Testimony of Mary Delmege

Senior Advisor to the Trade Promotion Coordinating Committee

House Small Business Committee California Field Hearing

Mr. Chairman, Representative Napolitano and Members of the Committee:

Thank you very much for including us in this hearing. This provides an excellent opportunity to highlight the importance of trade for our economy and to talk about how small and mid sized businesses are participating in global trade. I’d also like to discuss current efforts to ensure that the resources that are available to help small businesses participate in international trade are delivered in a coordinated manner. Finally, I’d like to share with you some examples of small California firms that have recently succeeded in selling into overseas markets.

Overview

With regard to the importance of trade, the facts speak for themselves: Exports have accounted for 30% of US economic growth since 1989 and 97% of the US businesses that export are small and mid sized firms. In developing the National Export Strategy this year, we surveyed more than 1,000 small and mid-sized exporters.* One of the things that we learned was that many small and mid sized exporters regard trade as a core element of their business and expect it to serve as a continuing source of revenue growth. Many of them also view their export sales as an important source of diversification when domestic sales are flat or declining. The majority of the firms surveyed have experienced growth of more than 5% annually in the past three years and expect that their export sales will continue to grow more than 5% annually in the next three years. Of the small businesses (under 100 employees) that export, 60% derive more than 20% of their total sales from exporting. Forty-four percent of the mid-sized exporters report that 20% of their total sales come from exports. There is no doubt about the fact that trade provides tremendous benefits for small and mid sized U.S. businesses. It is well worth the time and effort we are spending to make sure that trade services are well coordinated and effective.

The National Export Strategy

The Trade Promotion Coordinating Committee was established in 1992 under the Export Enhancement Act to provide a unifying framework to export promotion and export financing. It is an interagency committee, chaired by the Secretary of Commerce, which each year publishes the National Export Strategy.

This year, the TPCC developed the National Export Strategy through a process of reaching out to US firms in order to better understand their needs. In addition to the survey mentioned before, we conducted one-on-one interviews and focus groups with companies throughout the US. We also looked at trade promotion programs of other industrialized countries to learn as much as possible about their best practices. All of this input was used to develop a series of recommendations, including steps to provide better customer service and expanded outreach and education. Many of the specific recommendations for better customer service are focused on training. Although users of services are generally pleased, many of them told us that they would like to see better coordination between agencies. They expect more seamless client service than the agencies currently provide.

Training

As a result of these recommendations, an interagency task force is developing a training proposal aimed at making sure that trade specialists who interact with clients are well versed in the full array of services available. Trade specialists should be able to match the needs of the client with the most appropriate resources. Many small and mid sized exporters told us that they have trouble figuring out where to go for help. They would appreciate it if someone could guide them through the maze of available assistance. The goal of a well integrated, interagency training program is to deliver just this kind of help. The training will consist of short term, classroom style sessions, on-line resources and longer term rotational job details. By equipping trade specialists with increased skill sets, we will be able to better respond to exporters and potential exporters who expect more integrated service. The Commercial Service currently has over 300 international trade specialists in the field and our goal is to develop them as true account managers who are able to provide clients with access to the full array of trade services.

At the same time, it is important to point out that this is not a new effort. Rather than try to reinvent the wheel, we are attempting to build on our most successful efforts and institutionalize those best practices. The 1993 National Export Strategy called for the creation of US Export Assistance Centers where Commerce, Ex-Im Bank and SBA are co-located. These were designed to be “one stop shops” for exporters, where they could access counseling, research, and marketing assistance, as well as trade finance. One of the first four US Export Assistance Centers was here in Southern California and helped to serve as a model for how integrated trade services should be delivered. This work continues today as the three agencies work side by side, calling on clients and helping a great many small California businesses expand through exporting. The Southern California network of offices leads the country in numbers of successful export transactions reported by our clients. So far this fiscal year, these offices have counseled more than 1,100 clients and reported 480 completed transactions worth a total of $180 million. Many of these companies have received assistance from the US Department of Commerce, SBA, Ex-Im Bank and other TPCC agencies.

To cite a few specific examples, one of our specialists here in Los Angeles recently helped a small company in Santa Fe Springs, resolve an issue with the Mexican Customs authorities. Her efforts led to the successful shipment of $30,000 worth of refurbished electronic equipment.

In another case, the staff at the local US Export Assistance Center helped an apparel manufacturer in Vernon, link up with our Commercial officer in France. Through a series of “gold key” meetings, the company was able to expand their distribution network and generate sales in excess of $160,000 in 2001 and $200,000 this year.

A third example, concerns a Whittier firm that specializes in the manufacture and of electrical power systems and electrical components. By helping them understand NAFTA requirements and complete a certificate of origin, our trade specialist was able to help them complete a $16,000 sale of equipment to a buyer in Mexico.

These are just a few examples of local firms that have benefited from the trade services available locally. By providing these very productive trade specialists with additional training and resources, we are confident that we can increase the scope of assistance available to small and mid-sized firms. The training effort, along with implementation of the other recommendations in this report, are part of an overall effort to respond to the changing needs of small and mid sized firms that want to grow their businesses by getting involved in international trade.

* Report Card on Trade II: Assessing the Effectiveness of U.S. Government Support to Small and Midsize Exporters. Kenan Institute. June 12, 2002