John L. Manzella has a keen interest in global trade.
During a conversation, he moves from the problems plaguing China’s economy, to the impact of free trade agreements, to which nations show the most promising growth rates.
Manzella wants to put his knowledge to work for the benefit of local companies. Several months ago, the author and chairman of the Upstate New York District Export Council was named president and CEO of World Trade Center Buffalo Niagara.
If the organization’s name is not familiar locally, Manzella is determined to change that. The 56-year-old East Amherst resident is eager to introduce companies to exporting, and to help experienced exporters increase their amount of international trade. Buffalo’s World Trade Center is part of an association with more than 330 such locations in 89 countries. The local organization has about 100 members.
The way Manzella sees the global economy, local companies can’t afford not to export: “The opportunities for companies to expand are tremendous, and we can help them get there.”
Q: What is your goal as leader of this group?
A: We’re elevating, I think, the level of sophistication. Most World Trade Centers offer basic services such as a small manufacturer has an interest in penetrating, say, Brazil. They need a list of distributors, the tariff and non-tariff barriers. And then they get an understanding of the marketplace. And that’s all very, very important. We offer those services as well. However, we now have services we can offer to much larger companies that are already engaged, seasoned companies very familiar with the international marketplace. … What we do is really identify the emerging risks and provide a much better understanding of the international environment.
Q: What’s the argument for U.S. companies to export, instead of sticking to the domestic market?
A: U.S. economic growth is projected to be about 2 percent this year, 2017 and 2018. … And that may be optimistic, No. 1. and No. 2, the vast majority of economic growth is outside of U.S. borders. For example, markets outside the U.S. represent 73 percent of global purchasing power, 87 percent of economic growth and 95 percent of consumers. So U.S. companies, as a result of hyper-competition, have no choice but to expand internationally, or face severe consequences. I really believe this, I’ve always believed this, but now to a greater extent than ever, because U.S. economic growth is modest at best.
Q: What companies are best suited to export?
A: In the five Western New York counties, according to the Department of Labor, there are 1,628 manufacturers. The vast majority of these companies are small- to medium-size enterprises. Statistically, only about 5 percent of small- and medium-size enterprises export. So there is a tremendous opportunity right here in Western New York.
Q: There’s a lot of criticism of NAFTA and free-trade agreements in the presidential campaign. What do you think of free-trade deals?
A: U.S. manufacturers have a large deficit with the world in terms of trade. But U.S. manufacturers have a trade surplus with our free-trade agreement partners. So that tells us that when you level the playing field, American manufacturers can compete with anybody in the world. … What these free-trade agreements do is help us to eliminate tariff and non-tariff barriers in foreign countries, to allow U.S. companies to export to a greater extent.
There’s so much misinformation wrapped around this, it’s incredible. … Very often, what you have is politicians pandering to the fears of their constituents. For example, when a factory closes down the street, you lose, say, 100 jobs, that will make the local news, it may make the national news, it will be in the headlines of the local papers. However, what you don’t hear are the 15 companies in the region that hired three or four employees each as a result of them expanding internationally.
Q: What about U.S. manufacturing jobs going overseas?
A: A lot of manufacturing is coming back to the U.S. as a result of “backshoring.” For a whole variety of reasons, most importantly rising Chinese wages, more and more U.S. companies are redoing the math. And they’re finding that if their major market is North America, many are bringing production back to the U.S. … because of quality issues. And in China, when you put orders in, for example, they’ve got to be larger orders, there’s longer lead times, more capital invested. … If their major markets are China and Asia, many of these U.S. companies are still better off producing in Asia.
Q: What’s your view of China’s economy?
A: China’s going through a transition on a number of levels. It’s shifting from a state-managed economic system to a market-oriented system. It’s a very difficult shift, because they have 100,000 state-owned enterprises with assets of about $13 trillion, and they underperform, they’re less productive, they use capital less efficiently, they put a drag on the economy. … You’ve got state-owned banks which lend money to state-owned construction companies to build ghost cities, so the money is very inefficiently spent. The objective is to create jobs.
So when you have a state-managed system, you can dictate, in many ways, policy. You can create jobs by hiring workers, for example, but the money is used very inefficiently. China has a number of ghost cities. They built entire infrastructures – cities, roads – and people don’t live in those cities. They may come in the future, but that’s an example of a state-managed system gone awry.
Q: How can U.S. manufacturers stay competitive against other countries?
A: The bottom line is this: companies that focus on (intellectual property)-rich products that require skilled labor will continue to do well. Those companies in the U.S. that produce products that are lacking in terms of intellectual property or basic products will continue to be knocked off by developing countries.