Testimony of Secretary Donald L. Evans Before the Senate Banking, Housing, and Urban Affairs Committee
May 14, 2002

This is very much the approach the President wants all of us in the Administration to take. The President, through his government-wide Management Agenda, has made clear that he believes that Americans deserve a government that is "best in class" in service and effectiveness and that is results-oriented.

In the broader context of our trade agenda, this commitment to results translates into two things. First, it means aggressively opening new markets for our exporters. Second, it means having the best tools available to our exporters to realize sales in those markets once they are open.

The first prong of the trade agenda -- opening new markets -- is, quite frankly, on hold, waiting for the Senate to give the President Trade Promotion Authority. The President believes this bill is overdue. Simply put, we are losing real trade opportunities without it. We know the trade agreements that TPA will let us conclude over the next five years could contribute as much as $1.9 trillion to world economic growth. The question for the Senate is, what slice of this growing pie of opportunities will belong to U.S. companies? We believe the longer the delay on Trade Promotion Authority, the more it costs American farmers, business owners, and workers. We are pleased that the legislation appears to be moving to a vote as a carefully crafted, bipartisan balance. Amendments that would upset that careful balance would be strongly opposed by the Administration.

Senator Sarbanes, we appreciate the opportunity to articulate here the second aspect of the President's strategy -- expanding the base of exporters and providing the promotional support they need to "fill in" behind the agreements we negotiate. From the perspective of a small U.S. company wanting to export, new trade agreements are only half the battle. Agreements are meaningless to a company if it does not have the information, expertise and financing it needs to get started exporting and to do the deals.

All of you are aware that trade has never been more important to the U.S. and world economy. It now accounts for about a quarter of both U.S. and world GDP and is growing at over twice the rate of any other sector. The goal of the 60 recommendations in this Report is to make sure all export-ready U.S. companies can participate in this growth. Small companies now account for just under 30 percent of the value of U.S. exports; yet our survey found that 30 percent of U.S. small companies that do not currently export would like to. Moreover, of those that export, two- thirds only export to one market. By improving customer service and providing new export opportunities, we want to tap the unrealized export potential of both large and small U.S. companies.

These recommendations give our exporters a new strategic partner, and provide them with the tools they need to be globally competitive. We want to help those companies exporting to only one market broaden their horizons and make sure that capable small businesses can take full advantage of new market openings.

The recommendations in this Report were the result of seven months of research and interagency deliberations. As we explained last October, we took a management approach, starting first with our customers. The driving force behind all of these recommendations was to respond to customer needs. We talked to about 100 exporters in focus groups and one-on-one meetings, about half of which were smaller companies. We undertook a survey of more than 3000 small and mid-sized U.S. firms. We asked them what works and what doesn't work. We asked them to tell us how to improve government services and to tell us about other government, state and local agencies that do a great job of meeting their needs. We talked to both exporters and non- exporters to get at the question of why many small businesses choose not to export.

From our survey and interviews with clients, we came away with a number of observations:

• Our clients are pleased with our products and services, but want them to be even more streamlined and timely. Time is critical to companies of any size. Even the smallest customers have very high expectations about how quickly they get what they need.
• Our clients think government agencies have an important role to play in both trade and investment promotion. This is particularly true because other governments are more strategic in helping their companies get the best shot at possible opportunities and providing high-level focus and coordination of small business programs.
• U.S. companies want more than export assistance. They want an account manager to take them from their first transaction, to their first investment, through the life of a project. They want government personnel trained and skilled enough to take them through the maze of government programs, and they want the government to help generate new opportunities.
• U.S. companies want more coordinated government service. They want us to operate as if we were one company - not a collection of individual agencies. They expect seamless programs with a common set of standards and requirements and want coordinated client management among the agencies.
• U.S. companies look to the government first for information on market opportunities and financing. The companies that do not export would export if they had more information about foreign market trends and trade leads.

