Today’s Global Society: How Are Arizona Businesses Getting a Piece of It?

Arizona has been building its position as a player on the international stage, and opportunities continue to expand.
by Don Rodriguez

Attorney Karen Dickinson recalls the earlier days of her career when she traveled on business from Arizona to other countries. “I spent most of my career with people saying, ‘You’re from where?’” she recalls. Not exactly what anyone would want to hear after a flight to the other side of the world. She even found it challenging to build her credibility simply because she was from here.

What helped in the 1990s was Dickinson’s representing her employer, Honeywell, a firm with a reputation around the globe. As a representative of a multinational company, “I could have been from anywhere,” so doors opened to her. But for smaller Arizona firms at the time, it was hard just to find the right door to knock on.

Arizona Comes Out of the Shadows
What a difference a new century can make. In her roles now representing international clients for the Quarles & Brady law firm in Phoenix and as chair of the Arizona District Export Council, she has gained the experience to cite three key factors underlying the improved climate for Arizona exporting:

  • A strong economy prompting countries such as Canada to come calling;
  • The Internet, which opened access to the rest of the world; and
  • A state that widened its view beyond its immediate neighbors to the north and south.

The year 2008 was a peak one for Arizona when it came to exports. Companies in the state collectively exported nearly $19.8 billion to foreign customers, according to data collected by the U.S. Census Bureau. After nearly everyone took a hit during the Great Recession, the Arizona exports tally recovered in 2011 to nearly $17.8 billion — about 10 percent off the mark set three years earlier.

Through it all, there were 10 countries that were destinations for about three quarters of all Arizona exports despite companies here experiencing a drop in export revenue by slightly more than 7 percent from 2008 to 2011, the Census Bureau figures show. The top three countries, respectively, in both years were Mexico, Canada and China. Other than Germany maintaining the sixth spot, the remaining six countries swapped positions by 2011. Moving up were Japan (from No. 7 to 4), Thailand (from No. 9 to 8) and Malaysia (from No. 10 to 9) and dropping were United Kingdom (from No. 4 to 5), Singapore (from No.5 to 7) and France (from No.8 to 10).

The value of Mexico as an export destination goes beyond Arizona. According to the report “Realizing the Full Value of Crossborder Trade with Mexico” issued by Arizona State University’s North American Center for Transborder Studies, Arizona is among 22 states that count Mexico as their No. 1 or No. 2 export market, and Mexico is a Top 5 market for 14 other states. For every dollar Mexico makes from exporting to the United States, it in turn spends 50 cents on U.S. products or services, which demonstrates the unique quality of the “joint production” relationship of the two countries, the report says.

While the relationship with Canada is considered strong, there has been a slight setback. The Consulate of Canada office established in Phoenix to stimulate more economic activity between the two nations closed suddenly a few months ago. The shutdown was reportedly a cost-cutting measure as the Great White North struggles to balance its own books.

Top 10 Arizona Export Countries
Arizona is quickly becoming a player on the international scene as we export such high-tech goods as semiconductors and solar products. With $17 billion in exports and experts saying there is more where that came from, Arizona businesspeople are right to be looking at opportunity where it comes to global trade. Below, we have mapped the top 10 Arizona trade partners and included the 2011 numbers and regional percentages of the overall trade revenue.

Technology Leads the Exports
The largest sector for Arizona exports is technology. Claiming the largest share at nearly $2 billion in 2011 were companies involved in aerospace and defense. Some fears have arisen that proposed cuts in U.S. defense spending could take a big slice out of the state’s share of the pie. Consider that some tech exports sent to other countries return to the United States in the form of larger components used in A&D, and it’s easy to understand what’s at stake in the supply chain that begins in Arizona.

