Export Opportunities Await the Bold

Trade data suggests more U.S. windows and doors are being exported
By Ron Irvine, Iron Lock Imports
August 1, 2013
FEATURE ARTICLE | Strategies & Practices, Management

Although the United States is a major worldwide player in the importing and exporting of doors and windows, the actual percentage of product involved in international trade is quite small compared to overall production. A look at trade data shows that of the value of total production, only about 2 percent of doors and windows produced are exported, and about 4 percent of those consumed are imported.

Collectively, these percentages are admittedly small, and might even be considered as insignificant, unless one examines the potential opportunity awaiting producers that are willing to brave wading into the murky waters of foreign trade. Unless your company is actually involved in the export process, the fact that the United States exports a fairly small portion of its domestic door and window production has little, if any, effect on your day-to-day operation. On the other hand, considering the actual dollar value in international door and window trade, your company may be missing out on a sizeable opportunity.

To see how the business of foreign trade may affect a company, let’s begin by looking at international commerce in general. Table 1 indicates that 72 percent of total United States trade in goods is exchanged between the United States and our top 15 trading partners. By far, with the exception of China, most of the exchange takes place between the United States, Mexico and Canada.

Note that, with the exception of Brazil and the Netherlands, we import substantially more from our top 15 partners than we export. It is only with the United Kingdom that we approach parity in the exchange of goods. The ratio of imports to exports is about 1.47 to 1 for total U.S. trade and 1.62 to 1 for U.S. trade with our top 15 partners. The ratios are even higher for U.S. trade in doors and windows. Door and window imports exceeded exports by well over 2 to 1 from 2008 through 2010, but then dropped to about 1.8 to 1 for both 2011 and 2012 (Fig. 1).


What is remarkable here is that while the 2008 Great Recession had a marked downward effect on imports through 2011, the trend was upward for exports starting as early as 2010. Notably, the drop in exports was 11 percentage points less than for imports between 2008 and 2009. Could this indicate an important directional change in the flow of product, and possibly even a reversal in the export-toimport ratio for the near future?

Domestic Door and Window Consumption
To see how exports and imports affect the U.S. fenestration market, we need a method of quantifying how doors and windows are consumed—a measurement that we will define as Domestic Consumption. Because not all doors and windows produced in the United States remain here for consumption, we need to deduct the value exported from the total produced. Conversely, of the total consumed, a substantial quantity is imported. Accordingly, those imported products must be added to the quantity produced in order to arrive at our figure for Domestic Consumption.

Expressed as a formula:

Domestic Door/Window Consumption = Domestic Production – Exports + Imports

Table 2 is arranged to demonstrate this relationship. Although export and import data are available through 2012, production figures are only available through 2011. Consequently, we are limited to showing consumption only through 2011.


 
Export Opportunities
With a better idea of how domestic door and window consumption is affected by trade, we can get a clearer vision of what potential opportunities exist in export. Even though exports are dwarfed by production, it is possible to see how a small-to-medium sized manufacturer could increase sales by cutting even a few percentage points out of the $368 million export pie.

If we extrapolate the growth of exports into 2013, that pie becomes a bit tastier. Exports for 2012 grew to nearly $420 million (Table 3). We can therefore make a conservative prediction that U.S. door and window exports will increase by about 3.8 percent, to $436 million during 2013. That estimate may be understated, however, because it includes the down year 2009. The average percentage increase in exports for the last three years is 8 percent. If exports increase by the last three-year average, the amount projected would equal $453 million, exceeding exports for 2008. If exports increase by another 14 percent, as they did last year, door and window exports by U.S. manufacturers would amount to nearly $479 million. 

My own personal experience can illustrate the possibilities that lie in international trade. Some time ago, I was contacted by a U.S. wholesaler representing a client who had been to my company’s website and seen our Austrian Collection line of iron hardware. The client was a builder in the Caribbean who was doing a sizable design-build condo project. Of course, I was more than happy to accommodate the wholesaler but could not resist asking, since the client had found us, why did they not contact us directly, thereby eliminating the middleman. “Oh, that all of my customers were that loyal,” I exclaimed. “Not necessarily,” he replied. “In order to save on shipping expenses, the building supplies required for the entire project are shipped by our suppliers to our warehouse. They are then containerized, loaded and shipped by ocean freight directly to the project.”

The point of the anecdote is that, although opportunities for export certainly do exist, one must look for them in places that are not the usual suspects. As an illustration, Table 3 lists the top five countries to which the United States exports doors and windows.




Note that the top three destinations for U.S. doors and windows in 2012 are identical to those for total exports of goods shown in Table 1. The difference is the position of Hong Kong and Bahamas in the rankings. Neither country appears in the top 15 in Table 1. It is also particularly interesting to note that door and window exports in 2012 to both Hong Kong and China show a dramatic increase over 2008, the year where U.S. exports worldwide were at the high point. Again, it must be admitted that the numbers are relatively small compared to domestic consumption, but then opportunity is where you find it.

Foreign trade, to be sure, is fraught with difficulties. Exporting, in particular, requires a dedication and commitment to learning the ropes, and a willingness to accept some bumps during the learning process. Unless there is someone on board with high-level training in international commerce, competence in foreign trade must generally be gained by day-to-day, hands-on experience.

The learning curve can be softened by doing the required homework; the process can begin by simply placing a phone call to one of the many businesses that engage in logistics. A simple web search will produce a plethora of firms, both domestic and international, that can explain the intricacies of the export business.

Ron Irvine is the owner and operator of Iron Lock Imports, manufacturer of The Austrian Collection brand decorative forged wrought iron door hardware. Prior to his involvement with the hardware industry, he was employed at the U.S. Census Bureau Industry Division as an economic statistician where he was responsible for the collection, analysis and publication of industrial ceramics data for the Economic Census and the Annual Survey of Manufacturers. Currently, he writes about subjects involving the economics of the door and door hardware industry and blogs about economics topics at www.ronirvine.com.