I am a sucker for data, so I was jubilant when I received the results in Washington last week of a survey of experienced American exporters about the trade barriers they face in foreign markets. The survey was done by the Department of Commerce and canvassed about 400 exporting companies about the most bothersome trade barriers they have run into over the last five years. Some of the respondents, like me, are consultants who responded in behalf of their clients. Companies of all sizes were included, but most were small firms, though with considerable experience. The survey did not address the experiences of new exporters, who might be more inclined to let a foreign barrier stop them in their tracks.
The trade barriers that excited the most complaints were the pedestrian ones of customs barriers and disagreements about customs classification (seen by a bit over 15% of the respondents), or product standards testing, labeling or certification requirements (also about 15%). About 12% of the companies complained about excessive or unfair government requirements and fees (I am surprised this isn’t higher). Rules of origin issues come in at about 8%. The headline issues of bribery and corruption were mentioned by 6.5%, closely followed by government procurement barriers (6%) and intellectual property concerns (5.8%). Import licensing requirements and having to compete with state-owned companies both came in at over 5%. Fewer than 2% of the responding companies said they hadn’t run into any significant barriers.Where were you most likely to hit a road block? China, hands down. Taking your products to China is a risky business, cited by 17% of the respondents. The next most likely country to do you wrong was deemed to be Brazil (12%), followed by Russia and India at 8%. Gives BRIC a whole new meaning, doesn’t it! South Korea was next up (6%), accompanied by the European Union (as a whole), France and Germany (individually), and Mexico – all at 5%.
Most of these markets tend to specialize in the types of barrier they use. The EU, Germany, France, China and Japan all like to stop imports by using standards restrictions. Brazil is especially prone to use tariffs, customs classification and other barriers at the borders, though Russia, India, China and South Korea aren’t shy about this. China seems particularly tight on invoking rules of origin to keep products out. China and India were the most often criticized for their government procurement restrictions. It won’t surprise you that these two are also top of the list for intellectual property violations. Excessive fees and bureaucratic restrictions also feature Brazil, China and Russia. It is China and Brazil yet again for imposing import licensing requirements. China, Russia, India and Mexico lead the way on corruption. (I was pleased to see only one complaint about bribery in Indonesia.) Notice that China appears in almost every category, employing the full arsenal of trade restrictions.
To their credit, the exporters didn’t usually let the trade barriers stop them. Some handled the issue themselves, while others sought help from the foreign government or from the U.S. government, but most succeeded in doing business. Almost all, however, noted that they could have done a lot more business without having to run the barrier gauntlet. The countries where companies were most likely to give up were, of course, China (8 out of 42 that reported barriers), Brazil (3 out of 33), and the European Union (3 out of 23). Small sample, but intriguing.
There was a final question that tried to get at how many companies had not even tried to do business in a market because they were already aware of a deal-killing trade barrier. A huge 29% of the responding exporters said they had not gone to China because of its trade restrictions. 10% said the same about Germany! And 9% had stayed away from Brazil and Mexico.
Respondents were encouraged to comment, which produced a few gems. While most argued that India is tough to do business in, others made the point that you can’t consider India as a single market; if you pick the right state, you can do very nicely, thank you. One company, presumably with tech products, complained that the worst trade barrier they see is America’s own export licensing requirements. Individual companies commented that they refuse to do business in China, India or Italy (!). Another picked out eastern African markets as being good business, while different companies said they avoid Kenya, Nigeria, Ghana, Venezuela and the Middle East. Customs barriers in Italy and Turkey were hit, as were unexplained cargo seizures by customs agents in Russia, Belarus and Kazakhstan.
Protectionism is alive and well.