I/EC
Special Feature
Pfizer and International Trade JOHN J. POWERS, Jr., President, Pfizer I n t e r n a t i o n a l
What "makes" a successful "international" company? To find the answers I/EC's editors asked Pfizer International what the problems were as they faced and solved them through 777 years of foreign operations. We think these candid replies and observations will help those now in the international field as well as those contemplating such a course to plan their operations with greater assurance of over-all success ι:
•
'
Ji^^HBHHHBHHHHnH^nHH^HHBBBHHHBIillHBi ???????????????????? cals in 1950, dollar shortages and other international economic de How long has Pfizer been engaged velopments had considerably in international trade? changed the character of interna ???????????????????? tional trade. It became increasingly apparent that on-the-spot manu Virtually from its very beginnings facturing, distribution, and sale in 1849 Pfizer was engaged in certain would take on growing importance aspects of international trade, im in establishing and expanding our porting crude chemicals for process markets abroad. Thus, while we ing in the U. S. In the early dec have been engaged in international ades of the company's growth and trade on our present basis for about for some time thereafter we were a decade you might say that we have importing camphor from the Far been engaged in some phase of East, nux vomica from India to international trade for more than a make strychnine, citrate of lime century. from Italy, wine residues from the ???????????????????? countries bordering the Mediter ranean to make tartrates for the How extensively does Pfizer manu food and pharmaceutical industries. facture abroad today? Eventually, about the time of ???????????????????? World War I, the unpredictability of supplies of raw material for our Pfizer products are now being manu most important product at the time, factured in 20 countries: five in finished citric acid, obliged us to Latin America, eight in Europe, look for a new way to make it. five in Asia, and also in Canada and The fermentation technology de Australia. In four of these coun veloped by Pfizer research chemists tries, England, Argentina, France, in the 'twenties for the production and Japan, the company operates of citric acid has since been success basic fermentation plants, in the fully applied to the manufacture of latter two in conjunction with local other organic chemicals, including partners. A basic plant is almost oxalic, itaconic, gluconic, and as completed in Brazil, and another is corbic acids; sorbose, riboflavin, under construction in India. and other nutritional factors. Our ???????????????????? experience in fermentation chemistry Are these the only countries where gave us the background that was Pfizer operates overseas? needed for large-scale production of penicillin during World War II. ???????????????????? By the time the company entered No. Pfizer products are available the field of packaged pharmaceuti in practically every country of the 42 A
INDUSTRIAL AND ENGINEERING CHEMISTRY
free world, in over 40 of which we have our own organizations. ???????????????????? What were some of the considera tions affecting your decision to manufacture abroad? ???????????????????? We felt that this was essential if we hoped to expand our overseas busi ness. Many of the most attractive markets are in highly industrialized countries, such as those of western Europe. There, well established lo cal chemical and pharmaceutical industries offer stiff competition to imports while tariff and other restric tive policies often add materially to import costs. In other parts of the world, including some of the so-called underdeveloped countries, it was apparent that there were real oppor tunities for anyone who was pre pared to put down roots and grow and participate in the burgeoning industrialization programs. Some of these countries formulated eco nomic planning programs which lim ited imports and required at least local packaging plants, if not basic manufacturing, to remain in business in the market. Countries which may not be able to afford the import of finished goods in the quantities required arc helped by the estab lishment of a pharmaceutical manu facturing plant which makes it possible to import less costly bulk materials, and in some cases, basic manufacturing is indicated. ???????????????????? In Pfizer's international operations, especially in countries where you have manufacturing and produc tion facilities, are you regarded or even resented as "foreigners"? ???????????????????? This is occasionally a problem, but it is a fundamental principle with us to attempt to establish Pfizer as a
Has the recent development of the European Common Market and the European Free Trade Association been harmful to Pfizer operations in that part of the world?
France. We have growing sales organizations in these and other countries of the European Common Market and a plant in Italy as well. In the neighboring European Free Trade area we have sales organizations in Austria, Denmark, Sweden, Norway, Portugal, and Switzerland, and have substantially expanded our largest organization anywhere abroad, Pfizer Ltd. in Great Britain. A new microbiological research laboratory has just been completed at our plant in Sandwich, England, where new vaccine production facilities, which have already given us a firm position in biologicals abroad, are already being expanded to manufacture the new type of oral polio vaccine. Acquisition of Kemball Bishop in England in late 1958 gave us a stronger position in fine chemicals, not only in this key country of the Free Trade area but the world-wide sterling area as well. We look forward to the day when these trade areas will iron out their differences; meanwhile we are assured of full participation in the markets of these regional groupings.
????????????????????
????????????????????
The rise of the common market concept has simply confirmed our original conviction of the importance of operating production facilities within specified marketing areas, whether these are delineated by national boundaries or commonmarket agreements. Within the past year, wc have undertaken construction of new warehousing, shipping and office space at our Belgian facilities, broken ground for a new office building and pharmaceutical development laboratories at Karlsruhe, in Germany, and expanded our basic production operations in
The common market concept seems to be slowly spreading to other parts of the world. How does this affect Pfizer and what are you doing about it?
local company in every country where we operate. This is done not primarily to avoid criticism but because we think it is sound practice to put down roots as a part of the community in which we do business. We have stricken the term "branch office" from our business lexicon. Our labor and management abroad are mainly, often exclusively, nationals of the country. Our use of indigenous raw materials wherever possible not only serves the local economy and conserves foreign exchange but it gives us a more dependable source of supply. Our investment in any country is evidence we are there to stay. Only by being good citizens and meeting our social and economic responsibilities will we benefit as full members of the local community, entitled to a share in the progress we hope to help advance. ????????????????????
