Testimony of Assistant Secretary and Director General Awilda R. Marquez

Before the Subcommittee on Tax, Finance, and Exports, Committee on Small Business, House of Representatives

September 9, 1999

Introduction

Mr. Chairman, I would like to thank you, Representative McCarthy and the Members of the Subcommittee for providing me with the opportunity to speak to you about one of the true success stories in government: the U.S. Export Assistance Centers. I would ask that my complete statement be made a part of the official record.

Three years ago my predecessor, Lauri Fitz-Pegado, testified before Congress and gave an update of the U.S. Export Assistance Center network. At that time, although the network was not yet complete, its importance to the American exporting community had already been demonstrated. In the subsequent three years, I am pleased to report that the Export Assistance Centers have become a catalyst for small- and medium-sized companies seeking to expand their markets overseas and are an invaluable resource for the tens of thousands of companies which seek assistance from the Export Assistance Centers annually.

Exports are essential to the economic strength and security of this nation. In the ten years ending in 1997, U.S. exports gained over 140 percent (adjusted for price changes) and accounted for one-third of total economic growth. These gains have provided job opportunities for millions of Americans. Relative to the size of the economy, total trade (exports and imports) has risen from about 9 percent of GDP in the early 1960s to 24 percent today. Trade makes a tremendous contribution to the strength of our national economy and to the economic well-being of our citizens. Exports have accounted for a third of our economic growth and for jobs that pay 13 to 16 percent higher than other sectors. The Clinton Administration recognizes the importance of exports and the need to help American businesses, especially small companies, compete in an increasingly global market.

The 1992 Export Enhancement Act and the Trade Promotion Coordinating Committee (TPCC) report Toward a National Export Strategy called on Commerce's U.S. and Foreign Commercial Service (the Commercial Service) to join forces with the Small Business Administration (SBA), the U.S. Export-Import Bank (Ex-Im), the United States' Department of Agriculture's Foreign Agricultural Service (FAS), the U.S. Agency for International Development (AID) and other appropriate federal, state and local entities to coordinate and streamline export promotion and trade finance services. Almost six years have passed since we opened four pilot U. S. Export Assistance Centers in Baltimore, Miami, Chicago and Long Beach. I am pleased to join you today to show how we have not only achieved the goals first set out by Congress and the TPCC, but also have expanded on that original concept to the benefit of American exporters. By fostering strong partnerships with federal, state and local trade promotion organizations; incorporating technology; and strategically placing our resources where they could serve our clients most effectively, we created an integrated national export assistance delivery network.

Partnerships & the Export Assistance Center Network

Today, the Export Assistance Center network is comprised of over 350 employees located at 105 Export Assistance Centers nationwide providing export assistance to American companies nationwide. Each Export Assistance Center offers one-on-one counseling to businesses, particularly small- and medium-sized, with export potential. Commercial Service Trade Specialists work with firms to determine their export potential, find new markets and plan market entry strategies based on their experience and commitment to exporting. Aqua-Aerobic Systems, of Rockford, IL, a company that manufactures technologically advanced biological waste water treatment systems, utilized the expertise of the Rockford Export Assistance Center to identify new Latin American markets resulting in over $1million in new sales and several million dollars in prospective sales.

With the importance of coordination growing due to a scarcity of resources and a greater demand on services, it has become essential that the differences among organizations be transformed into synergistic opportunities. To most efficiently utilize our federal funding and capitalize on the strengths of other export assistance providers, the Commercial Service has pursued joint ventures with other government agencies and with the private sector to enable us to provide enhanced service to our clients. Undoubtedly, working together through partnerships at the point of service delivery is the most effective way to help the American exporter in today's climate of increased global competition.

The trade finance counseling provided by SBA and Ex-Im Bank professionals at the Export Assistance Centers complement the export marketing counseling offered by the Commercial Service. Increasingly, small and medium-sized export ready firms look to expand their overseas markets through working capital loans and export insurance that can help increase their capacity and reduce the financial risks of international trade. Through joint counseling sessions and coordinated off-site visits, the Export Assistance Center staff have streamlined the export assistance process significantly.