However, there is cause for some hope. “The budget indicates that priorities will shift from new manned aircraft systems towards unmanned aircraft systems,” notes David Dozer, CEO of Infrared Laboratories — whose products serve such fields as defense and astronomy — and an ADEC member. With the work already done at Fort Huachuca with the unmanned systems, there are suppliers presently in the state to fulfill the needs. Even if there are some cuts in defense, the civilian aircraft part of A&D remains significant. For example, orders in the aircraft interior market have experienced a recent resurgence in business, Dozer says.

Among the smaller, non-multinational exporters, Dickinson says Arizona “finally has a reputation outside the country.” With such organizations as the Greater Phoenix Economic Council and now the Arizona Commerce Authority making overseas marketing essential to their operations, representatives from such countries as Italy, Spain and China have been coming here, according to Dickinson. “Arizona has a global reputation as a solar state,” not just as investments but as suppliers, she says.

No matter whether a company wants to do business across the Pacific or closer to home in Mexico, the field is far from crowded. According to the U.S. Commerce Department, about 1 percent of American companies export their products or services. Given the economic history of the United States, this isn’t surprising to Eric Nielsen, director of the U.S. Commercial Service in Arizona and executive secretary of ADEC. “The U.S. domestic market is so large and has performed so well, most small companies haven’t been compelled to find growth overseas,” he says. “Clearly, there’s room for more companies to get into the game.” For Arizona, the companies finding the most success are those developing technology in demand by other countries, especially in aerospace and defense, Nielsen says.

Interest and Opportunities Expand
Nielson notes the past five “tumultuous” years seem to have increased the interest in small and medium-sized companies wanting to do business with foreign markets. “The Arizona U.S. Export Assistance Center is reminded of this on a daily basis as we work to help local firms identify international opportunities to sell their products,” he says. With the U.S. Department of Commerce reporting about 1 percent of American companies export their products or services, that leaves room for just about any type of company to take that first step. To help, the Export Assistance Center’s services include mentoring and counseling on all aspects of international business as well marketing on the Web.

Ironically, it has taken one Phoenix-based multinational to help smaller technology manufacturers crack the export market although it doesn’t even make tech products. From Arizona, technology distributor Avnet oversees operations in more than 300 locations worldwide and provides support to businesses making sales in more than 70 countries, says Vince Keenan, the company’s vice president of investor relations. Arizona is an important part of the equation for Avnet “because of the state’s attractive business climate, educated work force, community college and university system, reliable commercial transportation and the quality of life Arizona offers that allow us to attract and retain world-class talent,” he says.

In addition to its distribution activities, the company offers services ranging from logistics and financing to sales and technical support that allow firms to sell and export their products to countries around the world. Besides working closely with large Arizona firms such as Intel, Microchip and ON Semiconductor, Avnet also has supported several small to medium-sized businesses in the state, helping them design, build and bring their technology solutions to market. “With these and many other services we provide, our suppliers and customers are able to grow their businesses, expand geographically and capture more revenue,” Keenan says. These services range from support, such as marketing and sales, to streamlining processes that result in reduced overhead and time to market.

Dickinson notes technology also is at the heart of more companies being able to be part of the global marketplace. Because of the struggling economy, companies have turned to teleconferencing methods such as Skype. “You could do the whole deal without going anywhere,” which wasn’t the case previously, she says. Having the ability for such interactions has helped in doing business with companies in Europe and Canada.

But this isn’t the case with countries such as Mexico and China that put a lot of stock in personal contact. “They want to see everyone,” Dickinson says. That’s one of the reasons Arizona Gov. Jan Brewer led a trade mission to China this past November — the same month that 20 other U.S. governors went there — becoming the first Arizona governor to go to China. Another noteworthy event was the 2009 visit of Wu Bangguo, chairman of the Standing Committee of China’s National People’s Congress — that country’s top legislature — to renewable energy companies here. Calling the step “huge,” Dickinson points out, “China came to us.”

