FOREIGN GOODS

Why They Can't Compete in the U.S.

MANY Europeans are convinced that, if U.S. tariffs were eliminated, they could earn the dollars they need in trade, not aid. Many Americans are just as convinced that, without tariffs, cheap foreign goods would flood the U.S. and wreck many U.S. industries. But if all tariffs were removed, would cheap foreign goods flood into the U.S.? The answer is probably no, unless foreign businessmen drastically change their selling tactics.

One reason is that cheap foreign labor is usually offset by low productivity and lack of capital needed for investment in efficient plants and machines. Removing tariffs would certainly help foreign producers. But the main obstacle to big volume sales of foreign goods in the U.S. is the nature of the American market place itself.

A basic condition of selling in America is that goods must be sold in larger quantities than most foreign manufacturers are prepared to produce. The backbone of foreign industry is small and medium-sized plants, whose entire output would not warrant the large investment in promotion needed to sell in the U.S.

Foreign producers get another shock when they discover that the cost of distributing goods in the U.S. is considerably higher than in Europe. And because the American market is so big and active, the seller must make more noise with ads to be heard at all. Many foreign producers are reluctant even to whisper.

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The U.S. market also holds another terror: it is the most fiercely competitive market in the world. It is almost an axiom abroad that any mass-produced article that could be sent to the U.S. is being efficiently produced by American competitors. While U.S. producers thrive on competition, most foreign businessmen shun it. Thus they tend to concentrate on basic commodities, semi-finished goods for special industrial use, or national specialties unlike any produced in the U.S.--Scotch whiskey, British woolens, French wines or Belgian lace.

The American market is also the most demanding in the world. American consumers have high standards for the products they buy, and many foreign products must be completely redesigned to conform to their wants. British textile weavers, accustomed to making cloth 36 inches wide, found that American patterns required it to be at least 39 inches wide. Some other sellers have made the necessary changes. But most foreign producers still see no reason why they should adapt their products to American wants, even if they could afford the expense. It is hard for them to accept the rule that in the American market place the buyer is king.

Foreign businessmen also feel that the American market is unpredictable and fickle. At home, customers are faithful to their traditional suppliers; the European producer is aghast at the casualness with which the American consumer is ready to leave one supplier for another who comes along with something brighter, cheaper--or better. sb

Thus, the American market seems treacherously unstable to foreigners. What is in demand one day may not be the next. Therefore, many foreign producers are reluctant to expand their sales in the U.S., even when there is a strong demand for their products. One Dutch manufacturer of tea sieves, whose products made a big hit with U.S. housewives, nevertheless refused to enlarge his production for fear the market might dry up. Many fail to expand because their sights are set lower than U.S. manufacturers, and the small market they already have seems big to them. Others, not without reason, believe that if they build up too sizable a market for their products, bigger American companies will start competing and squeeze them out--or pressure Congress to raise tariffs.

Actually, the fundamental reason why most foreign goods cannot compete successfully in the U.S. is that selling in the U.S. involves big stakes, and big stakes mean big risks. Few foreign producers are willing to take the gambles American producers accept as a matter of course. The constantly changing demands of U.S. consumers can only be met by investment in new products and more efficient production methods that will lower prices. Foreign producers willing to meet such terms prosper, tariffs or no. British auto producers, for example, have shrewdly pushed sales of sport cars, something Americans wanted but did not have; last year they sold 31,243 cars in the U.S., far more than any other foreign country. The big lesson producers abroad must learn is that the main cause for failure to sell in the U.S. is not just high tariffs. It is the fact that foreign producers fail to study the market and use American methods to give the American consumer what he wants. Those who have recognized this are selling in the U.S. market despite tariffs; those unwilling to do this will find it hard to sell in the U.S. even if all tariffs are eliminated.

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