While China is pushing Lithuania, business is looking to the US: will we just have something to offer the giant?
Nevertheless, when it comes to the need for business to establish itself more than the Atlantic, economists question whether Lithuania has much to offer the world’s largest economy.
The mission to strengthen trade relations between the United States and Lithuania was undertaken by the Association of Lithuanian Chambers of Commerce and Industry (LPPARA), which received a delegation from the US Export-Import Bank (Exim) at the end of January. To promote bilateral trade, the bank set up $ 600 million. US line of credit.
“Exim the bank provides very important aid instruments – guarantees for export financing. “Not for Lithuanian, but for US companies that export”, said Rimas Varkulevičius, President of LPPARA, to Eltai. He noted that he had taken advantage of the proposed support to purchase the missing raw materials and equipment. American investments will also be funded.
According to R. Varkulevičius, the trade balance between the United States and Lithuania, although noticeably growing, is not very significant, it could still open up to the Lithuanian industry beyond the Atlantic, the pace of the economy and during the pandemic stagnation. The U.S. market is large and credible, but initiatives to develop bilateral trade relations are lacking, he said.
“We do not have a free agreement between the United States and the European Union. That, I know, is a hindrance, but the market is receptive, reliable in its payments. There is a need to create certain brands and greater initiative in the field of marketing by presenting goods. The US market is large, especially for Lithuanian food products, their quality, so you could make more efforts here, ”said R. Varkulevičius.
According to him, the best opportunities to enter the US market are not only the food industry, but also the textile industry, as well as manufacturers of electronics, machinery, biochemistry, lasers and other high value-added products. Services and IT sector opportunities are not excluded. Having a reader of recent economic tensions in the country, the head of LPPARA has no doubt that it is necessary to look for such opportunities, and the effort and cost invested will pay off.
The US market is large, especially for Lithuanian food products, their quality, so we can do more here.
“It simply came to our notice then. “Not all areas, but those who are connected and who will invest in gaining a foothold in that market, will achieve results,” said R. Varkulevičius, who also noted the much greater emphasis and stability of the United States compared to Africa, the Pacific or Asia.
“The U.S. market is much more sustainable and perhaps even better understood in terms of language level, in terms of the presence of people who exist both with the expatriate and with other things. It is completely untapped, I see the same from my practice. And that will presuppose the emergence of investment, “he concluded.
Direct trade with the US – not expanded
Alexander Izogordin, an economist at the communications agency Brandonomika, shares trade statistics, which show that the United States is very important for Lithuania’s trade and ranks second among all of Lithuania’s export partners, after Germany. The economist estimates that 9 percent is shipped to the United States. the origin of all Lithuanian goods, which, in his words, is a very large part of total exports.
Nevertheless, Izgorodin offers to examine the data in detail and notes that this trade is not well developed, as only categories of road goods dominate. 2021 In January-November, half of all exports to the US were made with two categories of products: mineral fuels, mainly petroleum products (32%) and chemical products (20%), which, according to the expert, were used for the production of COVID-19 vaccines.
Furniture, bedding and mattresses, modified starches or glues, fertilizers, and organic chemical products are still transported from Lithuania to the other side of the Atlantic. Optical products, iron and steel products, electronic machinery and equipment are transported in smaller volumes. Total exports to the US exceed $ 1.7 billion. EUR 913.8 million in imports. euros.
Exports are rising, but trade in fuels and vaccine components has largely increased by 62%. Mineral fuels and mineral products also account for over half of all imports from the United States.
“For the time being, we can state that the USA is an important export partner of Lithuania and exports to the USA are growing, but the growth is more sham and statistical. In reality, Lithuania’s exports and trade with the United States are not developed. But here we are talking about the direct effect “, – A. Izgorodin reviewed the data of Eltai,
According to the expert, the United States has had a significant impact on the Lithuanian economy indirectly – through partners in Europe.
Indirectly, the United States has an absolutely significant impact on the growth of Lithuanian industry and exports.
“Indirectly, the United States values Lithuania’s export growth very strongly. I would say that the growth of the US economy has an absolutely significant impact on the fact that Lithuanian industry and exports grew last year, ”said the economist, who will return to his mind with great trade relations between the United States and the European Union (EU).
