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Goin’ global: Mississippi looks to the world

The economy is becoming increasingly global, and Mississippi is taking advantage of its strengths to concentrate on exporting items that can be produced here at an economic advantage over other areas.

“Over time we’re becoming more and more a worldwide economy and not just a U.S. or a Mississippi economy,” said Dr. Phil Pepper, state economist with the Institutions of Higher Learning (IHL). “With NAFTA and GATT and other trade agreements, we’re seeing more and more international trade. And what we see is countries that have comparative advantages — the right climate, natural resources, low-skill labor — those that can produce something the cheapest are the ones selling it around the world.”

Pepper said as worldwide competition opens up more and more, countries with a comparative advantage in certain goods will specialize more in those goods. And while NAFTA has been criticized in Mississippi for causing the loss of jobs, particularly in the apparel and textile industry, the flip side of that is that U.S. consumers are getting products at a lower cost.

“There is a net gain to the world by having international competition,” Pepper said. “You will find industries in the U.S. that are losing ground because they don’t have a comparative advantage, so they are losing some of their business. But the consumers in the U.S. are gaining from that. It is overlooked that the consumer often gets better-quality and lower-priced goods with international competition.”

An example of competition resulting in improved quality is the automobile industry.

Japanese cars forced American automakers to make changes and improve the quality of their cars. Because of that competition, today the U.S. consumer has a better car and less expensive car — even those made by domestic companies — than would have been seen without the Japanese competition.

Pepper said Mississippi, other states and other countries are all going to have to compete in the worldwide market because they are going to lose part of their domestic market in certain commodities and products because of the worldwide competition.

“So we are going to have to expand our market to the world market, and put the emphasis on things we are good at producing,” he said. “In the past we have produced low-wage industry products such as apparel and textiles, and now other countries pay lower wages. So we’re losing the low-skill jobs. What we have to gain is in things where we have a comparative advantage. For example, we have a good location between the North and South American markets, and we have advantages in food products — poultry, catfish and agricultural products.”

Although there are risks to being a player in the global economy as evidenced by how the downturn in the Asian economy has affected some businesses in the U.S., there are also advantages. Pepper compared it to diversifying a portfolio: if a company has sales to 40 countries, they will be less affected by a recession in just one of those countries. That reduces the overall risk.

“If the U.S. economy slows, you are protected because you still have markets elsewhere,” Pepper said. “You are going to find countries somewhere in the world having economic problems at any given time. But you are reducing risk by diversifying.”

Marguerite Wall, director of the International Trade Center and Small Business Development Center at Hinds Community College, believes international trade will become increasingly important. She said for Mississippi companies to remain competitive, they must look at international markets. “If they aren’t exporting, you can rest assured that their competition probably is,” she said.

Wall said the most important reason for Mississippi companies to export is to increase sales and profits. The U.S. is just a small part of the world market. More than 90% of the world’s population is outside the U.S., and 75% of total world purchasing power is outside the U.S.

Besides reducing a U.S. company’s dependence on existing U.S. market, Wall said if there are seasonal market fluctuations in the U.S., exports can help stabilize that.

Mississippi exported close to $2 billion worth of products in 1995. Exports are now estimated to be in excess of $2.8 billion. Some of top exports include lumber, paper products, other wood products, food products, chemicals, industrial machinery, electrical equipment, and agricultural products.

There are numerous resources available to help Mississippi businesses and industry with information and assistance in exporting. In addition to the International Trade Center at Hinds Community College, the Mississippi Department of Economic and Community Development has an international marketing department. Assistance is also available from the international marketing department of the Mississippi Department of Agriculture and from the Mississippi Export Assistance Center. The U.S. Department of Commerce also has export assistance programs.

Support groups include the International Trade Club of Mississippi and the Mississippi District Export Council. “These groups really work hard to coordinate their efforts to provide a wide range of counseling and educational services for the export community,” Wall said.

About Becky Gillette

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