LI exporters find China a mixed blessing

Thanks to China, Veeco Instruments Inc. is expected this year to join the elite group of Long Island companies with annual sales of $1 billion or more.

Chinese manufacturers of low-energy light chips used in cell phones, computer screens, televisions and streetlights are snapping up the Plainview company's high-technology tools. Its exports to the Asian behemoth are more than eight times what they were in 2009.

Veeco is not alone. Dozens of Long Island companies sell to China, including computer software giant CA Technologies, distributor Arrow Electronics, filtration equipment manufacturer Pall Corp., and Peconic Bay Winery.

With more than 1.3 billion people and a middle class the size of this country's population, China offers huge growth for U.S. companies. Local businesses exported $268 million worth of goods and services there in 2009, up from $95 million in 2000.

Still, selling to China can be daunting because of cultural differences, high taxes on imported goods, theft of trade secrets and poor distribution systems, according to experts. Small businesses that lack employees who can speak foreign languages and exporting experience are at a real disadvantage, they said.

Veeco's sales to China have been eye-popping: up 758 percent from 2009 to last year.

The company, which employs 270 workers locally, supplies more than 20 customers in China "and we see this as an important market for our future growth," said senior vice president Debra Wasser. She added that an office will open in Shanghai this month to train Chinese manufacturers on how to use Veeco's TurboDisc tools.

President Barack Obama, pushing to double U.S. exports within five years, has been urging American companies that are already selling to China to boost their efforts. The Chinese are "selling here, and that's fine," he said earlier this year at a General Electric factory in upstate Schenectady. "But we want to sell there. We want to open up their markets so that we got two-way trade, not just one-way trade."

Last year, China sold almost four times the amount of goods and services to the United States than it bought from us -- making for a record $273-billion trade deficit. This imbalance occurred even though U.S. exports to China grew by one-third from 2009.

Under pressure from Washington, Beijing has pledged to boost imports by encouraging domestic consumption.

Eighth-largest market
China is Long Island's eighth-largest market behind Canada, Israel and the United Kingdom, among others, according to the most recent available data from the Trade Partnership consultants in Washington. Most of the exports are computers, electronics, chemicals and nonelectrical machinery -- some from surprisingly tiny firms.

W.H.P.R. Inc. has supplied U.S. magazines and academic journals to college, public and corporate libraries around the world since 1957. With a workforce of 15 to 20 people, the company derives all of its $5 million in yearly sales from exports.

However, W.H.P.R. only began selling to China in 2006. "It's a very slow process getting started there . . . it took a year and a half just to line up the appointments [with customers to hear a sales pitch]," said Richard B. Hayat, owner of the Farmingdale-based company. The meetings came after about 400 telephone calls by a Chinese employee of U.S.-China Partners Inc., a trade consultant with an office in Melville that helped Hayat.

"But once you've built those personal relationships with clients -- they trust you -- then it goes very smoothly," he said. "China is 20 percent of our business and I feel we've only scratched the surface."

Interest in the country "has always been high" among the small- and medium-sized firms that seek help from the Long Island U.S. Export Assistance Center at SUNY-Old Westbury.

"China is No. 1," said Shakir Farsakh, director of the center, which is part of the federal Commerce Department.

However, he and others said the Asian country isn't ideal for inexperienced exporters because of its distance from the United States, language and cultural barriers and product counterfeiting. Canada, Europe and parts of South America are often easier markets to crack.

Spencer Ross, president of the National Institute for World Trade in Cold Spring Harbor, stopped organizing tours of China several years ago.

'Stars in their eyes'
"Executives came back with stars in their eyes but their businesses weren't structured to analyze the deals they had with Chinese companies and some had their products stolen," he said.

D'Addario & Co. has been fighting counterfeiters for years. The Farmingdale-based maker of guitar strings, clarinet reeds, drumheads and other music accessories said its China sales should have been about $2.5 million in 2009. However, because of widespread counterfeiting, sales were only $600,000 out of a worldwide total of $118 million.

The company said its reputation also is being sullied by fake Chinese strings bearing the D'Addario nameplate that show up on eBay and other websites. "If the Chinese government doesn't stop counterfeiters completely . . . We're never going to see the business we should," said chief executive Jim D'Addario.

He has appealed to Washington for help, hired private investigators and pressed Chinese authorities to raid factories that made fake strings. D'Addario also puts serial numbers on packages to help verify authenticity.

Asked why he hadn't abandoned China, D'Addario said, "That's chickening out. If you want to grow your business, you have to figure out how to play the game on every ballfield."

Keith Williams, chief executive of Underwriters Laboratories Inc., said the Chinese government is serious about combating counterfeiting. Beijing understands that intellectual property rights must be protected if it wants to keep Chinese inventors from immigrating to the West, he said.

Illinois-based UL has a large office in Melville, where employees work on counterfeiting issues, along with the company's well-known product safety standards. UL staffers travel to China to train employees at a joint venture.

"There is really nothing on the horizon today that offers the opportunity of the Chinese domestic economy," said Williams, secretary-treasurer of the U.S.-China Business Council, a lobbying group. "It's kind of irresistible."

China is New York State's sixth-largest export market and Long Island's eighth. Here's a breakdown:

Long Island's exports to China

2000 $95M

2001 $127M

2002 $134M

2003 $181M

2004 $245M

2005 $253M

2006 $224M

2007 $253M

2008 $293M

2009 $268M

2010 N/A

Note:* Excludes Hong Kong and Taiwan

SOURCES: The Trade Partnership, U.S. Commerce Department, Census Bureau Long Island's top export markets in 2009

TOTAL EXPORTS

$7.5 billion

Canada $1.2B

Israel $593M

United Kingdom $484M

Hong Kong $465M

Germany $324M

Japan $308M

Mexico $273M

China $268M

Switzerland $259M

Netherlands $249M

Belgium $241M

Australia $221M

India $220M

U.A. Emirates $166.6M

France $166.4M

South Korea $159M

Taiwan $136M

Singapore $109M

Italy $93.9M

Brazil $93.8M