Exporting Round-up from NSBA and SBEASeptember 11, 2013
With more and more small businesses branching out into exporting, policymakers throughout the federal government have been active on working to improve and expand small-business exporting programs. Recent data has been released, including U.S.-wide exporting numbers as well as a report from the Government Accountability Office (GAO) on export coordination, while new data is expected in October from the U.S. International Trade Commission (USITC) which is currently investigating trade-related barriers facing small and mid-sized exporters. President Barack Obama and his administration continue to push for fast track authority to approve Free Trade Agreements (FTAs) while the House Small Business Committee has championed two bills which would reduce some of the key barriers and obstacles faced by small-business exporters, namely by improving coordination among federal agencies and state exporting agencies. Finally, an update on the Export-Import Bank of the U.S. (Ex-Im Bank) including confirmation of Chairman Fred Hochberg and the release of their Competitiveness Report.
U.S. Exporting Data
The U.S. Department of Commerce’s Census Bureau and the Bureau of Economic Analysis (BEA) recently announced that total exports for June 2013 increased to $191.2 billion from May’s revised total exports of $187.1 billion, an increase of $4.1 billion. On the imports side, the June total was $225.4 billion, down from $231.2 billion.
These changes resulted in a smaller overall trade deficit of $34.2 billion—a drop of nearly $10 billion from the May figure of $44.1 billion. Comparatively, the overall trade deficit is down from this time last year by $8.2 billion while exports were up 3.2%.
For the three months ending in June 2013, exports averaged $188.6 billion, while imports of goods and services averaged $228.1 billion, resulting in an average trade deficit of $39.5 billion.
For the three months ending in January 2013, the average trade deficit was $43.6 billion, down notably from the same period one year ago when, in the three months ending in January 2012, the average trade deficit was $50.2.
Please click here for more details from BEA.
GAO Report on Export Coordination
The GAO recently released a report on the Trade Promotion Coordinating Committee (TPCC), an interagency taskforce charged with ensuring coordination and development of a government-wide export promotion plan. The TPCC comprises 20 agencies and lists seven core agencies with which it works: the Departments of Commerce, State and Agriculture, along with the U.S. Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, and the U.S. Small Business Administration (SBA).
At the request of House Small Business Committee Chairman Sam Graves (R-Mo.), the GAO began back in February 2013 their analysis on federal export promotion resources available to TPCC agencies. The findings assess how TPCC complies and reports information and how existing resources match up with stated exporting goals – in short: not well.
What GAO found is that, “…[the TPCC] neither reports nor compiles information on how federal export promotion resources align with government-wide priorities. As a result, decision makers lack a clear understanding of the total resources dedicated across the country and around the world by TPCC member agencies to priority areas…”
The report highlighted areas of lacking information including the goals of increasing exports among small- and mid-sized businesses. GAO went on to state that, while the TPCC has, since the start of the National Export Initiative (NEI), reported on government-wide goals and provided status updates on those goals, it has failed to detail how various agency resources are allocated to support such goals.
Despite record-high exporting in June of 2013, according to Census data, the absence of tangible and useful data is prohibitive in determining whether or not agencies are doing enough to promote exporting, particularly to smaller businesses.
This lack of coordination underscores a broader problem facing small- and mid-sized exporters. According to a May 2013 survey from SBEA and the National Small Business Association, there was a notable drop among non-exporters who said lack of goods or services to export was their main barrier to selling internationally. Today, their main barrier is a lack of information and an unclear understanding of where to start.
In that survey, SBEA found that nearly half of small-business exporters spend a minimum of a few months as well as an average of 8.4 percent of their annual operating revenue preparing to export. The GAO report—along with SBEA’s findings—is clear evidence for the need to make exporting more accessible for Americas’ small businesses. Two of the top three recommendations to improve federal exporting were that the government should improve availability of information and consolidate federal agencies to provide a one-stop-shop.
SBEA and NSBA have been outspoken proponents for the development of a one-stop-shop as well as ensuring reliable information and data—the GAO report clearly makes the same case.
Please click here to read the complete report.
USITC Investigation on Trade-Related Barriers
On July 30, the U.S. International Trade Commission (USITC) published a Federal Register notice notifying small and medium-sized enterprises (SME’s) that the USITC is seeking information for a report that will identify trade-related barriers that SMEs perceive as disproportionately affecting their exports to the European Union (EU), compared to those of larger U.S. exporters to the EU.
The investigation, Trade Barriers that U.S. Small and Medium-Sized Enterprises Perceive as Affecting Exports to the European Union, was requested by the U.S. Trade Representative (USTR) in a letter received on June 18, 2013.
In identifying these barriers to exporting, the USITC will use information and definitions contained in the three previous studies on SMEs that were released by the USITC in 2010, including definitions of “SME,” “disproportionate,” and “barrier,” any relevant literature, and information gathered from SMEs and others.
As requested by the USTR, the USITC’s report will cover barriers faced by SMEs exporting both goods and services, and will focus primarily on barriers identified by SMEs that have experience in exporting to the EU. Also as requested, the report will identify barriers by economic sector or by special issue to the degree practicable and will focus on sectors with high concentrations of SMEs.
