The export revolution will be air-conditioned.

Trade and job creation
Nov. 22 2010 6:56 AM

Coolerado

The export revolution will be air-conditioned.

Also in Slate: Martha C. White explores California's domination of  the international almond market, Boeing's push to  sell more aircraft overseas, how a small steel manufacturer  thrives on the world stage, how a small American software company can compete cheaply abroad, and how exports can  save the American economy.

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While most of the components for the company's AC units are built in the United States, some elements, such as a high-pressure fan that's shipped from Germany, are sourced abroad. Faced with high-production costs that limit its ability to expand in emerging markets, Gillan says the company has explored the possibility of building units overseas to cater to lower-income emerging markets.

In 2008, Coolerado partnered with an Indian manufacturing firm that claimed it could bring down costs enough to win business from local commercial clients while retaining Coolerado's quality standards. While the arrangement remains in place, Gillan says the original promise of identical quality at cut-rate prices remains unfulfilled. "They haven't done as much as we would have liked them to do, but we have to drive the price down," he says. The partner is selling units "to a limited degree," Gillan says. Coolerado gets a cut of each unit sold and continually monitors its partner's performance. The off-shoring trade-off—cheaper goods versus the prospect of poor quality or production delays—is something many domestic manufacturers have had to figure out as globalization expands.

Coolerado also faces the difficulty of breaking into the Chinese market. Gillan is at once blasé and cynical about the threat of Chinese patent pilfering, saying, "It's going to happen with China one way or the other. Better to find the right partner and somewhat control it." Coolerado hasn't had a chance to test how well this "if you can't beat 'em, join 'em" approach will work; a deal with a Chinese factory that expressed interest in building and submitting prototypes back in 2005 fell through after Coolerado's would-be partner never shipped any models to them.

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China is a vexing problem for the entire cleantech sector. The nation is shaping up to be a huge producer as well as a huge consumer of renewable and energy-efficient products, thanks to zealous government intervention in and subsidization of the market, actions that some experts say violate trade regulations. China officially rolled back local content requirements on wind turbines last year, but they did so only after their own producers had become dominant. American manufacturing groups charge that China's way of selecting U.S. renewable-energy companies with which to partner skews in favor of those willing to do most of the production in China. Such actions are perceived by many in the West as heavy-handed, and that was the case even before China's recent halt of rare-earth mineral exports threatened to slow production of everything from smartphones to wind turbines. (China, for its part, denied any kind of deliberate stoppage of rare earth exports; trade economists don't buy it, since the freeze was preceded by a dustup over maritime borders between China and Japan.)

While some of these rare earth materials have made their way back into circulation both here and in the European Union, the sudden cutoff of supply has led some lawmakers to consider measures like loan guarantees to support American mining and production of these minerals. It would be a huge investment, but some think it's necessary. If China maintains its tight grip on rare earth elements, and the United States or other countries don't step in to fill that vacuum, cleantech manufacturers could be forced to move production to China to access the materials, an unappealing prospect for Western manufacturers and bad news for American factory workers.

To grow their exports, companies like Coolerado are going to need U.S. legislators to craft environmental policies and pursue a trade agenda that helps them sell more products at home as well as abroad. "The government has to understand we're in competition for renewable jobs, and we have to do everything we can," says William E. "Wilber" James, managing general partner of RockPort Capital Partners, a venture capital firm with a green focus. "Our entrepreneurs are the best in the world. We need to make sure they get every advantage in the world."

Video: The Export Revolution

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Martha C. White is a freelance writer in New York.

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