Small and medium-sized firms that export stand to benefit under President Obama’s international trade agenda.
“Trade and commercial policies should help small and medium-sized firms become more integrated as effective competitors in the global marketplace,” an official statement on the president’s trade agenda says. “Our goal should not only be to help them respond to competitive imports, it also should be to create conditions that help them become effective exporters.”
Exporting has become an important growth strategy for many firms. Global exports grew to $13.68 trillion in 2007 from approximately $40 billion in 1945, according to the World Trade Organization, making it one the fastest-growing economic activities. Small and medium-sized enterprises account for 50 percent of gross domestic product in developed countries and 60 percent of employment. With increased opportunities for global trade and maturing home markets, enhancing the export performance of SMEs is important for economic and social welfare, U.S. small business advocates contend.
Trade is a significant contributor to the U.S. and global economies. In 2008, U.S. goods and services trade (exports plus imports) were equal to 30.8 percent of U.S. gross domestic product and exports alone accounted for 13.1 percent of the U.S. economy. World goods and services trade accounted for an estimated 33.5 percent of global GDP in 2008 (about $20.8 trillion). But there are signs that trade is slowing as economies ravaged by the crisis in global credit markets tighten purchases. Global trade flows are projected to decline in 2009 by 2.1 percent to 2.8 percent. The downturn is hitting the United States especially hard. U.S. trade in goods and services dropped by 14 percent between the 3rd and 4th quarters of 2008 and export volumes are expected to drop 2.6 percent in 2009, while imports contract 1.1 percent.
All the more reason for Washington to step in. “As drivers of employment and economic growth, SMEs are well positioned to provide the greatest potential for wealth creation and redistribution. However, limited resources and capabilities may restrict their options for exploiting such opportunities. Specifically, SMEs may lack the internal ability to transform resources, processes and capabilities to meet the demands of new export opportunities,” argue the authors of the paper “Leveraging Entrepreneurial Orientation to Enhance SME Export Performance,” prepared for the U.S. Small Business Administration in January.
Exporters can help themselves as well, says Frank Vargo, vice president of international economic affairs at the National Association of Manufacturers. He advises them to stay close to existing customers, maintaining quality and service; cut costs and boost productivity; actively seek more customers and markets; work to get financing; use the facilities of the U.S. Department of Commerce, Export-Import Bank and the SBA; and press Washington to open overseas markets.