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New World Disorder

Now, however, some of that optimism has dissipated. Synchronized economic slowdowns in Asia, Europe and the United States, the three engines of global commerce, have decimated international trade. The World Bank estimates that last year global trade underwent "one of the most severe decelerations in modern times." Violent antiglobalization protests have become regular events all over the globe. And Al Qaeda's nefarious activities have demonstrated to the world that the open borders, integration and free flow of capital that characterize globalization can be used to brutal ends.

Many small companies that had switched their focus to export markets over the past decade have been hit hard. In August, the most recent month for which statistics were available, America's trade deficit swelled to $38.5 billion, as exports decreased and imports rose. This past summer, small companies' exports fell to their lowest level since January 2000.

Anecdotal evidence supports those figures. Duncan has seen his exports to Mexico drop by more than 30 percent. Patricia Torres, 28, co-owner of Computed Tool and Engineering Inc., a small Anaheim, California, company that designs and manufactures stamping dies, has had nearly half her customers cancel their orders.

In part, small companies' problems stem from their customers' economic weakness. "A lot of foreign customers cannot afford anymore to guarantee payment for exports received," says Duncan. "Bigger businesses can take the chance with such customers because they have legal departments and translators that can deal with foreign claims, but small American companies can't afford to take chances on customers who can't guarantee payment." Consequently, many goods destined for export have been piling up in U.S. and foreign warehouses.

Antiforeign sentiment in countries hurt by the global economic slowdown also works against U.S. exporters. In Argentina, for example, the collapse of its currency, which was tied to the U.S. dollar, has provoked attacks on foreign bank branches and calls for protectionist measures. (However, Argentina's own free-spending politicians are as much to blame: They passed laws that expanded state health care to pay for even liposuction.)

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This article was originally published in the February 2003 print edition of Entrepreneur with the headline: Stay Home?.

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