So, How Do We Fix SME Exports?
SME Export (photo: Abhijit Tembhekar)
Yesterday, I posted about a new report from the U.S. International Trade Commission about the problems faced by small U.S. exporters. My post was broad-brush, the best you can do when summarizing a substance-filled 314-page study. Today, we’ll get into some of the solutions that SMEs have come up with themselves.
First off, the Small and Medium-Sized Enterprises (SMEs) interviewed by the ITC staff were overwhelmingly in favor of negotiating new and more trade agreements, whether completion of the Doha Round or, more likely, new free trade agreements (FTAs). They see competing countries negotiating FTAs all over the world and they have experienced the stiffened competition that results – in the form of higher relative customs duties – for the countries that don’t play the FTA game. For now, the United States is the primary trading nation that is ignoring or hindering FTAs, to the detriment of our own exporters, their workers and our general economic well-being. SME exporters told the ITC that the “playing field” is fast tilting against them. So when will the White House and the Democratic “leadership” in the Congress get off their okoles (that’s Hawaiian for posterior portion of one’s anatomy) and get back into the negotiation game?
Why do SME exporters want new FTAs? Obviously, equal tariff treatment with competitors who enjoy FTAs is a big attraction. NAFTA is the prime example of an FTA that has helped America’s SME exporters, while the lack of implementation of the FTAs with South Korea and Colombia has boosted competition with countries that do have FTAs with them. Non-tariff market access has improved under the U.S. – Dominican Republic – Central America FTA – and SMEs want more of this in other markets. Our FTAs with Singapore, Australia and Chile have demonstrably improved market access, SMEs say, for products such as cellphones, auto parts, computers, medical equipment and many others. FTAs can also facilitate trade by making the trading and shipping process easier, a key benefit seen by SMEs from the NAFTA agreement. Agreements to improve intellectual property protection are also important. SMEs told the ITC that they are more likely to do business with the European Union, Japan or Singapore than with China because of IPR concerns in the the latter.
The ITC study then looks at exporting in seven sectors that feature competitive SME exporters: apples, wine, chemicals and nanotechnology, textiles and apparel, medical devices, computer services, and professional services. They all face limited access to capital and daunting regulation, both foreign and domestic. Apples and wine must cope with phytosanitary restrictions and high tariffs, and must overcome small production capacity. Computer services, nanotech and chemicals each must confront export control issues. Everybody runs into cultural and language barriers (services more than most), labeling or advertising restrictions, foreign support for their own industries and much more.
What do the SMEs in these industries do about all this? Industry associations have been established for wine, apples, nanotechnology and professional services to join forces in overseas marketing, trade show participation and for promoting changes in trade policies that limit those industries. Agricultural exporters have increased their use of the Department of Agriculture’s Market Acccess Program, while the others are turning more often to the Commerce Department’s U.S. Commercial Service for information about foreign markets, help in selling and lobbying for contracts. Venture capital firms are helping medical device companies with finance and in finding overseas customers.
The devil is in the details, so I will periodically post about some of those over the next few weeks. The broad brush is going back to my workshop.
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When I ran the commercial unit for the American Institute in Taiwan, we faced a hopefully unique problem in promoting U.S. apple exports. The State of Oregon had hired our exhibition facility in Taipei to promote the state’s products – including apples. Only the expected crates of Oregon apples never showed up, the freight forwarder having dispatched them to Thailand, not Taiwan. I sent my staff out to markets all over Taipei to buy up as many Washington State apples as they could find. We spent hours peeling the Washington labels off those apples and put them into the Oregon exhibits. Nobody spotted the substitution and the show went on.