In the letter, the USTR noted that the report will help U.S. negotiators attain broad input from SMEs as part of the domestic consultation process to support negotiations related the Transatlantic Trade and Investment Partnership (TTIP) and will seek to strengthen U.S.-EU cooperation to enhance the participation of SMEs in transatlantic trade, and to address trade barriers that may disproportionately impact small businesses.
As requested by the USTR, the USITC will
- Base its report on available information, including information furnished by SMEs and interested parties following the Commission’s notice of investigation;
- Address, where information is available, specific trade barriers in individual EU member states;
- Provide, to the extent applicable, qualitative distinctions among the identified trade-related barriers; and
- Include suggestions gathered from SMEs or the relevant literature to strengthen U.S.-EU cooperation to enhance the participation of SMEs in transatlantic trade.
As requested by the USTR, the USITC expects to transmit its report to the USTR by Jan. 31, 2014.
USITC is inviting written and oral submissions to assist U.S. negotiators attain broad input from SMEs as part of the domestic consultation process to support negotiations related to the TTIP. All written submissions should be addressed to the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, D.C. 20436.
The deadline for filing requests to appear at the public hearing is Sept. 13, 2013 and the deadline for filing pre-hearing briefs and statements is Sept. 20, 2103. the public hearing is scheduled for 9:30 a.m. on Oct. 8, 2013 in Washington, D.C. The deadline for filing post-hearing briefs and all other statements is Oct. 15, 2013.
Please click here for more details.
Fast Track Authority for FTAs
The newly appointed U.S. Trade Representative Michael Froman has indicated that he along with President Barack Obama will continue to push and work with Congress to put “fast track” trade authority in place to help the U.S. finish talks with the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP). Indeed, on July 30 while delivering remarks on his economic agenda, the president issued a brief request for Congress to grant his administration Trade Promotion Authority (TPA) and renew Trade Adjustment Assistance (TAA).
During his speech, he said: “I’m asking Congress for the authority to negotiate the best trade deals possible for our workers, and combine it with robust training and assistance measures to make sure our workers have the support and the skills they need for this new global competition. And we’re going to have to sharpen our competitive edge in the global job marketplace.”
In conjunction with the speech, the White House released a fact sheet, which reads in part: “As part of his commitment to increase exports and the good-paying jobs supported by exports, President Obama will work with Congress to secure Trade Promotion Authority as part of a package that ensures American workers have the support and skills they need to compete in the global economy, including through the Trade Adjustment Assistance program.”
The Fast Track mechanism involves special procedures for the negotiation, consideration, and implementation of trade agreements. The U.S. Constitution gives Congress authority over setting the terms of international commerce, and the Executive branch jurisdiction over negotiations with foreign nations. Fast Track, however, delegates Congresses authority to the Executive branch so that the administration is granted the power to negotiate trade agreements, draft implementing legislation to change U.S. law, and sign agreements into international law. Congresses involvement is restricted to 20 hours of debate and an up-or-down vote on the final bill with no amendments allowed. It was last passed by Congress in 2002 and expired in 2007.
The U.S. is now working on two trade deals of historic size—one with twenty-eight countries of the European Union, another with an assortment of Pacific-Rim nations. Each of these negotiations has the potential to significantly transform world trade patterns and provide unprecedented growth opportunities for the U.S. and the global economy.
SBEA and NSBA have long stated that free trade agreements are extremely important as they lower foreign barriers to our exports and produce a more level playing field. It is critical the president has the authority to negotiate trade agreements through TPA, as it will help provide new economic opportunities for American businesses, farmers, workers and consumers. New and expanded market access through trade agreements has been an important catalyst for increased small business exports.
In July, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Susan Collins (R-Maine) introduced the Trade Adjustment Assistance Extension Act of 2013 (S. 1357),to extend the TAA program, a critical job training and worker assistance program that helps strengthen the American workforce to be better equipped and more competitive. The bipartisan bill extends all TAA programs through 2020 and maintains training and assistance for workers in all sectors of the economy, including manufacturing, services and agriculture. Bipartisan, bicameral discussions among trade leaders on the Hill are continuing on TPA legislation, which could be introduced as early as September.
House Legislation to Improve Exporting
On May 9, House Small Business Committee Chairman Sam Graves (R-Mo.) and Committee member Steve Chabot (R-Ohio) introduced two pieces of legislation—the Export Promotion Reform Act (H.R. 1409) and the State Trade Coordination Act (H.R. 1926) aimed at reducing some of the key barriers and obstacles faced by small-business exporters. On July 24, the House Foreign Affairs Committee approved by a unanimous voice vote these measures and both are now pending floor action.
NSBA and SBEA are pleased with the committee passage of these bills because we have been urging for years—decades, even—that more must be done to emphasize the needs of small business within the scope of U.S. trade in order to enhance exporting opportunities for small U.S. companies.