The Export Trade Assistance Program or ETAP is an example of the how the SBA and the Export Assistance Centers partnership benefits American companies who are new-to-export. The ETAP program is a series of participatory seminars on exporting aimed at increasing a firm's international sales. ETAP provides the training for committed and capable companies to dramatically increase their export sales. Area economic assistance organizations contribute speakers, recruit export professionals, and mentor companies to ensure participants' success.

One company that has benefited from the ETAP program is Westar Corporation of Bridgeton, Missouri. The company states that, "[T]he ETAP classes followed right along with our sale to Korea. When the classes were talking about shipping, we were in the process of shipping our product."

Another example of federal USEAC partners working for the benefit of American exporters is the recent development of our Client Management System (CMS). The CMS database enables the Commercial Service network to track a client's export endeavor from the first counseling session in a domestic Export Assistance Center through the successful completion of an export sale using the services of an overseas Commercial Service office. Beginning October 1, 1999, SBA will adopt CMS as its database management system. This will allow the SBA and the Export Assistance Centers to share client information and provide improved client service. Ex-Im is looking into the feasibility of adopting the CMS as well. At the Chicago USEAC, prior to the database integration, Ex-Im and SBA are entering their respective client information into the Commercial Service's CMS giving that office a USEAC-wide client data management system.

Federal-state partnerships take many forms, but always involve sharing resources and common goals to help U.S. firms export. Partnerships turn differences into assets, create a seamless local export assistance infrastructure, and eliminate overlap and duplication among federal, state and local programs. Working together locally is the most effective way to help the small business exporter in today's climate of increased international competition and budgetary constraints on export development resources. The Export Assistance Centers are located in convenient, accessible places for local business communities. The original vision of providing a "one-stop-shop" for American exporters has become a reality. In the words of Kiss Products, a manufacturer of manicure products, from Long Island, NY, "Export Assistance from the Commercial Service has been an integral part of our success internationally."

Strong partnerships with state and local export promotion organizations are fundamental to increasing the effectiveness of federal export services. Where possible, Export Assistance Centers are co-located with other public and private partners (such as world trade centers and state development agencies). Co-location improves the accessibility to services and allows the leveraging of resources among partner organizations. Strong partnerships expand the range and depth of services available at a single site, and establish a more rational, integrated service delivery network.

The state of Ohio is an excellent example of Export Assistance Centers partnering with states. The state of Ohio, Commercial Service and SBA created the International Trade Assistance Centers in 1993 to provide assistance to clients not yet export ready and to bring these businesses up to a level where they can be assisted either by the state, SBA or the Commercial Service. Ohio's International Trade Assistance Centers have helped to increase the amount of Ohio exports. An article in the August 27, 1999 edition of the Cincinnati Enquirer stated that Ohio companies are expected to dramatically increase their exporting in the next five years. The article was based on a survey commissioned by the District Export Councils (DECs) in conjunction with the Ohio Export Assistance Centers. DECs are organizations of community leaders, appointed by the Secretary of Commerce, whose knowledge of international business provides a source of professional advice to firms seeking to expand international sales. DECs were established to support and promote the programs and services of the Export Assistance Centers and contribute to the development of a comprehensive local referral network and directory for the business community.

The Atlanta USEAC partnership was instrumental in the international roll out of the Commercial Service's PC based video conferencing equipment. The State of Georgia was awarded a Department of Commerce Market Development Cooperator Program grant to create a video conferencing network between several sites in Georgia and the State's 11 international offices. When the grant ended in September 1998, the state shared their video-conferencing experiences with the Department. The Commercial Service immediately recognized the benefit of this technology to trade promotion, and the equipment has now been installed in all domestic Export Assistance Centers and in selected sites around the world. Also, a website, created by Georgia a resource for general information about video conferencing, was adopted by the Commercial Service and now serves as our primary source for general information about video conferencing.

