1. Presenter: Karen L. Kurek- National Manufacturing & Distribution Practice Leader, McGladrey LLP MVITA World Trade Day- Sponsored by Battelle & Battelle Outward bound: Global strategies and exporting May 16, 2013

2. Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model 1 Real gross domestic product (Chained 2005 dollars)

3. Source: Bureau of Economic Analysis 2 Percentage growth in real GDP and contributions to real GDP of goods and services

4. Source: Bureau of Labor Statistics 3 Employment situation

5. Source: Bureau of Labor Statistics 4 Manufacturing sectors with the largest net employment gains

6. Source: U.S. Census Bureau, National Association of Home Builders 5 Housing market situation Housing starts, permits (in thousands of units) NAHB Housing Market Index

7. 6 Global manufacturing output

8. 7

9. How is that possible? “But I never see any American products in the stores. how can America be the world’s largest manufacturer?” In 2010, U.S. factories produced $5.02 TRILLION of products, including: - Chemicals, excl. Pharmaceuticals$526 Billion - Computing Equipment$397 Billion - Motor Vehicles$360 Billion - Metal Products$327 Billion - Industrial and Other Machinery$298 Billion - Steel and Other Primary Metals$239 Billion - Pharmaceuticals$186 Billion - Plastics and Rubber Products$185 Billion - Aircraft$147 Billion - Electrical Equipment$115 Billion 8 Source: U.S. Census Bureau

10. Source: Institute for Supply Management 9 ISM manufacturing indices

11. Manufacturers’ shipments, inventories and orders  New orders for manufactured goods in February increased $14.5 billion or 3.0 percent to $492.0 billion.  Shipments increased $4.3 billion or 0.9 percent to $489.3 billion.  Unfilled orders increased $9.3 billion or 0.9 percent to $999.7 billion.  Inventories increased $1.1 billion or 0.2 percent to $620.0 billion. 10 Source: U.S. Department of Commerce – February 2013 – Census Bureau

12. Source: Bureau of Economic Analysis, 2011 Annual Input-Output Tables

13. 12 U.S. manufacturing is the world’s most productive

14. 13 Source: McKinsey Global Institute Manufacturing contributes to exports, innovation and productivity growth

15. Manufacturing and business R&D Source: National Science Foundation

16. 15 Manufacturing generates 2/3 of all U.S. exports

17. 16 Made in America: The Top 10 Manufacturing Sectors that Export Source: Business Insider - March 8, 2012 / Brookings Transportation Equipment Share of U.S. manufacturing exports: 18.5% Share of manufacturing export growth: 17.0% Total growth rate: 13.2% Total revenue: $175.8 billion The top 10 manufactured products in America's $2 trillion export industry

18. 17 Source: Business Insider - March 8, 2012 / Brookings Chemicals Share of U.S. manufacturing exports: 18% Share of manufacturing export growth: 16.4% Total growth rate: 13.1% Total revenue: $171.2 billion Made in America: The Top 10 Manufacturing Sectors that Export

19. 18 Source: Business Insider - March 8, 2012 / Brookings Machinery Share of U.S. manufacturing exports: 13.1% Share of manufacturing export growth: 17.5% Total growth rate: 20.4% Total revenue: $124.6 billion Made in America: The Top 10 Manufacturing Sectors that Export

20. 19 Source: Business Insider - March 8, 2012 / Brookings Computer and Electronic Products Share of U.S. manufacturing exports: 12.8% Share of manufacturing export growth: 13% Total growth rate: 14.8% Total revenue: $121.4 billion Made in America: The Top 10 Manufacturing Sectors that Export

21. 20 Source: Business Insider - March 8, 2012 / Brookings Petroleum and Coal Products Share of U.S. manufacturing exports: 6.4% Share of manufacturing export growth: 5.4% Total growth rate: 12.0% Total revenue: $50.9 billion Made in America: The Top 10 Manufacturing Sectors that Export

22. 21 Source: Business Insider - March 8, 2012 / Brookings Food Share of U.S. manufacturing exports: 5.4% Share of manufacturing export growth: 4.5% Total growth rate: 12.0% Total revenue: $50.9 billion Made in America: The Top 10 Manufacturing Sectors that Export

23. 22 Source: Business Insider - March 8, 2012 / Brookings Primary Metal Share of U.S. manufacturing exports: 5.2% Share of manufacturing export growth: 5.1% Total growth rate: 14.2% Total revenue: $49.6 billion Made in America: The Top 10 Manufacturing Sectors that Export

24. 23 Source: Business Insider - March 8, 2012 / Brookings Medical Equipment, Sporting Goods and Miscellaneous Share of U.S. manufacturing exports: 4.1% Share of manufacturing export growth: 2.9% Total growth rate: 9.6% Total revenue: $39.4 billion Made in America: The Top 10 Manufacturing Sectors that Export

