Exporting Round-Up

September 5, 2012

In this latest Exporting Roundup, NSBA and its international trade arm, the Small Business Exporters Association (SBEA) examine how SBEA and NSBA leadership attended a  White House Business Council forum, “American Economic Competitiveness – Manufacturing” where they raised critical reforms needed to bolster U.S. exporting for small- and mid-sized businesses.

We look at how the U.S. Export-Import Bank has authorized export financing totaling $23.8 billion in the first three quarters of FY 2012—nine percent higher than the same time period in FY 2011, which also represents an increase in small-business authorizations. As well as action on Capitol Hill with both the Senate Finance and House Ways and Means Committees recently approving legislation that would establish permanent normal trade relations with Russia, and how it is expected to be passed shortly after lawmakers return to Washington, D.C. in September.

Finally, how, according to data released in August by the Department of Commerce, total exports for the month of June were $185 billion, up from May’s exports of $183.3 billion, resulting in a net decrease of the total goods and services deficit.

SBEA Leadership Attends White House Forum

On Aug. 15, the White House Business Council hosted a forum to address the topic of “American Economic Competitiveness – Manufacturing.” Among the thirty invited guests to hear presentations from, and interact with, senior administration officials on the topic of manufacturing in the U.S. were David Ickert, NSBA First Vice Chair and SBEA Past Chair and NSBA President Todd McCracken. The thrust of the forum involved a restatement by the administration of the importance of manufacturing to the U.S. and to discuss ways that government and the private sector can work together to increase manufacturing in the U.S.

Dr. Rebecca Blank, Acting Secretary, U.S. Department of Commerce, opened the meeting with a welcome of guests and statement on the importance of manufacturing and the growth of manufacturing to the President. A variety of administration officials made presentations to the group.

During a panel session that included Jason Miller of the National Economic Council, Nicole Lamb-Hale, Assistant Secretary for Manufacturing and Services at the Department of Commerce and Susan Helper of the Council of Economic Advisors, Mr. Ickert raised the issue of small-business exporting activity with the panel.

The three key issues he identified to the panel concerning small-business exporting were:  (1) there still remains a vast untapped potential of job creation in the area of small-business exporting and more should be done from both the public and private sectors to stimulate more exporting from small businesses; (2) more should be done by the Department of Commerce to identify specific international sales leads for small business and (3) begin work now in getting the lending cap raised at the Export-Import Bank of the U.S. Acting Secretary Lamb-Hale noted the issues and agreed to continue work in these areas.

Ari Matusiak, executive director of the White House Business Council, closed out the program. The White House Business Council is a body composed of over 225 senior administration officials from the White House and nearly twenty Cabinet and sub-Cabinet agencies. The Council is one of the principal ways the administration engages directly with business leaders around the country, getting feedback on what the administration can do to help create jobs and making businesses aware of the programs and resources available to help them grow and succeed.

Export-Import Bank Update

During the first three quarters of FY 2012, the U.S. Export-Import Bank (Ex-Im) authorized export financing totaling $23.8 billion, nine percent higher than the same time period in FY 2011. Small-business authorizations grew from $3.4 billion in FY 2011 to $3.6 billion in FY 2012, a seven percent increase. Other noteworthy growth in financing occurred in the oil and gas and transportation industries.

Among all Ex-Im markets, Australia topped the list of the fastest growing countries. During the first three quarters of FY 2012, $3 billion was authorized there compared to $10 million in all of FY 2011. In the final quarter of FY 2012 there are several large transactions still under consideration that will, if approved, significantly increase export financing for Australian buyers, perhaps by as much as 15 times over FY 2011 levels.

Ex-Im has recognized that small-business exporters are significantly contributing to our nation’s economic recovery by competing for and winning sales overseas against aggressive foreign competition. With 95 percent of the world’s customers located overseas, Ex-Im has been critical to providing these small companies the tools they need to be successful in the global marketplace.

Ex-Im Bank is contributing to growing export sales and last year the Bank set export finance records for the third straight year and supported 290,000 American jobs. In May, Chairman Fred Hochberg cited small-business export financing reached over $6 billion—up 90 percent since 2008. More than 85 percent of all Ex-Im transactions in FY 2011 were for small businesses. More than $517 million of this financing supports minority- and woman- owned businesses, a 12 percent increase in export financing from the same time frame in FY 2011—at $4.6 million. So far, 477 small-business customers have used Ex-Im Bank products for the first time this year, putting new small-business customers at 1,775 since the launch of Ex-Im Bank’s Global Access program.

It is critical that the federal government and its public and private sector partners continue to provide resources for small business to succeed in the global marketplace.

