Trade Policy and Export Promotion: What To Expect From the New Administration

1. Trade Policy and Export Promotion: What To Expect From the New Administration International Trade Association of Greater Chicago February 18, 2009 Presentation by James Morrison, President & CEO Small Business Exporters Association of the United States

2. Atmosphere • Public not well educated about trade and wary of it. • Mixed signals from President Obama. • Democratic Party divided on trade issues. • Both early efforts at bipartisan cooperation – Trade Adjustment Assistance -- and outbursts of partisan friction – “Buy America”

3. Early Signs to Watch For • Obama trade team • Kirk hearings • Selection of Commerce Secretary • Decision on whether to seek Trade Promotion Authority.

4. Very Likely to Get Done • Trade Adjustment Assistance • OPIC operating authority extension • US Customs reauthorization • “Trade preference programs” revisions • Panama Free Trade Agreement

5. May Get Done • Trade Promotion Authority (“fast track’) • Strengthened trade law enforcement • Colombia Free Trade Agreement • Trans-Pacific Free Trade Agreement

6. Outside chance • South Korea FTA • Miscellaneous Tariff Bill (now ruled “earmarks”) • Doha Development Agenda, global trade agreement

7. What SBEA Wants, 1 • Strengthened trade financing – Ex-Im Bank: temporary liberalization of terms, more delegated authority to commercial banks, more direct lending -- SBA: increase guaranteed lending percentages, raise loan caps, provide through more USEAC’s. -- OPIC: maintain operating authority, beef up Enterprise Development Network

8. What SBEA Wants, 2 • Improved export promotion -- increase, don’t cut, U.S. Commercial Service budget. Pays back $415 in export sales per $1. -- put smaller companies more on the trade agreement radar screen. Focus on lowering transaction costs, opportunity costs.

9. Why promote exports? Keeps U.S. companies globally aware and competitive. Access different business cycles in different countries. Each $1 billion in export sales creates 9,000 U.S. jobs.¹ These jobs pay 13-18% more, on average, than non-trade-related jobs.² SME’s that are globally engaged are top performers in the U.S. economy – and they spread international trade benefits to Main Street.³ ¹ Export database, U.S. Department of Commerce ² Why Exports Matter, Institute for International Economics, 1996 ³ Importers, Exporters and Multinationals, Andrew Bernard, et. al., National Bureau of Economic Research, 2005

10. Obstacles to effective export promotion: Export Promotion Spending and Staffing, 2007Germany spends twice what we do, as a percent of GDP. Spain spends 12 times as much. We deploy fewer export promotion personnel than Canada, an economy one-tenth our size.

11. U.S. Exporters, by Business Size

12. Good news / bad news:The good: 240,000 U.S. small businesses already exportThe bad, part 1: that’s less than 1% of all U.S. small businesses. Compared to: France -- 6% Canada, Germany, UK -- 9%Australia -- 15%

13. Bad news, Part 2: Nearly two-thirds of all SME exporters sell to just one foreign market

14. What to do: Key fact to keep stressing: 95% of the world’s consumers live outside the U.S. To promote exports, start with the low-hanging fruit: small companies that already export. Get them to export to more countries. Then move on to non-exporters: Show upside potential of exporting, effectiveness in smoothing business cycles. IMPROVE PUBLIC AWARENESS OF INTERNATIONAL TRADE.

15. The Small Business Exporters Association of the United States1156 15th Street NW, Suite 1100Washington, DC 20005-1755 USA202-659-9320Fax: 202-872-8543www.sbea.org America’s Premier Association for Small and Mid-Sized Exporters®