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Hearing of the House Small Business Committee - Trade Issues Affecting Small Businesses

Hearing

By:
Date:
Location: Washington, DC

In the last year, international trade has emerged as a bright spot in the continuing U.S. economic recovery. According to the Department of Commerce, exports increased 1.2 percent to $187.4 billion in April, the second-highest level on record. U.S. businesses are having particular success selling industrial and telecommunications equipment abroad, while American-made vehicles and auto parts also rose to a high of $12.8 billion. Given the critical connection between trade and job creation, this is good news for U.S. workers.

With foreign trade on the rise, so are opportunities for small businesses, as they make up 98 percent of exporters. Recent research confirms this, showing that more small firms are exporting today than just three years ago, while many more are becoming increasingly interested in doing so. For many companies, their success depends in part on their ability to access these international markets.

Small businesses, however, face many challenges. It takes time to identify foreign markets, to target new customers, and to learn the "ins and outs" of the exporting process. In fact, nearly half of small exporters spend a minimum of a few months a year -- as well as an average of 8.4 percent of their annual operating revenue -- preparing to export.

Compounding these obstacles is that they often have fewer resources to expend on developing a trade strategy or complying with complex regulations. As a result, they consistently enter fewer foreign markets than their larger counterparts, with nearly 60 percent only entering one, while more than half of large firms export to five or more markets.

In order to help bridge this divide, there are several tools and resources available to small exporters. The key cog are U.S. Export Assistance Centers, which fill a void by providing access to technical trade specialists in over 100 U.S. cities and 80 countries worldwide. By delivering foreign industry and market expertise, as well as trade compliance assistance, small businesses are better able to navigate the complex terrain of the international marketplace.

Another top challenge that small exporters face is securing credit, which is essential to finance cross-border transactions. If banks are unwilling to provide this funding, companies' ability to export will be severely curtailed. To address these very problems, the SBA and the Export-Import Bank provide small business specific export financing products. Last year, SBA loans generated $1.7 billion worth of small business exports, while Ex-Im authorized more than $6.1 billion in financing and insurance for small businesses -- a record for the bank. These initiatives are critical, especially during periods when banks pull back on their own lending to exporters.

While these nuts and bolts challenges always persist, there is another on the horizon that is even more serious: that weak global demand could reduce U.S. exports. The recession in Europe continues to put a dent in American sales abroad, as exports to the European Union declined nearly 8 percent. With China, the trade deficit rose to $24 billion -- the highest level since January and the largest with any single nation -- as export to China decreased by 5 percent. Not only are American exports declining, but imports from these foreign nations are rising as the U.S. market remains a top destination.

International trade will always be a complex undertaking, dependent on this complex global macroeconomic climate, as well as on country-specific trade policies and resources. Regardless, it is absolutely critical that small businesses are able to participate in this marketplace. Doing so gives them access to more customers, which in turn fuels their growth and employment -- and that of the U.S. economy overall.

I would like to thank our witnesses in advance for their testimony and I look forward to hearing their perspective on these challenges.

Thank you and I yield back.


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