2017 International Trade Survey of Connecticut Businesses
International trade has historically been a mainstay of Connecticut companies large and small.
This year, with the dawn of the Trump administration, many are asking what the White House has in store for international trade.
Against that backdrop, we conducted our sixth biennial Survey of International Trade, finding most respondents undaunted by the headlines and focused on their bottom lines.
With nearly 6,000 companies exporting from within the state, Connecticut achieved export levels in goods and services reaching $14.4 billion, and contributing to the more than $1.45 trillion in U.S. commodity exports in 2016.
The vast majority (89%) of Connecticut businesses engaged in international trade are small and midsize enterprises employing fewer than 500 workers.
This survey provides a comprehensive look at the state’s current exporting environment, barriers preventing growth, and the risks and rewards for businesses entering the international market.
The survey is sponsored by the Connecticut Export District Council, TD Bank, and CohnReznick, who continue to be committed to supporting trade services for Connecticut businesses.
Level of Involvement
More than three-quarters of surveyed companies (77%) are engaged in international trade, and most of those are veterans of the global marketplace, with an average of 27 years exporting experience.
Connecticut’s top three export categories are transportation equipment, machinery, and computer and electronic products, sold primarily to France, Germany, and Canada.
Survey respondents, on average, attributed about a quarter of their gross revenues to exporting (24%).
When asked if they believed exporting helped their companies weather the weak recovery from the recession and/or better positioned their company for a stronger recovery, 68% of businesses said yes.
Major Current & Future Markets
The largest foreign markets for Connecticut exporters are North America (73%), Western Europe (63%), and Northern Asia and the Pacific Rim—China, Japan, and Taiwan (51%).
Since our 2015 survey, North America regained its position as the largest foreign market.
Resources used to determine or establish new international trade markets include trade shows and meetings (63%), online or telephone inquiries (57%), agents and trade representatives (56%), and recommendations from business colleagues (28%).
Since our last survey, attending trade shows and establishing new trade relationships through agents have become more popular than cold-call inquiries, while relying on recommendations from industry colleagues has become less popular.
Of survey respondents engaged in international trade, 22% have facilities or employees outside the U.S.
The primary reason for investing in overseas facilities and personnel is to be closer to major customers and suppliers, cited by 48% of respondents with operations abroad. Thirty percent of businesses identified lower overall operating costs as their primary reason, down from 33% in 2015.
The primary motivators for entering international business are reactions to what customers want and where they are.
Expansion as a result of domestic customer needs (32%), ad hoc sales responding to specific inquiries (23%), and arm’s length sales to overseas distributors (13%) were most determined individual approaches to new international business dealings.
Forty percent of companies surveyed manage their international businesses by having leadership actively engaged in promoting international expansion.
A quarter have ongoing product or business development to meet international needs, while only 12% have dedicated and experienced logistics, sales, and marketing resources to manage international dealings.
Barriers to International Trade
Doing business abroad is not without its risks and hurdles.
The single greatest challenge for Connecticut exporters is government trade policy/regulation (40%), followed by international competition (23%), overall costs (20%), and cultural differences (12%).
Seventy-nine percent of businesses said state taxes are a disincentive to doing business in Connecticut.
Seventy percent of Connecticut exporters surveyed take advantage of the state’s R&D tax credit, 48% take the domestic production deduction, 14% utilize IC-DISC, and 38% benefit from other state tax incentives.
Improving tax policy—including preserving tax incentives that not only offset some of the costs of doing business in Connecticut, but also encourage companies to invest here—could go a long way toward making Connecticut a better state for exporters.
Almost half of respondents engaged in exporting have experienced payment delays or buyer defaults (45%).
Respondents use open accounts/letters of credit and payments-in-advance as established payment agreements with trading partners (both 67%).
Free Trade Agreements
Eighty-seven percent of respondents are currently exporting to Free Trade Agreement partner countries, up from three-quarters of respondents in 2015.
Only one-third of respondents said current FTAs (including NAFTA and countries such as Korea, Israel, Chile, Panama, and Peru) improve their ability to export. Half of survey respondents said FTAs with additional countries would be helpful in their international business and trading activities.
Companies cited areas where they could use help strengthening their export activities. The top three areas are market research (52%), making connections with customers (32%), and finding foreign representatives (19%).
The single greatest barrier to participating in international trade shows for respondents is cost (identified by 59%), followed by time/resource constraints (17%), and lack of interest (16%).
Despite 98% of respondents using the internet to communicate with international customers and clients to market their goods and services globally, a majority (76%) acknowledge their company website is not capable of processing international orders. That is a significant increase from 63% in the last survey and shows a continuing weakness.
Forty-one percent of companies are using the internet for marketing purposes, while 19% make their websites multilingual to attract non-English speaking customers. Eleven percent report using their websites for e-commerce transactions.
Getting Into the Market
One-third of our non-exporting respondents reported they are interested in trading to foreign markets.
Slightly more believe involvement in international trade is possible for their businesses within the next two years (36%).
When asked what the greatest barriers are to entering the foreign markets, businesses identified lack of knowledge and experience (32%) and the costs of exporting (27%). Fourteen percent noted that lack of desire and lack of opportunities prevent them from engaging in exporting.
Non-exporters were asked what the state of Connecticut could do to encourage their company’s exploration of international markets and facilitate exporting activities.
Half of respondents said the state can offer training and technical assistance to alleviate the lack of knowledge and in-house resources, and others said more grant opportunities (25%), help in obtaining sales leads (17%), and reduced costs of doing business in the state (8%), will assist them in expanding internationally.
Since our first International Trade Survey in 2007, we have witnessed a steady increase in the number of Connecticut companies engaging in international trade—from 53% to 77% over a 10-year period.
After this survey was distributed, the Trump administration withdrew the United States from the Trans-Pacific Partnership agreement, which continues today without U.S. participation.
In CBIA’s 2015 International Trade Survey, 79% of Connecticut businesses surveyed believed the TPP agreement, then under negotiation, would be beneficial for their international trade dealings and activities. The impact of U.S. withdrawal from the TPP on Connecticut exporters is yet to be seen.
Exporting continues to be vital to the state’s economy and its long-term prosperity, spurring economic growth and creation of jobs here in Connecticut and nationwide.
While most Connecticut exporters are veterans in international trade, our survey shows that both exporters and non-exporting businesses would benefit from help in expanding their reach into the global marketplace.
Untapped potential remains for the state’s leading job creators—small and midsize businesses—to enter new global markets, increase their share of U.S. exports, and compete for customers based outside our nation’s borders.
Methodology & Demographics
In February 2017, CBIA emailed and mailed this survey to 3,794 Connecticut businesses with export potential.
We received 199 responses, for a response rate of 5%. The margin of error was 6.8% at a 95% confidence level.
More than half of respondents are privately held (54%), while 42% are family-owned, 37% are incorporated, and a third are S-corporations.
Businesses in this survey employ a total of 15,864 employees, with the average company employing 111 people.
Total gross revenues for 2016 among respondents was $2.21 billion, with the average gross revenue of $20.47 million.
EXPLORE BY CATEGORY
Stay Connected with CBIA News Digests
The latest news and information delivered directly to your inbox.