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Dorotea Mekaniska: “The TTIP free trade agreement would enable us to employ more folk”

Dorotea Mekaniska is a company based in the Swedish county of Västerbotten that manufactures machines sold all over the world for the maintenance of wetlands and other waterways. The company was founded by current managing director Torbjörn Hahlin at the start of the 1990s. Torbjörn has talked to us about free trade in general and the free trade agreement TTIP in particular, which is currently the subject of negotiations between the EU and the US.

More than 90% of the Dorotea Mekaniska’s production is exported, a fact that the company website proclaims proudly. The website has been translated into several languages, including Chinese, Russian and Spanish, and brochures for the company’s products are available in approximately ten languages. 

 

“We are, in principle, the only company in the world that provides these products. They are not the sort of thing you can buy off the shelf,” explains Torbjörn Hahlin.

 

Dorotea Mekaniska’s amphibian machines are used for reed cutting, clearing up oil spills, digging, dredging and several other types of environmental care. The company is proud to present the broadest range of machines for water maintenance in Sweden, possibly in the world.

 

“Export is crucial to us: without it we would be nothing. More than 50% of production is sold to countries such as Thailand, Hungary, Romania, Bulgaria, Slovakia and Poland. Russia used to be the company’s largest market, but the fall in the value of the rouble means that sales in Russia have essentially ceased. We still do business there, but from being our best market the country has become a very small customer.”

 

The American market is, however, just another market for Dorotea Mekaniska, despite the great size of the US. Torbjörn Hahlin speculates about how it should be a larger market for the company.

 

“It’s my belief that the US and Russia could be markets of comparable size for us. Another way of looking at it is to consider the total land area of the EU: this is approximately the same as that of the US. Suppose that I have 20 retailers in the EU. I would expect that the number should be about the same in the US, since the purchasing powers of the two markets are pretty much equal. However, I consider that trade barriers are one reason that it is not possible for our sales to grow in the US to the level that I believe is possible.”

 

The import duty on these machines is 7%. Torbjörn Hahlin recounts how he continually receives complaints that the import duties are a problem for retailers. The duty increases the total cost of the products, which means that the price paid by the customer increases.

 

“A niche product such as these machines is already expensive: this is a hand-crafted product that cannot be produced on an assembly line. This means that the price is higher than that of a product with a sales volume in the thousands. It involves large costs for both us and the retailers. The addition of considerable import duties on top of these does not make things easier.”

 

And the import duties also give rise to considerable administration, obviously.

 

“We have to work on the paperwork every day. This is the case for the US, Russia and Indonesia. The paperwork for the US is not greater than it is for any other market.”

 

Torbjörn Hahlin, however, hopes that the free trade agreement TTIP will become reality. This would make it easier to compete with products manufactured in the US. In the current situation, the alternative is to establish a factory in the US and transfer production to it.

 

“I’m sure that I would be able fairly quickly and easily to create operations that correspond to what I currently have in Dorotea.”

 

This says something about the potential of the American market for Dorotea Mekaniska, if the current trade barriers were to be removed. In addition to the duties, non-tariff barriers to trade affect the company.

 

American legislation from the start of the 20th century states that only machines manufactured in the US may be used to dredge waterways that are in direct contact with the sea. Thus, it is by no means certain that a dredging machine manufactured in Europe may be used in an American harbour.

 

“Dredging is the business area in which we are growing most rapidly throughout the world. In the US, however, I know that we cannot take a large piece of the pie, due to this legislation. It really is a barrier for us.”

 

Of course, some dredging machines are sold in the US. They can be used in water-courses that are not in direct contact with the sea. “American entrepreneurs have probably a lot in common with Swedish ones”, speculates Hahlin. “It is possible that some European dredging machines are used in places where they should be prohibited.” The legislation, however, is not concerned with any possible differences in quality between Swedish and American products. This is an example of regulations that make trade between the regions more difficult, without providing any benefit for customers.

 

“It’s just unbelievable. I suppose that the legislation was drawn up to protect American industry. But with a free trade agreement, such a barrier to trade would not be allowed.”

 

When Torbjörn Hahlin is asked about further trade barriers that he has experienced, he initially can’t think of any. But then he describes the engines used in the company’s machines.

 

“The best diesel engine that is currently available is an engine from Kubota with Environmental Class 3. But I cannot deliver this engine in a machine that is destined for the US. This is because the same engine in the US is subject to what are known as “flexible conditions”. It is the same engine; it just has a different registration plate. This is the sort of thing that we have adapted to. We now only purchase flexible engines that are intended for the American market, because they are accepted anywhere in the world. An entrepreneur must be creative and able to solve problems. So I’ve solved this by using flexible engines also in Europe. This means that a customer here purchases an engine that follows standards that apply in the US.”

 

Hahlin believes that an entrepreneur must be able to solve problems, in order to make progress. The fact that the European standard was not accepted in the US constituted a bureaucratic barrier that took nearly a year to solve.

 

“There was a period in which I delivered machines to the US without engines, and installed the engines there. So it’s clear that the world would be a simpler place if we were able to talk to each other.”

 

This is probably a viewpoint that many entrepreneurs recognise. Problems are there to be solved, which means that people sometimes forget that the problems are, in fact, barriers. But they are, even so, barriers, even if it is possible to find ways around them.

 

“I’m not sitting here and saying that I break the law. I obey it right down to its smallest detail. But I am saying that I understand that a smaller and newly started company that does not have such a solid economy cannot manage this. It’s necessary to have a fairly strong economy to be able to cope with this, since it’s necessary to suffer some setbacks before you reach your goal.”

 

If it was just as simple to trade with the US as it is with countries in the EU, the American market could in the long term become as large for Dorotea Mekaniska as the European market is now.

 

“I don’t think the difference would be that large in the beginning. I must be sure that investment in marketing will give proper returns before I decide to take this step. But the TTIP free trade agreement would mean that I would set my sights higher and invest more in marketing in the US. We would, for example, participate more frequently in trade fairs and other events. These give results. I have a fairly low profile in the US at the moment, since I have reached the conclusion that the import duty makes our machines a bit too expensive. As soon as I can reduce the price of our products, I believe that increased marketing will give rewards in a completely new way. And this may, in turn, lead to the total market growing by 20-30%”. This corresponds to around 5 or 6 new employees, in a company that currently has 38. 

Tags: SMEs

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