Seamless Delivery of Service

The underlying premise behind the creation of the Export Assistance Center was the desire to provide a seamless delivery of services to clients at one location. The "one-stop-shops" combine the marketing expertise of the Commercial Service, the financing specialty of the SBA and Ex-Im, agricultural know-how of FAS and the procurement and trade-lead gathering experience of AID giving American exporters unparalleled export assistance. The Export Assistance Centers actively engage in joint client calls and joint training such as last years Trade Specialist Training in St. Louis. The Export Assistance Centers are committed to seamless service delivery and every Commercial Service annual performance plan has one element dedicated to working with partners. On a managerial level the federal Export Assistance Center partners meet annually to develop a strategic plan for the upcoming year and hold at least quarterly TPCC USEAC working group meetings to monitor progress. In St. Louis, the office is considered a "one-stop capital shop" as well as a "one-stop export marketing shop" where appointments are being set up for SBA by the Commercial Service and vice versa. Resources are leveraged and joint goals are established. In the words of Randy LaBounty, the St. Louis USEAC Director, "The Commercial Service succeeds; SBA succeeds; and the client succeeds."

Initiatives

The Commercial Service maximizes scarce resources is through initiatives such as Teams Initiatives, the Rural Export Initiative, the Electronic Commerce Initiative, the Global Diversity Initiative and Innovation 2003. All of these initiatives enable Trade Specialists to work collectively throughout the country on programs that benefit the entire Export Assistance Center network.

Teams

Commercial Service Teams Initiative has made a significant contribution to ITA's goal of integration and increased communication between ITA units. After five years, the Commercial Service Teams have matured and now have a solid and effective international structure that coordinates activities across the U.S. This international structure, headed by a headquarters team coordinator, has facilitated increased communication and coordination of trade promotion programs by all International Trade Administration (ITA) units. A large number of Foreign Service Nationals, Commercial Officers, and representatives from other ITA units have joined Commercial Service domestic Trade Specialists to bolster Team's international and industry expertise. Teams are also incorporating local trade partners and the private sector into their membership as affiliate team members.

Teams are field driven and created to better serve their clients. By bringing together the best expertise that the ITA has to offer, Teams are developing new and innovative programs using the latest technology in order to meet the needs of SME clients in this fast moving trade environment. Teams are reaching out to clients through industry focus groups to solicit input on how they can meet specific industry needs. Teams are working together with the private sector to conduct training programs that further develop the expertise of our trade counselors around the world. With a focus on innovation, the teams have increased outreach to new clients, developed enhanced matchmaking programs, and used new technology, such as web-casting and video conferencing, to educate clients and put them in virtual touch with buyers overseas.

Teams are reaping success by delivering high quality and timely service to clients. Several measures of this success include an increase in our client base, including more minority and rural clients; more focused distribution of trade leads and multilateral bank opportunities through our team structure; more expert counseling delivered directly to clients; and increased team support for reverse trade missions.

The United States is the world's leading provider of services and in 1995 services accounted for 70% of US GDP or US$4 trillion. In order to meet the needs of this rapidly growing industry, the Export Assistance Centers created a Services Team divided into five sub-teams: design and construction (design: architectural, engineering, industrial, graphic, new media); education; franchising; transportation; and travel and tourism. These sub-teams are continuously holding focus groups with clients and refining their strategies. In some cases, strategies are being replicated from one subgroup to another to take advantage of cross-disciplinary synergies and to facilitate export promotion efforts. Because of the lack of existing tools such as available market research, and proven strategies, the incubation time for seeing results in export actions and success stories is longer than the normal 12-18 months. However, as strategies are replicated across sub-sectors, the R& D time needed to determine how best to assist companies is expected to diminish.

A key part of our Service Industries Initiative is the San Francisco Design Solutions that is made up of 17 Bay Area design firms encompassing graphic, industrial and new media (web) design and international marketing services. The consortium is supported through the combined and leveraged resources of the member firms, and through the support of firms in allied industries. During the pilot phase of the project (due to end on September 30, 1999) the Commercial Service has acted as a catalyst to bring the group together and is helping the group to establish overseas "brand identity" through the development of strategic alliances and direct contact with potential clients.

An example of a new program is the collaborative effort between the Services Team worked with the Association of Western Washington International Student Advisors to form the Washington State International Education Consortium. The consortium works with local public and private-sector partners, such as the Washington State Tourism and the Trade Development Alliance of Greater Seattle, to raise the profile of Washington State schools in the international sector.

Rural Export Initiative

The Commercial Service is dedicated to providing the best in export promotion services to rural America. The Rural Export Initiative was launched to reach small and medium-sized companies who are export ready, but have not had full access to international trade services because they are located in remote areas or in business centers away from major metropolitan areas. The Rural Export Initiative and E-Commerce projects are jointly funded by a direct line item appropriation from Congress.

