with China,” Bryson said. “Our goals are to help open markets to U.S. exports that will improve the lives of the Chinese people, and to work to level the playing field for American companies. Our year-long work on these and other issues on the JCCT agenda will help spur economic growth here at home by increasing exports to China, and help us meet our National Export Initiative goal of doubling U.S. exports by the end of 2014.” “Thanks to the productivity of America’s farmers, ranchers and producers, our trading partners in China recognize the United States as a reliable supplier of the highest-quality food and agricultural products,” Vilsack said. “Partnerships with a growing market like China are integral to the strength of the U.S. economy in the decades ahead. Under the Obama Administration, USDA has continued to expand markets for American goods abroad, worked aggressively to break down barriers to trade, and assisted U.S. businesses with the resources needed to reach consumers around the world.” Established in 1983, the JCCT is the main forum for addressing bilateral trade issues and promoting commercial opportunities between the United States and China. The JCCT holds plenary meetings on an annual basis, while a number of JCCT working groups meet throughout the year in areas such as intellectual property rights, agriculture, pharmaceuticals and medical devices, information technology, tourism, environment and statistics. Please find the full release here. United States and East African Community Launch Discussions on New Trade and Investment InitiativeNovember 4, 2011 – Today, the United States launched exploratory discussions during a meeting with the East African Community (EAC) in Arusha on a potential new trade and investment partnership. Ambassador Alfonso Lenhardt, the U.S. Ambassador to Tanzania who is also accredited as the U.S. Ambassador to the EAC, opened the meeting. Assistant United States Trade Representative for African Affairs, Florie Liser, led an interagency team of representatives from the Departments of State, Commerce, and Agriculture, as well as the United States Agency for International Development (USAID), in the day-long consultations. “The possibility of a new trade and investment partnership between the East African Community and the United States has generated a high level of interest and excitement on both sides,”said Assistant U.S. Trade Representative Liser. “This excitement is largely due to the recognition that greater trade and investment between the United States and the East African Community has the potential to increase economic prosperity and create jobs in America as well as in the EAC member countries.” The EAC Partner States include Burundi, Kenya, Rwanda, Tanzania, and Uganda. Total two-way goods trade between the United States and the EAC was $1.1 billion in 2010, with $632 million in U.S. exports and U.S. imports totaling $437 million. Kenya was by far the United States’ top trading partner within the EAC with two-way trade totaling $656 million, followed by Tanzania with $201 million, Uganda with $143 million, Rwanda with $51 million and Burundi with $17 million. Top U.S. exports to EAC countries were machinery, aircraft, and used clothing last year. Top imports included coffee, apparel, nuts, and semi-precious stones. Please find the full release here.

InvestUkraine

NY Report’s Alexander Gordin talks about an opportunity to invest in an emerging market

By: Michelle Court

November 3, 2011

An upcoming event about the benefits of investing in Ukraine will showcase the country’s opportunities for interested investors. The event will feature opening remarks from US Congressman Michael Grimm (R-NY) as well as presentations on the country’s investment climate, legal requirements for investments, and Ukraine’s national projects such as gas, recycling, and wind and solar energy projects, as well as the country’s developing sports and tourism infrastructure in order to potentially host the Winter Olympic Games in 2022.

Small businesses looking to invest in foreign markets, especially developing foreign markets, should take Ukraine into consideration. “Foreign nations with emerging markets are growing, and so is their middle class, opening up a new consumer market with spending power,” says Congressman Grimm. “These markets also provide an opportunity for a company to build a global brand with less competition and lower costs.” In a country like Ukraine, for example, there are also opportunities to expand into the surrounding markets in neighboring European countries, as well as Russia and the Middle East.

Businesses that would benefit most from investing in Ukraine include companies whose focus is environmentally based, such as waste management and recycling, as well as industries such as travel, tourism, and hospitality. Agriculture industries could also potentially benefit from investing in the country.

Investing in Ukraine, while potentially beneficial for an American company, is not a decision to consider lightly. “We think it’s a long term, bullish market. Anybody coming to Ukraine should look at is as such. It’s not a place to get rich quick,” says NY Report contributing editor Alexander Gordin. Gordin is also the Managing Director of the Broad Street Capital Group, one of the hosts of the InvestUkraine event.

If you and your company are interested in investing in the country, says Gordin, it’s incredibly important to understand the country’s political, regulatory, and business climates. This is particularly important because of Ukraine’s complex politics. Doing research on the country beforehand is imperative. “The more time spent preparing, the better served a company will be prior to going in,” he says. For research, Gordin recommends using the CIA.gov website, the U.S. Commercial Service website, The American-Ukrainian Chamber of Commerce and Industry, Princeton Council On World Affairs (www.princetoncouncil.org) and the U.S.-Ukraine Business Council. Gordin also recommends visiting the country beforehand and spending time there in order to understand the country’s people. “Ultimately, businesses transactions take place between people,” he says. “It’s a very proud nation with a long, rich history.”

Because politics and businesses are so closely aligned in Ukraine, it’s also important for investors to understand the country’s political system. Prudent investors should not align their business with a particular party, however, but respect the party in power.

Also, says Gordin, “patience is important. It is important to realize the bureaucracy is very well entrenched.” Investors should also make sure to follow through at all times and all levels of their projects. “Even though an agreement is reached at high levels, unless it’s followed through thoroughly, its implementation may get bogged down in midlevel bureaucracy.”

However, for a company that invests the time and research beforehand, the rewards can be plentiful. “Ukraine is a great place to do business. It’s a country with tremendous potential with a lot of people in the middle of Europe. It’s a very attractive marketplace,” says Gordin.

Congressman Grimm agrees. “Last year, the United States exported $240 billion worth of goods to the EU, and had a $281 million positive trade balance with Ukraine,” he says. “It has tremendous growth potential and there are benefits to deepening our economic ties. With Europe poised to enact a historic free trade agreement with Ukraine, we don’t want to be left behind.”