The Export Coordination Act would establish stronger Congressional oversight and coordination of the federal export promotion agencies. Currently, there are over 20 federal agencies that provide some, or all, of the steps in the export process, and many small businesses do not know where to go for the information relevant to their needs. Graves’ legislation was merged with Foreign Affairs Committee Ranking Member Rep. Eliot Engel’s (D-N.Y.) Export Promotion Reform Act (H.R. 1409) during a subcommittee markup on June 26. Additional provisions of the Graves bill were added during the full committee markup.
This proposal goes hand-in-hand with a key recommendation NSBA and SBEA have been making for years—a one-stop shop for small exporters. Increased coordination between agencies will help more small businesses access the tools they need to export. Especially for small companies that are new to exporting and those with specialty products for exotic markets, there are undeniable fear factors, such as knowing exactly where to go and who to call.
Second, the State Trade Coordination Act, sponsored by Rep. Chabot, would establish the framework to ensure that federal and state trade agencies work in unison to assist their local exporters. The bill would direct the president to appoint as least one representative of state trade promotion agencies to the Trade Promotion Coordinating Committee (TPCC). It also calls on the Commerce Secretary to develop a plan to integrate resources and strategies of state trade promotion agencies into the overall federal trade promotion program.
SBEA and NSBA have long stated that enhanced export training and technical assistance are essential to small exporters’ success. Cross-agency outreach guides and learning materials on the intended foreign markets with virtual marketplace and virtual trade missions would make it easier and less expensive for small businesses to reach foreign partners.
By making it easier for small businesses to sell their products overseas, we can create an environment in which small businesses can thrive, grow and expand. The presence of small business exporter’s in America’s global trade strategy must continue to increase and the government needs to ensure that they facilitate the exporting process, and not hamper it through excessive regulations.
Ex-Im Bank Update
On July 17, the Senate voted 82-17 to approve Fred Hochberg for a second four-year term as president and chairman of the U.S. Export-Import (Ex-Im) Bank. Ex-Im Bank, a self-sustaining federal agency, is the official export credit agency (ECA) of the U.S. It helps finance American exports of manufactured goods and services, with the objective of contributing to the employment of U.S. workforce, primarily in circumstances when alternative financing is not available.
By law, the Bank’s Board of Directors must have a quorum—or three of its five members—to approve transactions. Chairman Hochberg was previously confirmed by the Senate on May 14, 2009. His first term ended on Jan. 20 and he was leading the Bank under a six-month extension. The extension allowed under the Bank’s charter would have expired on July 20, had the Senate not reconfirmed Hochberg for another term, and the Bank’s business would have grinded to a halt and transactions would not have gotten approval.
Additionally, President Obama recently nominated Ex-Im Bank Vice Chair Wanda Felton for a second term as she has been a driving force behind the expansion of financing exports to Sub-Saharan Africa. She had yet to be confirmed by the Senate. Meanwhile, Director Larry Walther has left the Board after serving two years, and a replacement has yet to be named.
Hochberg was easily confirmed in 2009—by unanimous consent in the Senate—and saw the Bank through a difficult reauthorization fight last year that renewed the Bank’s charter for three years and raised the limit on the total financing the Bank can guarantee, to $140 billion from $100 billion.
In the 2012 budget year, which ended last September, the Bank provided a record $35.8 billion in direct loans, loan guarantees and other types of financing to help U.S. exporters make sales. That was the fourth consecutive record year for the Bank, which has seen increased demand for its services in the aftermath of the global financial crisis.
Hochberg’s nomination also became entangled in a broader Senate battle over several Obama nominations, with the majority Democrats accusing Republicans of abusing a procedural roadblock known as a filibuster to delay votes indefinitely. A deal to resolve that dispute was reached on July 16, allowing a vote on Hochberg’s nomination to proceed.
During a recent speech, Chairman Hochberg noted that U.S. exporters often face head-to-head competition with competitors backed by foreign governments that offer attractive financing terms, sometimes tipping the scale for their own domestic manufacturers and how U.S. companies can succeed in an increasingly competitive global environment, by identifying diverse opportunity areas ranging from nuclear power to infrastructure.
In conjunction with his speech, Hochberg released Ex-Im Bank’s 2012 Competitiveness Report. The Bank has produced these reports for Congress annually since 1972, and this year’s report the challenging trends in trade finance driven by emerging economies. The Bank’s press release is online here.
The Ex-Im Bank’s 2012 Competitiveness Report found that commercial bank capacity has declined since the global financial crisis, making export credit agencies (ECAs) an increasingly important tool. Many Asian countries have ambitious export plans to gain market share, and the report finds China, Korea, Japan and others are ramping up government export support.
The report goes on to state, U.S. exporters compete in many markets and sectors that other countries have targeted as a “national interest,” either explicitly as part of their national policy, or implicitly by making available a range of official financing tools intended to maximize the flow of national benefits. More and more financing is being offered outside of OECD guidelines. But it is not just interest rates. It is open season on other inducements as non-OECD countries continue to use financing to sway purchase decisions.
In the report, the 2013 Advisory Committee commended the Bank for its continued success in filling commercial financing gaps in support of U.S. exports. The Advisory Committee also noted that certain public policy issues –domestic content requirements, economic impact studies and MARAD shipping requirements – continue to be a concern.