Many rural companies share common characteristics: they lack access to trade services such as counseling, banking and freight forwarding experts; they don't have peers who can share international experiences; they do not regularly interact with people from other nations; and they often do not have the benefit of industry clusters. We are dedicated to finding rural companies with the capacity to succeed and to assisting them in entering the international marketplace.

A key element of the Rural Export Initiative strategy is increased outreach and travel by our Trade Specialists to rural communities across the United States. Our Trade Specialists are seeking and establishing new partnerships and strategic alliances with rural business multipliers and economic development organizations. These new partnerships will provide rural companies with better access to Commercial Service export assistance and global market research.

One of the hallmarks of the Rural Export Initiative is its utilization of technology, particularly Internet applications. One such application is Webcasting. The Commercial Service has developed a site on the Internet where trade specialists can broadcast seminars on international trade issues to rural companies. We are developing a "library" of webcasts for U.S. companies to utilize. The Rural Export Initiative provides companies with better access to export assistance, global market research, and other international trade services through increased outreach and innovative use of technology.

An example of an Export Assistance Center utilizing E-commerce to the benefit of rural companies occurred on March 10, 1999 when the Phoenix EAC, in cooperation with the Rural Exports Team and the Multicultural Team, conducted a briefing and live video conference with our office in Milan, Italy. The briefing was held at the 1999 Reservation Economic Summit & American Indian Business Trade Fair, held in Phoenix, AZ. Conference participants included American Indian entrepreneurs, tribal economic and business development decision-makers, as well as tribal government representatives. Subjects discussed included services available from the Commercial Service, the Rural Export Team's "Incubator" program, and the Multicultural Team's "Global Diversity Initiative." In addition, Commercial Service Milan provided an overview of the Northern Italian Market for Indian indigenous products, and interviewed an Italian buyer who inspected samples on the spot and negotiated directly with suppliers. More than sixty people attended the event.

E-Commerce

In order to remain competitive in today's world economy, American exporters must take advantage of tools that can help them quickly and effectively reach their international customers. One of the most important tools to accomplish this is the Internet and the implementation of E-commerce strategies.

The Commercial Service has developed a suite of video conferencing products and services including the Video Gold Key, the Video Meeting and the Video Market Brief. These products and services utilize the latest computer technology and assists American companies with their export endeavors without leaving their office.

The Video Gold Key is intended to be an enhancement that may be added to the regular Gold Key - the most popular Commercial Service product where an overseas post makes individualized in-country appointments with potential overseas buyers. The Video Gold Key provides the client an opportunity to test the market prior to traveling to the country for Gold Key service, prescreen foreign buyers, and focus their efforts. It is not intended to replace the Gold Key product. Therefore, the pricing includes the cost of the first day of a regular Gold Key plus the video conferencing costs. As such, when a company decides to go "in country" for in person meetings, the first day of the Gold Key has already been paid for. The only additional charges are the fees for the second and third days appointments, driver costs, interpreter fees and other incidental expenses.

Clients/partners/other interested parties may want to have a video conference with their overseas distributor, agent or other parties overseas. The costs for these conferences will include the line charges and other associated fees. A typical video conference will last one hour.

The Video Market Brief is a thirty-minute appointment that allows U.S. companies to connect with an overseas Commercial Service office via video in order to obtain a current view of the overseas market. After a fifteen minute presentation by the Foreign Service Officer or Foreign Service National, the video conference is open for questions. Questions that need researching are listed at the end of the video conference. The overseas Commercial Service office will then determine how much it will cost to do the necessary research and generally provide the cost to the client the following day.

Most of us have participated in a trade show of some kind. The Commercial Service changed the perception trade shows in FY99 when we debuted our virtual trade show, E-Expo USA. The best way to describe a virtual trade show is to think of an electronic catalog where many products are listed and categorized accordingly. Virtual trade shows are expected to be one of a new series of products for the commercial service which will assist U.S. companies in export promotion by bringing product information to potential buyers through electronic means. Companies have the ability to place photos a description and pricing information for their product in an electronic trade show format and link to their own websites. .

