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Nov 20, 2014

A guide to trading outside of the US

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trading outside of the US
The ever-increasing popularity of the Internet has been of almost immeasurable benefit to companies of all sizes, from single person entities to multinational corporations. Thanks to the web, consumers now have access to a global market that just a decade or so ago was almost non-existent. Today, for example, a family run bed and breakfast in New England is able to reach potential clients in just about every country on Earth, all for the cost of a URL and a simple website.

With very few exceptions, no matter what the product or service, it has never been easier for business owners and entrepreneurs to trade internationally. In addition, thanks to the US government’s ongoing efforts to reduce or remove entirely trade barriers, not to mention cutting the amount of paperwork involved, the entire process of exporting has been simplified out of all recognition. The results are clear to see, with two-way trade now accounting for over 30% of GDP, an increase of some 20% since 1970.

As the world begins to slowly recover from the recession, generating foreign income by exporting goods and services has become more important than ever to the US economy. Tapping into markets in countries that have either not been as seriously affected by the financial crisis, or that are recovering and growing at a faster rate than the US, enables American-based companies to benefit by becoming more profitable more quickly than they would if restricted to the domestic market.

When considering which markets offer the best prospects for growth, while also being politically stable and friendly towards international companies, it may come as a surprise to some that Central America is becoming a popular area for investment. Countries such as Panama, Nicaragua, Costa Rica and Guatemala have a burgeoning middle-class, hungry for a whole range of consumer goods. A number of ex-Communist Bloc nations have recorded extraordinary rates of growth since gaining independence and have taken positive steps to attract Western exporters to fill an ever-expanding demand from their populations. Azerbaijan is a great example; the country’s government has gone out of its way to encourage international trade. In an interview with Anar Mammadov the highly successful Azerbaijani entrepreneur explains how the country has evolved over the past 20 years.

There are a number of important points to be borne in mind before taking the plunge and starting to trade internationally. The first is to be aware of exchange rate fluctuations. A country’s currency is highly sensitive to issues such as changes in government, natural disasters and social unrest. When quoting prices for a product or service, therefore, it is always sensible to ‘buy forward’ the currency of the country involved at the exchange rate used in the quotation. Failing to do so can lead to major losses should the exchange rate fluctuate significantly.

It is also essential to be aware that every country has its own set of laws relating to importing and exporting: certain items may be prohibited and that taxes and duty vary wildly. Rather than risk falling foul of these regulations, exporters are strongly advised to seek the services of a locally based handling agency. There is no doubt that restricting international trading to the internet is the simplest and most cost effective option, and is a great way of ‘testing the water’ and learning about shipping costs and the impact that fluctuating exchange rates have on prices and profits.

There is no reason why any US business person or budding entrepreneur should not make a success of trading internationally. As with any enterprise, the secret to success lies in careful planning, attention to detail and getting to know the target market.


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