Permanent Normal Trade Relations with Russia

Following the bipartisan approval by the Senate Finance Committee on July 18 of the bill that would establish permanent normal trade relations (PNTR) with Russia by removing the nation from the 1974 Jackson-Vanik Amendment, the House Ways and Means Committee followed suit on July 26 by unanimously approving H.R. 6156, the Russia and Moldova Jackson-Vanik Repeal Act of 2012.

U.S.-Russian trade is governed by Title IV of the Trade Act of 1974, which conditions Russia’s normal trade relations (NTR) status, including the “freedom-of-emigration” requirement of the Jackson-Vanik amendment. The Jackson-Vanik amendment in the U.S. was introduced to prohibit most-favored-nation (MFN) status for non-market economies originally on the basis of human rights concerns. The U.S. has retained the law each year, but has, since 1992, granted a waiver to Russia.

On Dec. 16, 2011, the 153 members of the World Trade Organization (WTO) invited Russia to join the organization, after Russia completed an 18-year accession process. The WTO requires each member to accord newly acceding members “immediate and unconditional” MFN status which is called NTR in U.S. law. Russia is expected to formally join the WTO on Aug. 22 and, in order to comply with the WTO rule, the U.S. would have to change Russia’s status from conditional NTR to unconditional or PNTR.

The change in Russia’s trade status will require legislation to lift the restrictions of Title IV of the Trade Act of 1974 as they apply to Russia and authorize the president to grant Russia PNTR status. On June 12, Senate Finance Committee Chairman Max Baucus (D-Mont.) introduced legislation to remove the application of Title IV to trade with Russia. Some members of Congress raised concerns and  felt issues need to be addressed before Congress considers PNTR legislation for Russia, including Russia’s use of sanitary and phytosanitary measures to restrict unnecessarily imports of U.S.-produced meat; week enforcement of intellectual property rights; and government corruption.

Human rights and foreign policy issues also were of concern. As a result, the Senate Finance Committee’s approval of the repeal legislation included new political and human rights sanctions, called the Magnistky bill (S. 1039 and H.R. 4405), formally titled the Sergei Magnitsky Rule of Law Accountability Act of 2012.

Reported out of committee, in a unanimous vote, the Magnistky bill is named for a Russian lawyer who died in detention after trying to expose corruption with the Russian government.  The legislation would require the State Department to identify publically individuals responsible for the detention and death of Sergei Magnitsky and other individuals known to have committed human rights violations seeking to expose fraud by Russian government officials. It would require the Secretary of State to deny visas for these individuals to enter the U.S. and for the Secretary of Treasury to freeze the financial assets in and financial transactions with the U.S.

The House and Senate committees approved identical trade measures that would repeal the Jackson-Vanik emigration provision, but there are some differences in their human-rights bills, namely that the Senate’s Magnitsky measure is broader and could allow for sanctions on visas and finances on human-rights violators beyond Russia.

Final passage of PNTR with Russia will translate directly into new export sales and jobs here in the U.S.  Of the top 15 U.S. trading partners, Russia was the market where American companies enjoyed the fastest export growth last year—38 percent. The President’s Export Council estimates that U.S. exports to Russia—which, according to estimates, topped $11 billion in 2011 — could double or triple once Russia joins the WTO. Meanwhile, the U.S. gives up nothing — not a single tariff — in approving PNTR with Russia.

Since both the House Ways and Means Committee and the Senate Finance Committee approved PNTR legislation by wide bipartisan margins, it is likely Congress will address PNTR soon after they return in September. Lawmakers do not want to risk putting U.S. businesses, workers and farmers at a long-term disadvantage in this important market.

U.S. Trade Deficit

The U.S. Department of Commerce’s Census Bureau and the Bureau of Economic Analysis (BEA) recently announced that exports in June 2012 increased to $185 billion from May’s total exports of $183.3 billion. Additionally, imports were down $3.5 billion from January which resulted in a notable decrease in the goods and services deficit of $42.9 billion, down from the May revised deficit of $48 billion.

The U.S. trade deficit has been continually dropping: in January 2012, the goods and services deficit was $52.5 billion. Goods continue to be the primary driver of the trade deficit, to the tune of $57.5 billion in June 2012 while services are now showing a surplus of $14.6 billion. Both factors are experiencing positive movement, however, with the export of U.S. goods rising $1.8 billion between May and June to $132.8 billion, and imports of goods dropping $3.6 billion to $190.3 billion.

For the three months ending in June, the average trade deficit was $47.2 billion, down notably from just six months ago when, in the three months ending in January, the average trade deficit was $50.2.

Please click here for more details from BEA.