Small business: a crucial player in U.S. exports

Small firms in the United States are realizing that they are competing in a global economy, and should not limit their marketing efforts to the United States alone. Although small firms face great obstacles in expanding into foreign markets because, for example, they are less likely to have bilingual employees or staff with international trade expertise, recently compiled data indicate that they are meeting the challenge.

A study recently conducted for the U.S. Small Business Administration Office of Advocacy estimates that as much as 21 percent of manufactured exports are produced by small firms. Firms with fewer than 500 employees account for 12.2 percent of the value of manufactured goods exported directly by manufacturers by vessel, and small manufacturers exporting through wholesalers and brokers are estimated to represent an additional 9 percent of the value of U.S. manufactured goods.

In other words, small manufacturers export in proportion to their production (small businesses account for approximately 21 percent of all manufactured goods produced in the United States). Clearly, the role of small firms in U.S. exports of manufactured goods is more significant than previously believed.

Recent tradeagreements, such as the U.S. Canada Free Trade Agreement (FTA) and the unified European Community market (EC 1992) are particularly important to smaller exporters. Canada and Europe present fewer cultural and language barriers and are often the first export markets for smaller American firms.

The FTA will remove artificial impediments to trade, creating the largest free trade area in the world. It will eliminate all bilateral tariffs within the next 10 years, increase procurement opportunities without disturbing the small business "set-aside" program, relax or eliminate dozens of rules and procedures which create nontariff barriers to trade, and set up a dispute resolution procedure to resolve trade conflicts.

Many small businesses expect expanded trade with Canada under the new Free Trade Agreement. For example, a family-run furniture company, located in upstate New York only 70 miles from the Canadian border, has been interested in selling its products to Canada for years. Although the company has sold successfully in the Middle East and Western Europe, it has been stymied by the high tariff on furniture exports to our neighbor. This company now looks forward to expanding its market into Canada under the FTA. Similarly, a small manufacturer of agricultural equipment in North Dakota is relieved that, under the FTA, he will no tonger have difficulty sending service personnel into Canada to honor warranty and service contract obligations.

Exporting to Canada will be easier and more profitable under the FTA. The free trade area will afford small businesses new markets in which to sell their products and, in the long run, introduce even more small U.S. businesses to exporting.

The unified European market created under the EC 1992 program may also ease the burden of small firms exporting to the 12 EC member countries. Currently, the EC market is fragmented by internal frontiers which slow down and add costs to shipping; a plethora of different national standards on industrial products; and restrictions on the provision of services across borders. The EC hopes to remove these and other barriers to intra-EC trade, which should provide opportunities to U.S. firms. However, there is a concern that the program will be implemented in less than an open fashion for non-EC countries.

These changes in the international marketplace are affecting current small U.S. exporters as well as small firms seeking to export. The EXPORT '89 AmericanEuropean Small Business Congress scheduled for Frankfurt in October will not only provide a unique opportunity for U.S. and European small firms to meet and 'ointly discuss policy issues of interest to small firms worldwide, but will also create new business opportunities and contacts.

COPYRIGHT 1989 U.S. Government Printing Office
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