US Missing Trade Opportunities In Central and Eastern Europe
DESPITE the national call for stronger competitiveness, United States policymakers are offering ambivalent support for American firms that need money and guidance to reach overseas markets.
Overshadowed by Europe's historical ties and proximity to Central and East Europe, American businesses are shrinking from promising trade and financial opportunities there.
Witness Uncle Sam's help in making Polish bagels and Hungarian cellular phones while Germany offers Prague a crucial chance to reduce its dependence on Russian energy with a Czechoslovak pipeline to German oil terminals.
A host of US government agencies help finance US projects and exports to the former communist countries. But the pace is slow, reflecting conflicting US government priorities, inadequate investment capital, and persistent US uncertainties about these new markets.
One government organization, the Overseas Private Investment Corporation (OPIC), issues political-risk insurance and financing for US companies investing in the developing world. In 1989, Secretary of State James Baker III waived the prohibition against allowing the federal agency to insure investments in "countries subject to the international communist conspiracy."
Today a vast new market is open for OPIC President Fred Zeder, who was at the White House on March 9 promoting OPIC's Eastern European work. Its accomplishments include a bagel bakery in Poland, as well as scores of other regional investments, such as food-processing plants, banks, a hotel, and Burger King restaurants. But the funds fall short of what is needed.
"For our worldwide operations, Congress authorizes $350 million per annum, but we have requests from US firms with projects for Eastern Europe three times that amount," Mr. Zeder told the Monitor.
The Bush administration recommends a higher ceiling for OPIC's annual budget, with an eye toward Eastern Europe and the former Soviet Union. But the lack of commitment from Congress has prevented OPIC from authorizing any additional capital, says Zeder. Corporate giants silent
Small and medium-sized businesses, not America's ailing corporate giants, have been the important contributors to economic growth in the past year. And some 30 percent of the companies filing for OPIC assistance are small firms, first-timers in international finance and trade. In 1991, OPIC financed deals that produced $2 billion in exports and created 40,000 jobs, Zeder says.
But, Bush administration officials lament privately, there is no concerted government policy that accompanies the rhetoric about "creating American jobs" and the constant reminders that US exports are essential to spur the nation's economic recovery.
This is a major problem for US companies, which are capital-poor compared to their Asian and European counterparts, says Jay Mitchell, an economist with PlanEcon Inc., a Washington-based firm that analyzes former Soviet-bloc economies. Given the massive corporate-debt buildup during the past 10 years, the on-going US recession, and tough banking regulations that restrict lending, US enterprises are hard-pressed to find ample funds for investment, says Mr. Mitchell. Difficult to compete
By contrast, European and Asian competitors, backed by their respective governments, are flush with funds and are aggressively pursuing markets for their goods and investments. "It's especially difficult to compete with Germany, the lead investor in the former Communist bloc," says Mitchell. The Germans are way ahead, he says, despite the strain of their $100 billion outlay for eastern Germany's economic restructuring.
Austria, Britain, France, and Italy are firmly rooted in Central and East European markets. South Koreans and Taiwanese have joined the Japanese as Asian suppliers of trade credits and start-up capital for the region.
"The US corporate community has publicized a couple of big deals in Eastern Europe," he says, but small and medium-sized American firms are not seizing opportunities like similarly sized European firms. "In five or 10 years it's going to be the medium-sized firms that make up most of the volume of investment in Eastern Europe," Mitchell says.
Joseph Fleig, a senior loan officer at the US Export-Import Bank, reports a slow "upswing" in applications from US exporters seeking ExImbank insurance and loan guarantees for Central and East European markets. US exporters must persist, says Mr. Fleig. "These markets have a thirst for American technology," he says. American producers can help quench it if they can avoid being squeezed out by West European competitors and scared off by slow-moving reforms.
Americans need more intelligence about prospective markets, says Zeder, and the commercial sections in US embassies must be better equipped to provide it. "Our best attache in Eastern Europe is at or below the European embassies' average," he says.
As a demonstration of Washington's commitment to promoting East European stability, the Bush administration points to the US role as the largest single shareholder in the World Bank and the International Monetary Fund. But the region can't count on endless support from these two global lending institutions.