The Obama administration's efforts to grow small-business exporting, and how Congress could derail them.

Trade and job creation
Dec. 6 2010 11:42 AM

Thinking Small

The Obama administration's efforts to grow small-business exporting, and how Congress could derail them.

President Obama. Click image to expand.
President Barack Obama

Small businesses are politicians' favorite constituencies on the campaign trail; whether wannabe lawmakers skew red or blue, when it comes time to hustle for votes, visiting local stores and factories is right up there with kissing babies. Unfortunately, that show of support doesn't always translate into meaningful legislation after the election. When the Obama administration put forward a plan to double exports in five years as a way to increase employment and reduce the deficit and the trade imbalance, it specifically targeted small businesses as an intended source of this growth. In the aftermath of the tumultuous midterm elections, though, Washington observers worry that the incoming Congress will slash spending indiscriminately and idle the machine that's supposed to pull our economy out of the doldrums. "Republicans like to posture themselves as champions of small businesses, but when it comes to making policy, they're not walking the walk," says Adam Hersh, an economist at the Center for American Progress.

A small business is defined as one with 500 or fewer employees, but most are much smaller than that. According to Census data, the greatest number of U.S. businesses have four or fewer employees. There are around 6 million small businesses in the United States, compared with roughly 18,000 firms that employ more than 500 people. These 6 million small businesses contribute about half of our nonfarm, private-sector GDP. When it comes to exports, though, their impact isn't as great. The percentage of small businesses that export slid from roughly 31 percent in 1996 to just under 29 percent in 2006, and this took place during a period in which the dollar value of exports grew by almost $410 billion.

"Exporting is a big-company game," says Robert Lawrence, a Harvard University professor and senior fellow at the Peterson Institute for International Economics. "If you want to get into a foreign market, there are fixed costs you have to incur, and these aren't insignificant." Businesses need to acquaint themselves with foreign regulatory bodies and distribution models and deal with logistical challenges like a language barrier or a 12-hour time difference.

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Just finding companies that might be interested in exporting can be a challenge. The International Trade Administration partnered with UPS and FedEx, along with the U.S. Postal Service, to track down small exporters in a program called the New Market Exporter Initiative. The shippers combed through their customer databases to find companies that shipped to one other country. The ITA then approached the companies to gauge their interest in expanding to another overseas market. The ITA says it found 250 prospects in just eight weeks, thanks to the outreach program.

It's been an all-hands-on-deck effort to try to promote exports, with the Commerce Department (of which the ITA is a part), U.S. Trade Representative—which held a conference dedicated to the topic in January—and Small Business Administration, among others, all involved in the proselytizing. For its part, the Small Business Administration demurred when asked if it was worried that a slash-and-burn attitude to government spending would impede its efforts in 2011 and beyond, but the answer is almost certainly yes.

"Financing is always going to be the No. 1 priority," says Richard Ginsburg, senior international trade specialist at the SBA. Ginsburg praised the passage of the Small Business Jobs Act signed in September, legislation that boosted small businesses' borrowing power in a tight credit climate. It's worth noting, though, that the act was passed by the House back in the summer, but it was stuck in the Senate for three months after Republican senators held it up—and that was before the deficit hawks had solidified their hold on the House. "When it came time to doing something that would help small businesses grow, Republicans were standing in the way," says CAP's Adam Hersh.

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