An Op-Ed by Gardner/Ferreira

To paraphrase the title of a late eighties movie title, there could be “Big Trouble in Little China”.

The big trouble (potential commercial fallout from the perceived and/or actual mishandling of COVID-19) could relegate China to the little trade partner – especially if Donald Trump hits the nuclear option on trade and tariffs with the “Middle Kingdom”. Add this possibility to the fact that importers were seeking non-China sourcing alternatives prior to the Coronavirus, and the handwriting could be on the wall for the future of commerce with America’s number one import trading partner. 

If that happens and companies begin looking for places to buy and sell their goods outside of China, Small-to-Medium Sized Enterprises (SME’s) will have to play a big role in what many are hoping is a renaissance for U.S. manufacturing. And given the very nature of trade itself that means that those same SME’s are going to need access to a very important resource: Trade Finance. Stated simply, if SME’s don’t have the working capital to run their operations, a major opportunity for the U.S. will have been lost.

Trade Finance was important prior to COVID-19 and in our opinion, will quickly become a hot button subject for the “New American Revolution”. Recognition of the importance of trade finance already can be seen in long-standing government programs run by the U.S. Exim Bank, as well as the Small Business Administration. Also, access to international markets for SME’s is now an explicit provision of all major Free Trade Agreements, the best example of which is the newly ratified U.S., Mexico, Canada FTA.

Of equal import, a diverse group of commercial entities like Citi, American Express, Zilingo, SAP Ariba and even the 3PL, Flexport are all offering trade finance services. In the future, this could means that a small manufacturer of wearing apparel in Akron that imports raw material from Mexico, manufacturers in Ohio and exports finished goods to Europe will have access to competitively priced trade finance options. The same can be said for a “solopreneur” broker of imported auto parts that through trade finance can grow her business and hire more people in the U.S.

Add to the above the continued growth of B2C and B2B on-line models and the potential for trade finance to become a catalyst for job growth in the U.S. will be undeniable. Whether a company operates their own model or uses platforms such as eBay, Etsy or Shopify, the possibilities for e-commerce trade growth are endless. Because many of these on-line traders are SME’s, they’ll need substantial support for their import/export operations, too. 

In the realm of global trade, the unfortunate reality is that having a great product at a fair price is just the, “price of admission” into the Big Game. Companies also need things like strong logistics networks, world-class customer service, highly targeted marketing programs and of course, trade finance. Even if the Trump Administration doesn’t go full nuclear with its China policy, it’s a big world out there and as America’s SME’s seek opportunities in foreign markets, they’re going to need to working capital to pull it off.

In the spirit of the original American Dream, it is our belief that trade finance will be the tool that just might allow Flexport to find the next Apple or how American Express nurtures the next Tesla. Let’s not forget that companies like Apple started out as an idea in an entrepreneur’s mind and without an early financial hand, we wouldn’t be talking about them today. When it comes to supporting the next generation of SME’s, let’s hope that trade finance is the apple that doesn’t fall far from the tree. 

About the Authors:

Daniel L. Gardner is President and co-founder of Trade Facilitators, Inc. https://tradefacil.com Prior to establishing TFI Mr. Gardner spent twenty three years in the Third Party Logistics field where he held senior management positions with Fritz Companies and DHL Global Forwarding.

In addition to his professional experience Dan has been an adjunct professor of logistics and supply chain management in the graduate business schools of Florida International University and The University of Miami. During the 2001-2002 academic year Mr. Gardner was voted Top Professor by the students in the Masters of International Business Program at FIU.

Steve Ferreira has a 37-year background in global container shipping. He established Ocean Audit in 1994 and his work includes securing multiple million dollar refunds for his clients, including 16 of the Fortune 100. Steve is recognized as one of the world's leading experts on billing, auditing and business intelligence in the ocean freight industry. and overcharge issues experienced by Shippers. Steve is often cited in leading business publications, including The Journal of Commerce, The Wall Street Journal, USA Today, CNBC and Forbes. To learn more about Ocean Audit, head to www.oceanaudit.com.

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