Virtual trade shows enable U.S. exporters to exhibit their products and services internationally on-line via the Internet before, during and after a specific trade show. These electronic trade shows enable firms that are planning to attend an actual trade show to conduct pre-event promotion - even establishing preliminary contracts prior to the event. In effect, they serve as an on-line catalog show. For firms that would like to participate in an international trade show, but are unable to actually attend the event, virtual trade shows let companies have an electronic presence. Trade leads and international sales interests are collected and forwarded to the client for follow-up. Company product and service information remain on-line for 365 days, enabling all participants in virtual trade shows to benefit from post-event promotion. To date, nearly 600 companies have registered with E-Expo USA.

Global Diversity Initiative

This year, the Commercial Service introduced an initiative that forges new pathways between minority owned businesses and opportunities in the global marketplace. The Global Diversity Initiative capitalizes on America's diversity through trade by creating comprehensive programs that will: increase the number of minority owned firms exporting their services and products abroad; expand the capability of minority firms entering international trade; and enhance the nation's economy through increased trade by minority firms

The Global Diversity Initiative works at both the national and local levels to accomplish these goals by partnering with national and local organizations, conducting substantial outreach activities, and integrating minority-owned firms into Commercial Service programs.

The Global Diversity Initiative works at both the national and local levels to identify minority owned firms that are ready to export through the nationwide network of Export Assistance Centers. These Centers, together with their Commercial Service counterparts overseas, have the expertise to provide minority owned businesses with the international trade information and industry connections that can make their product or service successful in the global marketplace.

In April 1999, the Global Diversity Initiative launched a new training and outreach program focused on increasing the number of minority-owned firms who export. The Market Entry Program is a six-month program that prepares firms to sell their products and services internationally by providing training, ongoing consultation and support, and participation in a trade mission to either Canada or Mexico in January 2000. The nine pilot sites for the Market Entry program during fiscal year 1999 are Los Angeles, CA; Seattle, WA; Phoenix, AZ; Albuquerque, NM; Houston, TX; Atlanta, GA; Miami, FL; New York City, NY and Chicago, IL. Based on the success of the initial pilot, in fiscal year 2000 the initiative has been expanded to an additional nine sites: Detroit, MI; Minneapolis, MN; New Orleans, LA; Newark, NJ; Dallas, TX; Denver, CO; Orange County, CA; San Francisco, CA; and Charlotte, NC.

Innovation 2003

The Commercial Service is one of the few USG agencies that provide direct service to the business community. This unique relationship necessitates that the Commercial Service maintains credible, flexible, business-friendly and business-relevant services that keep up with the dynamic, technology-based pace of business.

Recent focus groups and customer surveys have shown that the needs of small- and medium-sized businesses have changed dramatically in response to advances in technology, increased global competition and the growing demand for services exports. The Commercial Service has responded to clients' changing needs through an ambitious modernization and new product development initiative, Innovation 2003. In addition to improving its portfolio of products and services, service delivery mechanisms, business processes and quality standards, the initiative also makes innovation and product improvement a part of every employee's job.

Pilot programs designed to test new and enhanced products and services, and new business processes, are underway at 48 sites throughout the Commercial Service network. The innovations being tested focus on increasing flexibility and customization, harnessing new technologies and increasing partnerships to expand the access of small- and medium-sized businesses to the resources and capabilities of the private sector and state/local governments.

The goals of Innovation 2003 are: to develop a product line that anticipates clients' changing needs and is flexible enough to meet those needs; business processes that support flexibility and continuous improvement; greater use of technology in all aspects of product development and delivery; greater client intake and client satisfaction; and greater cost recovery, cost savings and revenue generation for the Commercial Service..

Conclusion

Let me close my telling you what an exciting time it is at the Commercial Service. The federal, state and local partnerships, Teams, Rural Export Initiative, E-commerce products and services, Global Diversity Initiative and Innovation 2003 only begin to scratch the surface of the changes underway to better-serve the American exporting community. The over 350 Domestic Export Assistance Center employees are dedicated, hardworking and committed to providing export assistance service that is second to none and their enthusiasm is contagious. I invite each of you to visit your local Export Assistance Centers to observe firsthand the tremendous service that they provide to your constituent businesses that seek to export. Thank you for the opportunity to testify. I will be happy to answer any questions at this time.