America’s small business owners are hailed as heroes of free enterprise, not least because they generate two-thirds all new U.S. jobs. But it’s often overlooked in the trade debate that 98% of the 300,000 American companies that export are small and medium-sized businesses.
In fact, smaller companies account for one-third of U.S. merchandise exports, according to a report by the U.S. Department of Commerce. The number of small and midsized firms that export has risen about threefold over the past 25 years.
However, we can and must do more. Just one in every 100 of America’s 30 million small businesses export. In countries such as Germany and Switzerland, the share of small firms that sell their products abroad is five to ten times larger.
To expand export opportunities for small businesses and make it easier for them to take advantage of global markets, the United States should negotiate new trade agreements that support small businesses and broader economic growth by tearing down trade barriers and creating new business opportunities.
While some critics argue that trade agreements only benefit large multinationals, the truth could hardly be more different. Trade agreements require foreign governments to eliminate the tariffs that too often shut out American exports ranging from apples to zucchini and airplanes to x-ray equipment.
These tariffs may be small change to multinationals, but they are a big deal to small businesses. Also, multinationals can rejigger their supply chains and shift some parts of their production to other countries to route around tariff walls — which small businesses can’t do.
These agreements include other provisions that disproportionately help small businesses. Among other things, U.S. trade agreements:
- Cut red tape and make customs procedures in foreign ports more efficient and transparent.
- Require fair and transparent regulatory procedures for the development of product and technical standards, thus ending many of the “nontariff barriers” that too often shut out U.S.-made products.
- Allow products tested in the United States to be imported, thus saving companies the money they would otherwise be obliged to spend on duplicative testing and certification.
- Boost the potential of e-commerce to allow thousands of smaller firms to easily reach foreign customers through online portals.
- Promote paperless trading by allowing electronic authentication and signatures.
- Make it easier for businesses to search, register, and protect intellectual property.
- Criminalize bribery and the theft of trade secrets while ensuring transparency in bids for foreign bidding for government contracts.
While removing the trade barriers that shut U.S. exports out of foreign markets is by far the most cost effective way to help firms of all sizes to boost their sales abroad, export promotion programs focusing on America’s small businesses offer significant gains. Showing how smaller companies can gain from trade would also help build political support for international trade. By adding to the ranks of small businesses that see direct benefit in exporting, Americans will be able to see more clearly the possibilities offered by worldwide trade.