25. 24 Source: Business Insider - March 8, 2012 / Brookings Fabricated Metal Products Share of U.S. manufacturing exports: 3.4% Share of manufacturing export growth: 3.9% Total growth rate: 16.8% Total revenue: $32.6 billion Made in America: The Top 10 Manufacturing Sectors that Export

26. 25 Source: Business Insider - March 8, 2012 / Brookings Electrical Equipment Share of U.S. manufacturing exports: 3.4% Share of manufacturing export growth: 3.4% Total growth rate: 14.7% Total revenue: $32.2 billion Made in America: The Top 10 Manufacturing Sectors that Export

27. 26 Half of major U.S. markets are developing economies

28. Source: Markit PMI for Top 10 Export Markets

29. The U.S. has a huge trade deficit… 28

30. ... which many say was caused by NAFTA and other U.S. trade agreements. 29

31. It is true there has been a large increase in the trade deficit with free trade partners 30

32. But the increase is because of our oil imports from NAFTA... 31 1/3 of U.S. worldwide energy imports come from NAFTA

33. ... not because of a soaring deficit in manufactured goods 32 In fact, U.S. manufacturers have now enjoyed a SURPLUS with free trade partners for three straight years

34. But we don’t have enough free trade agreements  U.S. free trade agreements cover only about 40 percent of manufactured good exports– about 45 percent once Columbia, Korea and Panama are in effect  U.S. manufacturers face trade barriers in almost 60 percent of our overseas market 33

35. Source: U.S. Department of Commerce

37. 36

38. Exports and export markets 37 Source: McGladrey Monitor- Fall 2011

39. 38 Source: McGladrey Monitor- Fall 2011 Exports and export markets

40. 39  Industry sectors in the upper-tier produce highly engineered products, thus enabling them to distinguish themselves in foreign markets from locally produced products. Source: McGladrey Monitor- Fall 2011

41. Emerging Markets: Which are important today and tomorrow  Brazil is rising quickly as an export market and South America in general is high on the list for U.S. companies. 40 Source: McGladrey Monitor- Fall 2011

42. Perceived barriers to export trade for non- exporters 41 Source: McGladrey Monitor- Fall 2011

43. Top strategic priorities for exporting 42 Thriving and growing Holding our own Long-term market growth54%37% Served specific customer demand/key customer asked 52%57% Strategic decision40%30% Opportunistic reasons (can include networking introduction) 15%17% Began a joint venture7%0% Source: McGladrey Monitor- Fall 2011

44. How to build an export strategy 43 Source: 2011 Fall McGladrey Monitor

45. 44 Exporting best practices  It starts with your customers  Then be strategic  Leverage your advisors Resources Needs Source: 2011 Fall McGladrey Monitor  Ensure you have the right resources in place

46. 45 Exporting best practices  Level the international playing field for your company  Leverage industry and U.S. government resources  Know your foreign markets Know my foreign markets Local Regulations Regulatory Issues Advisor Client Source: 2011 Fall McGladrey Monitor

47. U.S. halfway to Obama administration's five-year export-doubling goal  Obama set the five-year target in his January 2010 State of the Union address with the 2009 exports of $1.57 trillion  As of 2012 they've climbed to a record of $2.19 trillion  This is about 48 percent of his goal - $3.14 trillion a year by the start of 2015 46 Obama tells his export advisory council the nation was "well on our way" to his five-year export-doubling goal. Source: AP- April 4, 2013

48. Direct presence in a foreign market 47 Source: McGladrey Monitor- Fall 2011

49. Off-shore production by large companies 48 Source: McGladrey Monitor- Fall 2011

50. Offshore supply chain procurement  43 percent say that foreign sourcing for their supply chain will increase in the coming 18 months.Nearly 60 percent say they are not going to increase foreign sourcing in next 12-18 months. 49 Source: McGladrey Monitor- Fall 2011

51. Why the optimism toward a manufacturing comeback?  Cheap U.S. natural gas and other increased energy production are helping to power U.S. factories more efficiently, with gas especially providing inexpensive raw materials for U.S. manufacturers of plastics, tires, certain pharmaceuticals and other petrochemical products.  Higher wages in China and other foreign export markets are making outsourcing less profitable to U.S. firms.  Congressional approval in 2011 of trade agreements with South Korea, Colombia and Panama and other agreements being negotiated now with Asia and Europe are promising to open more foreign markets to U.S. products.  High U.S. unemployment is relieving pressure on factory owners to increase wages, helping to make U.S. labor costs more globally competitive.  Major technology advances have steadily boosted factory efficiency and worker productivity. 50 Source: AP- April 4, 2013

52. Experience the power of being understood. SM www.mcgladrey.com 51

53. Contact Me 52 Karen L. Kurek National Industrial Products Practice Leader, McGladrey karen.kurek@mcgladrey.com

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