Too many small exporters are missing opportunities in the global marketplace and the U.S. government wants to help change that, Washington, D.C.,’s point man on small business says.
“While the opportunities are vast, with ninety-five percent of the world population living outside of the United States, the majority of small exporters do business in only one overseas market,” Steve Preston, administrator of the U.S. Small Business Administration, said in a keynote address at the National Minority Business Council Inc.’s 28th Annual Awards Luncheon in February. “We need to make foreign markets more accessible in part because it will further unlock the power of small business to drive our economy forward.”
About 97 percent of all U.S. exporting firms are small companies, but they account for only about 30 percent of the country’s exports. The number of small companies that export grew more than twice as fast as the number of large exporters between 1992 and 2003, proof of a growing interest in doing business overseas. Indeed, today’s environment for exporting is more favorable for exporters than before, thanks largely to the record low value of the dollar against foreign currencies, which makes it cheaper for most foreign buyers to purchase U.S. goods than for U.S. buyers to purchase foreign-made goods.
Add to that the global marketing reach of Web sites; the ability to stay in close contact and conduct transactions with customers worldwide through e-mail, telecommunications and readily available online transaction technologies; and the ease and speed of sending and receiving goods, regardless of source or destination, with modern transportation and logistics techniques.
“There has never been a better time to export. And the growth in exports reflects that. Our exports increased by twenty-five percent from 2005 to 2007,” Preston said.
Even so, several roadblocks for small-business exporters remain, including tariffs — the duties levied on imported goods — and non-tariff barriers, such as burdensome paperwork, import restrictions, difficulties in getting products across borders and concerns over intellectual property rights.
This is where policy comes in, Preston said. The goal is to increase access to foreign markets for small U.S. companies by putting tariffs on a level playing field and creating greater transparency and predictability for small businesses operating overseas, he explained. “The way to do this is by enacting well-structured free-trade agreements. Countries where we have an FTA accounted for almost half of our exports in 2007,” he said.
For example, small-business exporters accounted for 46 percent of all U.S. exports to the six Central American countries in Central America-Dominican Republic-U.S. Free Trade Agreement in 2005. “Before we passed CAFTA, we had a trade deficit with those six countries. Now we have a growing trade surplus with those countries,” Preston said. That surplus was $1.2 billion in the first half of this year — twice what it was during the same period last year.
“Free-trade agreements eliminate or reduce tariffs, duties and quotas and work to create a level playing field for U.S. companies. They also work to reduce non-tariff barriers, which can make exporting very difficult for small businesses,” Preston said. These barriers, from excessive paperwork to the inconsistent enforcement of customs policies or valuation of imports, require fixed costs that can be prohibitive for small businesses.
Even so, Preston encouraged small businesses that are not yet involved in international markets to consider the opportunities in those markets. “There are many places to get advice and support,” he said. He listed some:
• SBA and the U.S. Department of Commerce’s export assistance centers offer help in any number of areas, as do many of SBA’s Small Business Development Center partners and the Service Corps of Retired Executives.
• SBA and the U.S. Export Import Bank provide export-financing programs.
• The National Minority Business Council’s programs.
“Leverage that support as you look to foreign markets,” he advised.