| Love it or hate it, the Australia-United States Free Trade Agreement is up and running but what does it mean for your bottom line? APA hones in on motor racing components importer Raceparts Australia and hands out a few aftermarket tips on doing business in the Land of the Free.
(CAP)It’s been heralded as a landmark agreement that gives Aussie businesses expanded access to the world’s largest importer and investor – The United States of America.
The Federal Government says the deal has created significant export opportunities through the reduction of tariffs, the increase of specific quotas, the easing of market restrictions and the streamlining of investment processes.
It’s promised to increase economic activity, create jobs and give Australian companies a fair go in the international marketplace.
The result: More jobs, more consumer choice, and with a bit of luck, more opportunities for those in the auto aftermarket.
CASE STUDY: Raceparts Australia
Brisbane-based company Raceparts Australia started off its operation in October 1996.
Company director Mike Edwards built the family-owned business on importing BMRS hose and fittings, Ford Racing Performance Parts and Performance Friction Brakes from America.
He says the new free trade agreement between Australia and the U.S. has put the products in a more competitive position.
But a major reason for getting involved with USA manufacturers came from a visit to one of America’s biggest trade fairs, Edwards says.
Take to the Streets with Relevant Trade Fairs
In 1995 Edwards visited the Performance Racing Industry Trade Show (PRI) which now takes place in Orlando, Florida.
Impressed by the enormity of the potential and the different and unique product lines that had never been shown in Australia, Edwards set about developing all-important business links.
“The benefit to us is that the racing series here in Australia closely reflects the racing industry in America. So drag racing, sprint car racing and our V8 Supercars are more closely related to the American style of racing.”
Currency is King
“We now concentrate on dealing with manufacturers from the USA as opposed to the UK or Europe as the advantage of the FTA and the stronger currency makes the product more attractive to the end user.
The FTA has certainly helped our business because the price of some of our items is at a level where the smaller racing teams can justify the cost of our product rather than opting for a cheap copy from Asia.
Manufacturers like Performance Friction brakes also make product to suit passenger vehicles, light and heavy commercial and off highway applications. The costs savings for product used in the mining and transport industries will in effect help our largest export industry.”
The Jury is Out
Austrade chief economist Tim Harcourt believes some commentators have been quick to applaud or condemn the FTAs that Australia commenced with Thailand and the US in 2005.
“Although there is very limited trade data currently available under the FTA regimes, we can begin to assess the contribution that these FTAs have made, and will continue to make, towards generating export opportunities for Australian business,” he said.
FTA Fast Facts
Australian exports to the USA more than doubled from $7.4 billion to $16.7 billion between 1995 to 2000, partly thanks to a depreciating currency and strong economic growth in the USA
However, from 2001 to 2005, exports declined due to slower growth in the USA (following the dot.com crash), an appreciating currency, and special sectoral factors affecting Australia’s exports of oil, beef and passenger motor vehicles. The largest fall was in 2003.
|
This trend is beginning to reverse with a 3 per cent increase occurring in Australian merchandise exports to the USA in 2005-06.
Although its early days, some sectors that received reductions in tariffs under the FTA have seen increase in exports – including Dairy, Lamb, motorboats, medicants, space navigation equipment, (unwrought aluminium), selected automotive components. There have also been some gains in government procurement – although they tend to have longer lead times.
The FTA has also provided something of a ‘head turning effect’ for encouraging small and medium sized enterprises (SMEs) to get into export. Before the FTA, in August 2004, 19 per cent of exporting SMEs sold to the USA, whilst in August 2006 the proportion was 27 per cent.
Case studies of Australian companies in the US market: Sealite Pty Ltd, Powersafe, Team Results, Vic, Future Fibre, Seed Genetics, EGR, Suncoast Gold Macadamia, Lunar Lighting.
Business etiquette – Courtesy of Austrade
When dealing with US business people the use of Australian slang should be avoided as it may lead to confusion and misunderstanding. Ensure you use American spelling on materials targeted at the American market, eg. color not colour.
In the USA, business attire is very important and projects the image of your company. US business people are generally quite sensitive to dress standards, so it’s wise to err on the conservative side. A business suit is appropriate for meetings and most trade shows.
Academic credentials are not necessary on business cards. Americans will be more impressed with your understanding of the market, your product, and their company. It is recommended that phone and fax numbers on your business cards should have the International Country Code dialling details.
Face-to-face business meetings are an important element of doing business in the USA.
Plan appointments at least a month to six weeks in advance, or as soon as you know your travel details.
Voice mail is used by companies across the USA as a filtering device. Messages are often never returned. Have a rehearsed message ready so that if you are required to leave a message it is a quality and succinct selling message.
Confirm appointments the day before and never arrive at an office unannounced.
US business people will rarely leave their office to meet you, so meet them at their office or at a venue of their choice.
Ensure that all necessary information is readily available, including your pricing CIF, delivered, production capabilities and trading terms.
Remember that your first price is just the starting point for negotiating - the US entity will expect several offers and counter-offers before a mutually acceptable price is reached.
Involve a lawyer to check any contract reached.
Make sure you clarify what you understand to have taken place at a meeting because Americans are generally courteous and positive in listening to your presentation, which can give a false impression of interest (or commitment) on their part.
Conclude the meeting with the understanding that you will follow-up - don’t rely on the US businessperson to make the next move.
Fast and comprehensive follow-up is essential - in any follow up go over who you are and when you met as the buyer may meet several hundred sellers a month.
|
