American manufacturers understand that they are working in a flat world where they compete globally, whether they choose to or not. Many firms are increasingly aware that their future growth is going to come from emerging markets overseas. The Economist reports that in the next decade, almost a billion new consumers will enter the global marketplace from emerging economies. The question is: Will American manufactured products be competitive enough to capitalize on these new markets?

To take the pulse of the manufacturing industry and how it is faring in this flat world evolution, I spoke to Al Frink, the U.S. government's manufacturing czar. Frink serves as the federal government's chief advocate for the U.S. manufacturing sector at the Department of Commerce. He brings tremendous credibility to his position, having served 30 years in the private sector as a small business executive. As we close in on 2007, I asked him what trends he sees emerging from U.S. manufacturers on the front lines.

“While the situation is very fluid, the good news is that there are more and more companies getting off the sidelines and into the game,” Frink says. “Cutting costs and emphasizing lean production methods will go only so far. The future is going to be based on innovation and on products that are hard to replicate.

“Companies are working to get their costs down, but more and more are recognizing the need to differentiate. They know that they can't hold on to being a low-cost commodity producer. That's just not a realistic role for American manufacturers today.”

It's not all up to U.S. manufacturers. Government has a role, as well, particularly regarding the need to enforce existing global intellectual property rights (IPR) regulations. If Americans are to continue innovating to stay competitive, they must be protected. This problem is very significant to the future of American manufacturing. According to the National Association of Manufacturers (NAM), each year some $500 billion in fake products are sold in the global market, and perhaps no industry has been more affected by this counterfeiting than manufacturing. China is one of the largest violators.

While Frink readily acknowledges these challenges, he says there are some great Fortune 500 models to emulate, like that of Caterpillar Inc. “The Caterpillar model is definitely one to be studied,” says Frink, who works closely with Caterpillar CEO Jim Owens through the commerce department's manufacturing council. In the first six months of last year, Caterpillar reportedly increased its exports to China by 40 percent over the previous year, which created 5,000 new production jobs at factories back in the United States.

Caterpillar is not alone. USA Today recently noted that last year's $41.8 billion in U.S. exports to China represented a 157 percent increase compared with 2000's $16.3 billion. Such success stories are the ones that help Americans understand the great value of international trade and to know that it's not a one-way street. Foreign trade will be more critical to growth for the U.S. economy. According to the U.S. Trade Representative (USTR), trade contributed to 20 percent of U.S. economic growth in 2005.

Although American multinationals continue to prosper in foreign markets, it's the small companies that are providing hope to those companies wondering if they can still compete in this new global world. “What inspires me is meeting great industry leaders like Donald L. Mottinger, CEO of Superior Products,” Frink says. “While only a $10 million firm, they are maximizing their competitive edge and acting like a global powerhouse like Caterpillar.” Headquartered in Cleveland, Superior Products manufactures a line of compressed gas fittings, assemblies and manifold systems for the welding, medical and specialty gas markets throughout the world.

The firm was founded 60 years ago as a general screw machine company. When Mottinger assumed the helm in 1992, the firm expanded its product lines to serve the welding, medical, beverage and specialty gas industries worldwide. In 2002, Superior opened a state-of-the-art distribution center to handle its 8,700 products and ship 12 million parts a year. Superior has added new products each year and now has five patented product lines. It has developed an engineering department to develop new products and systems.

Frink sees Superior Products as a great model for small manufacturers. “One of their product lines includes small medical device components that are made from brass, a commodity that is much more readily available to U.S. domestic producers than their foreign competition,” he says. Frink says this gives the company an immediate leg up on its sourcing needs. “They are a $10 million business which serves global customers in Canada, Mexico, Europe and now Asia. Superior Products Inc. is being run like a Fortune 500 company and the results speak for themselves.”

A critical Resource
A key linchpin in America's international trading success is the ability to finance commercial transactions in difficult markets and to do so expeditiously. Commercial banks are a critical resource to manufacturers doing global business. One such bank is M&T Bank, which has been awarded the president's “E” award for excellence in international trade.

M&T Bank has a track record of having put together more than 600 international trade loans worth more than $750 million in the last 10 years. “M&T has also been one of the top-five banks working with the U.S. Eximbank,” says David Cooke, group managing director for international trade finance at M&T.

The M&T-U.S. Eximbank relationship allows it to respond to the financial export needs of U.S. manufacturers in almost any foreign market with the backing of the U.S. government. If companies want to export to emerging markets like Mexico or China, M&T quickly sizes up the customer at the other end and advises whether or not the deal is viable, helping save the company time and potential anxiety. Additionally, M&T can extend financing to the foreign buyer to enhance the prospect of the deal going through while expediting the payment process to the U.S. exporter.

Leading markets for this service include Central America, Mexico, the Dominican Republic, Turkey, Nigeria and Russia. This is a key advantage to exporters that cannot afford long delays in payment.

“M&T Bank is a global company with corresponding relationships in most parts of the world,” Cooke says. “We have correspondent relationships with more than 2,000 banks in nearly 3,000 locations worldwide.”

These relationships can prove extremely fruitful. Local banks in foreign countries have access to state economic development agencies similar to those in the U.S. “For instance, in Mexico, many states are providing incentive packages for firms to do business in their regions,” he says. “They bend over backwards to get U.S. investment.” Additionally, these banks can help manufacturers that may wish to develop joint ventures or pursue local country acquisitions.

“While U.S. manufacturers must do the hard work of innovating and cutting costs, executives need to know that the U.S. government also has vast resources to help U.S. manufacturers export their products to foreign markets,” Frink adds.

At the state level, those resources include their local state economic development office, U.S. Export Assistance Center and local industry trade associations. Overseas, the U.S. Commerce Department has commercial offices throughout the world that are staffed by business-savvy veterans to help U.S. firms succeed in foreign markets. Companies can find out more about tapping the U.S. Commercial Service by accessing www.buyusa.gov. “Those manufacturers that do well are those that don't give up. The ones that succeed are the ones that make the second effort,” Frink says.  

Peter R. Gourlay is chairman of the Business Growth Committee of the World Trade Center Institute. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

©2006 Schofield Media Ltd.