There are two ways of looking at a common market area : from the outside, the European Common Market may eventually appear to exporters as a long unbroken tariff wall. But it is also an integrated market of proportions that have never before presented such opportunities on the European continent.
A pelietizer forms products for Pfizer's Indian and southeast Asian customers . . .
A technician checks mixing operations in England and . . .
Pfizer's new basic manufacturing plant in Argentina nears completion
SPECIAL
FEATURE
By its very nature, of course, the common market limits its greatest opportunities to those operating within its boundaries, and we have found in Pfizer's own experience the advantages of being firmly established within such trade areas even before they take formal shape. In Latin America, for example, with basic manufacture under way in Argentina and about to begin in Brazil, and with pharmaceutical manufacturing plants already in production in Chile, Colombia, and Mexico, we feel well prepared to participate in any trade area developments in this hemisphere. The likelihood of a common market emerging in the Middle East was, in some degree, a factor in our recent decision to erect a plant in Egypt, where such activities will probably center. Our manufacturing facilities in the Far East in .Japan, the Philippines, Australia, Pakistan, India, and Ceylon—are strong assurance of participation in free-trade areas that will probably take shape in that part of the world, if only to combat aggressive Communist Chinese trade tactics. ? ??????????????????? Since the common tariff has been called a key political and economic provision of the common market concept, isn't it possible—in fact probable—that the appearance of such tariff barriers will be added incentive to the protectionist approach here in the United States? ???????????????????? Possible, but I hope not probable for I think it can also be said that the appearance of such a common tariff barrier is only incidental to the more fundamental reasons for the formation of the common market itself. This is really a move toward free trade even though confined, for the moment, to the member countries. National tariff's arc canceled out for the mutual benefit of the member nations, and I think that eventually common market tariff barriers will cancel each other out in much the same way, or simply be stretched by expanding membership to the point of disappearing. Even the limited success of the common market concept to date is evidence that the evolution of international commerce throughout the 44 A
world is toward free trade, which may in the end be of critical importance for world peace and economic progress. ? ???????? ? ? ? ? ? ? ? ? ? ?? Comment has been mounting recently on the possibility of foreign "sourcing" by American manufacturers. Have you plans for overseas manufacture of products for the domestic TJ. S. market? ???????????????????? We have never considered such an arrangement and, in fact, it would not be practical for us or, 1 dare say, for the pharmaceutical industry generally. The American pharmaceutical market is well served by domestic production. And you will find here many branches and subsidiaries of European drug firms who have found that the only way they can participate effectively in the important American market is to manufacture here. It seems to me that the complexities and difficulties involved are such that foreign sourcing for the pharmaceutical industry would not occur in any but a few isolated situations unless things change far more than we anticipate, ???????????????????? Have you any comment to make on the effect of direct TJ. S. private investment in industrial expansion abroad on this country's balanceof-payment deficit problem? ???????????????????? Direct U. S. private investment abroad has been a favorable, not an unfavorable, factor insofar as our balance of payments is concerned. This is a point which, 1 feel, has not been made sufficiently clear in recent statements on the subject. In 1959, American direct investment abroad was about $1.3 billion, while remittances to the U. S. totaled 32.1 billion, and the figures were similar in the preceding year. For the period since the end of World War II the United States Government reports a total of about $25 billion in earnings remitted to the U. S. from all private foreign investment, whereas a little less than $21 billion in new private investment left this country, leaving a favorable surplus of over $4 billion for the period. It is clear that U.S. private capital seeking outlets abroad
INDUSTRIAL AND ENGINEERING CHEMISTRY
makes a strong, positive contribution to the balance-of-payments sector of our national economy. ???????????????????? Do you feel that U. S. private investment overseas can in any way take the place of government economic aid, particularly in the underdeveloped areas of the world? ???????????????????? The need to use the full potential of American private enterprise abroad is hardly debatable and is clearly recognized by at least some leading figures of our Government, such as Under secretary of State Douglas Dillon. However, much yet remains to be done by our Government to encourage American industry in this role. Certainly the Russian government is making a substantial effort to encourage countries now developing industrially to do so in the Communist way. Their objective is clear: to direct the new industries in these countries into state-owned socialist patterns for both economic and political purposes. We have seen this effort in Asia and the Middle East and are currently seeing it in the new countries of Africa. The objective of U. S. Government economic aid programs is, after all, to facilitate the move toward economic and social progress in the newly developing countries. In the course of history such progress has depended in large degree upon the laying of a proper infrastructure through public works in the fields of transportation, communications, and power. It is in assisting to lay this infrastructure that the vital role of govcrnment-to-government aid lies. Such a foundation is essential to the creation of a superstructure of an efficient and productive industry in the economic development of a nation. In a free society, government should have a minimal role in the construction of that superstructure. Certainly our own Government aid programs should not encourage other governments to take a different view. For when utilized to build in the publicsector the kinds of industries which traditionally have developed under the aegis of private enterprise in the West, U. S. Government aid can only abet the Russian plan.