Mr Izgorodin said the US was the EU’s largest trading partner and that EU exports to the US were growing, with demand and consumption in the US almost a third above pre-pandemic levels.
“Accordingly, with the growing demand for EU goods from the USA, Western and Scandinavian producers, respectively, place a large number of orders with Lithuanian producers. Indirectly, the United States has an absolutely significant impact on the growth of Lithuanian industry and exports, ”explained A. Izgorodinas.
It will be very difficult for companies to establish themselves
Asked about the potential to expand the export of Lithuanian goods to the USA, A. Izgorodinas doubted whether many Lithuanian producers could establish themselves in the American market. According to the economist, Lithuania mainly produces intermediate goods, such as components for various equipment, which are not needed in America.
“Example: Germany produces a well-known, Lithuania produces a necessary component, say, brake pads. And that is assessed as the final component that makes exports to Western European countries, ”the expert illustrates.
“If we look at the construction of our industry, the categories that dominate among exporters are those that do not produce the final product, but produce intermediate goods. It would not be very logical to offer intermediate goods to the United States, as their economy is on the final consumption and consumption is very strong, “he continued, stressing that the United States would demand products such as food.
According to A. Izgorodin, the Lithuanian food industry is starting to produce products on an ever-increasing scale that can be exported to more distant regions of the world. The US economist is skeptical about the prospects of other industrialists.
“Maybe in theory there could be an engineering, woodworking industry, but I see very little chance here. Realistically, in addition to food, there are no more categories of food that can be destined for the United States, ”he said, adding that it would be difficult for a company to establish itself in America if it required investment.
“Our businesses, as separate components, will have neither the financial nor the power to actually offer anything in the United States. “Because we produce intermediate goods, they need end-use goods,” concluded A. Izgorodin.
Realistically, apart from groceries, I don’t see more categories that can be directed to the U.S.
According to R. Varkulevičius, the diversity of exports of Lithuanian products to the USA is low, primarily due to the fact that producers themselves often lack information about product certification procedures, market availability or its trends.
“Sometimes the teams and specialists do not know. Then it is necessary to study complex certification systems, pass all relevant requirements, supply product safety, and various social responsibility issues, ”said the President of LLPARA.
“Companies avoid such things, although the added value is then created very strongly, because the US market can become long-lasting, much more reliable than we do with Asian countries. I don’t mean China, but others where the changes are usually big and the episodes are different, “he said.
Greater reciprocal investment is needed
In order to strengthen trade with the USA and diversify exports, R. Varkulevičius considered that there would be more frequent business missions and exhibitions. He also notes that the representation of Lithuanian business – individual representatives of commerce now in some US cities – is not enough, an information office would be needed.
“I think it should include a provision in the medium-term program that we are entering the American market. What we will do in three years, in five, in ten years, ”says the business representative of the need for a coherent long-term strategy. He also does not rule out the importance of Klaipeda Seaport, which, according to R. Varkulevičius, should be the flow of American goods.
The interlocutor noted that with such close political and diplomatic reciprocal ties, the development of business relations must not lag behind, and both sides should invest more in sharing information and offering opportunities for cooperation.
“In summary, more investment is needed from both us and the countries, which will clarify how to reach the market and validate certain, first of all, information channels, and further cooperation opportunities. This is how the state influences. Indirect, but has. In the conditions of a market economy, preferences, presentations, clarity, friendliness – all these things have a broad meaning and for increasing exports, ”said R. Varkulevičius.
“No matter how much LPPARA we receive from European countries and how much we receive from the United States. We don’t get it because either they don’t know or they don’t want to because of distances, maybe what other reasons there are. Only in time and through work can we achieve results, ”believes the president of LPPARA.
A. Izgorod is still convinced that the economy from Lithuania’s partners with the USA Atlantic would win most of Lithuania by strengthening ties not with but with partners in Western Europe and Scandinavia, which produce end-use goods for the gaming market.
“Our exporters could join the retail chains in Western Europe and Scandinavia, strengthen ties with Scandinavian and European manufacturing companies that export worldwide, and export to the United States through those companies,” said the Brandonomika economist.