Consultants in Singapore help Minnesota businesses figure out who can distribute their products in Southeast Asia. In Montreal, one woman is constantly pitching Minnesota as the place for Canadians to grow their businesses. A European company represents Minnesota at trade shows and promotional events from Berlin to Brussels.
State contractors across the globe help businesses here export products and entice companies abroad to expand or relocate in Minnesota. But a year after the state hired consultants in several new regions, trade wars and economic uncertainty have prompted Minnesota to scale back the work of those little-known outposts — at least for now.
Gov. Tim Walz, who returned last week from a trade trip to Japan and South Korea, said his administration has been evaluating the contracts and could add people in different locations.
“As trade relationships develop, we do make shifts in our focus,” said Steve Grove, the Department of Employment and Economic Development commissioner who traveled with Walz. He said an outpost in South Korea is something the department would consider “after seeing the momentum there.”
The St. Paul-based Minnesota Trade Office, which works with the consultants, boosted its consultant locations last summer from three to seven as it aimed to build footholds in untapped regions and navigate Brexit fallout. Six of those contracts have continued under the leadership of the Walz administration, but the state’s investment in the consultants dropped significantly from 2018.
The decision to scale back was driven by businesses’ opting to hold off on export growth, said Gabrielle Gerbaud, executive director of the Minnesota Trade Office.
“We have tariffs, we have countermeasures, we have renegotiations,” she said, noting the free trade agreement between the U.S., Mexico and Canada has not been ratified. “You know, the small and medium companies are just holding. They don’t know if they want to make a huge investment of their time and their energy just going into the export world right now.”
Minnesota spent $457,333 last year on contracts with seven consultants focused on Canada, Mexico, Japan, the European Union, the United Kingdom and Ireland, Southeast Asia, and Australia and New Zealand. Its most expensive contract, $100,000, was with the Canadian representative.
This year, the state is spending just $292,000, and several of the contracts are less than half what Minnesota allocated last year.
The state has not yet decided whether to extend its contract with the Australia and New Zealand representative, who primarily did research on trade opportunities in different industries, like mining. Gerbaud said the office could renew the contract or might decide to hire a company elsewhere, like South Korea.
In Southeast Asia, nearly 80% of the state contractor’s work is helping those small and medium businesses figure out if there are opportunities to sell their product in the region, how to distribute it and navigate any regulatory constraints, said John Evans, managing director of consulting firm Tractus Asia.
They also help businesses deal with problems, like a distributor not paying a bill or a product getting hung up in customs, he said. They don’t have the budget to proactively try to attract companies to expand in Minnesota, Evans said, but promote the state whenever they can.
The emphasis is different in the United Kingdom and Ireland. James Mackrill of Far Shore Consulting said in its first year working for the state, it has partnered with government agencies and trade associations to target certain sectors, like medical and agricultural technology. The consultants let several thousand companies in those arenas know Minnesota is the place to set up a U.S. base, he said.
With so many factors affecting trade outcomes, it’s challenging to pin down consultants’ effectiveness. It is difficult to demonstrate whether an export deal would have happened without government help or calculate the return on investment for international trade programs, according to a report on the topic by the State International Development Organizations (SIDO). The Washington, D.C.-based nonprofit works with state trade agencies and the federal government.
Nonetheless, states have continued to add international offices. Minnesota was near the middle of the pack in SIDO’s recent survey tallying states’ international representatives. The number of contracts states have varies widely, from zero to 18, with one state reporting 75 “pay-as-we-use-them” representatives.
“You’re seeing states are being more proactive in understanding, unless we’re there advocating and formulating those relationships, we cannot depend on the federal government or somebody else to send us trade leads. We have to be on the ground, hitting the pavement,” SIDO Executive Director Andy Karellas said.
Walz and Grove said the impact of having a representative on the ground in Japan was clear when they traveled there.
During Walz’s first international trip as governor, he met with companies that have branches in Minnesota. Walz said the state’s Japan consultant, KWBS Marketing & Trading Co. Ltd., was instrumental in working with the companies to get the trip and visits organized.
“These things are important,” Grove said. “In a global economy, to have someone there all the time to represent Minnesota makes a difference.”