Dickinson’s observations about the rest of the world, and China in particular, are based on extensive experience in international commerce. She negotiated numerous transactions outside the United States during her stint with Honeywell. She also is co-chair of the China Law Group for Quarles & Brady, which opened an office in Shanghai last year. Key reasons for establishing a presence were the Chinese five years ago began showing interest in mid-sized companies such as those found in Arizona and China implemented a new “Get Out Policy” that encouraged doing business in other parts of the world, she says.

While it’s not unusual for companies new to doing business in China to establish offices there, Arizona-based firms are not taking that step. Quarles & Brady, which is considered a consulting firm as its attorneys are not licensed to practice law in China, is not there year-round yet but, rather, shares office space with Chinese partners (which include lawyers). Plans call for the firm to hire a Chinese lawyer, Dickinson says.

Another person who has seen an increased interest in exporting is Doug Bruhnke, CEO of Growth Nation, a global marketing firm with clients in technology, manufacturing, healthcare and professional services. Bruhnke also is president and founder of Arizona International Growth Group, which holds events to help executives grow globally through education, certification, networking and collaboration. Nearing its fifth year in existence, AZIGG has more people involved since the economic slowdown as they recognize that a “significant amount of the world’s worth is outside the United States,” Bruhnke says, adding, “They’re asking themselves ‘What’s the opportunity for me?’”

Image and Understanding Impact International Business
When he thinks of a state that’s making a significant mark on the global scene, Bruhnke looks to Arizona’s neighbor to the north, Utah. He began doing business with clients there in the 1980s and notices an environment that has become conducive to doing business with the rest of the world to the point Utah doubled its exports in the last five years. “They know what it takes to interact with someone from other places,” he says. Part of that comes from many members of the Utah Legislature going on missions with their church, making them more comfortable working within other cultures and less isolated from the rest of the world.

Although both states share a conservative heritage, that’s about where similarities end. Bruhnke recalls that former Gov. Janet Napolitano had an understanding of international business. “But the [current] legislature and the governor don’t get it,” Bruhnke says. “We’ve made progress but not enough.” While Dickinson points to Gov. Brewer’s recent visit to China as a step forward, Bruhnke cites as a negative SB1070 and the fallout that resulted when the rest of the world got wind of the measure recently unraveled by the U.S. Supreme Court.

Bruhnke also blames the Arizona media as another barrier. A prime example was the coverage of former Arizona Commerce Authority CEO Don Cardon and his compensation package that many considered lucrative despite his being at the helm at a time when more international focus shifted to Arizona. “Here’s someone looking out for the best interests of Arizona” Bruhnke says. “Criticism is focused on the wrong things.”

But the tide is turning, he says, thanks to new local leadership. Mayor W.J. “Jim” Lane of Scottsdale is a “perfect example” of understanding the value of international business, Bruhnke says, noting that Lane takes the time to meet with every foreign business representative who wants to see him. Bruhnke sees the same traits in new Phoenix Mayor Greg Stanton, who addressed attendees at Mexico’s Annual Conference of Municipalities in March.

There is promise these homegrown solutions that range from established programs to a new generation of local leadership will help homegrown products reach new markets, resulting in new highs for Arizona exporters.


Window to the World

The Arizona District Export Council — currently headed by Executive Secretary Eric Nielsen — provides statewide leadership in international trade through volunteer international trade veterans and experts appointed by the U.S. Secretary of Commerce. ADEC collaborates with Arizona business, public and private sector groups to stimulate economic growth through trade and investment.

There are several ways to connect with ADEC:

  • Arizona companies needing export assistance can contact the U.S. Export Assistance Center and talk to trade specialists who can reach out to ADEC members to offer advice for the company. Because all members are volunteers, the advice is free.
  • Individuals who want to help Arizona be a “global ready” state can become a Friend of ADEC to assist as volunteers at various events and activities.
  • ADEC and the U.S. Commercial Service annually nominate new ADEC members for approval by the Secretary of Commerce. With 30 to 35 member positions, there usually are three to four spots open for nominations each year.

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