We also took an in-depth look at the programs offered by our major competitors:
• We were particularly impressed by the high level of support our trading partners give to small and mid-sized firms. Here in the United States, we know that these firms are a tremendous engine of job growth. And when these firms are successful in international markets, they can achieve even higher growth rates and pay better wages here at home. Our competitors also understand the dynamism and power of small business. We found that a number of our trading partners have coordinated, Cabinet-level task forces dedicated to getting small companies into overseas markets. Korea, for example, is moving away from support for large conglomerates or chaebols, and has a Presidential Commission that integrates programs and budgets that help small business exporters. France, Canada, Spain and the UK also have coordinated, high-level programs to help small business exporters.
• Our competitors take a more active approach in generating opportunities for their exporters. Many governments cultivate relationships with procurement officials in emerging markets and "cherry pick" the best projects for their exporters - presenting them with a shopping lists of the most lucrative projects.
• Other governments take a more holistic view toward export promotion, combining their export and investment promotion programs. Rather than focus strictly on export sales, they focus on their firms' international competitiveness.
• And we found especially in Europe, the Swedes, the French and the British have elaborate e-business strategies that have become the organizing principle for their trade promotion programs. By next year, the British will have all of their export promotion services online. All of the trade promotion agencies will be linked with each other and with all of their known exporters.

The National Export Strategy

Our strategy, simply put, is to make sure our exporters have the best tools to take advantage of the commercial opportunities we negotiate. It boils down to three points: - a more active U.S. government partner with U.S. exporters when it comes to major project competitions; - better customer service through joint promotion, training, trade finance and information delivery; and, - a government that is working harder, through state and local partnerships and trade education to make sure potential exporters know about the services we provide.

Strategic Approach to Project Development. One of the themes that came up repeatedly in our discussions was that companies want government to take a more coordinated and more strategic approach to helping them compete internationally. This applies to a wide range of issues including major project development, a coordinated commercial response in crisis regions and advocacy support throughout the life of the project. Our competitors often have the upper hand in major project competitions well before the project is publically tendered. Other governments indicate that they can finance a particular project early on and then coordinate their response between the agencies responsible for on-the-ground market intelligence, technical assistance and financing. Ex-Im Bank, Commerce and a number of TPCC agencies are going to meet this challenge by working together to discover projects sooner, show an early likelihood of U.S. financing and help U.S. exporters take advantage of these opportunities. In key pilot countries, we will now have a coordinated, team approach to bringing buyers and sellers together.

Exporters also told us they want to see the U.S. government take a more active role in countering and discouraging market distorting uses of tied and untied aid. As a result, we have expanded the tools available to exporters to address tied aid, including a more aggressive response to Japan's use of tied and untied aid (Japan is the largest provider of both), a pilot program that would enable the Trade Development Agency to fund engineering studies that often set the standards and specifications for future projects, exploring the design of a pilot project that would provide mixed credits for specific developmentally sound projects, and use of the war chest to address instances where non-Japanese trading partners use tied aid to capture market share in emerging markets.

Better Customer Service. In the area of client service, we found that U.S. firms that export have an increasingly sophisticated understanding of what they need to be successful overseas. They are aware of competing government programs and have very high expectations about the quality of service that they get. Not surprisingly, more experienced exporters want better coordination among government agencies; in short, they want the agencies to operate as if they were part of the same U.S. government "company."

To respond to this concern, we are going to do a better job of promoting each others' programs. We are planning on training our Commercial Service officers so they can act as "account managers" that can help our companies with an overseas strategy, not just an export sale. That means a much greater emphasis on training across agencies than ever before, with the goal of creating agency staff that can function as "one-stop-shops," or account managers, that can help a firm navigate the full array of government export promotion programs.

Trade Finance: Our survey told us that trade finance is still a major obstacle to getting small businesses into world markets. It also indicated that too many U.S. companies turned down sales because they had problems getting financial support, or limited their exports to those opportunities they could fund on their own. Too few small exporters are taking advantage of SBA and Ex-Im Bank working capital programs. While many companies know about these programs, they are unaware of how they work and are confused by the fact that there are two, apparently competing programs. We are going to address this by combining the marketing efforts of SBA, Ex-Im Bank and the Commercial Service to make sure lenders know how these programs can help their clients. We also want to integrate the programs to the extent we can - while still preserving the benefits of each. In the future, we will promote one government trade finance service to our customers, that can then be customized with SBA and Ex-Im Bank features, as appropriate, depending upon the resources of the bank and the needs of the client.

Information: This came up again and again in our discussions with customers and was ranked in our survey as the most important service government provides and businesses need. We learned that more than half of the exporters we surveyed use a government source to gather information on potential trade opportunities, and that they want a single site where they can get trade leads and information about specific markets. At the same time, they are unaware of the full range of government assistance that is currently available. In response, we are enhancing Export.gov - our one-stop web portal - so that exporters can find all of the government's best information on trade leads and markets in one place, in real time. We will use our BuyUSA product - which links buyers and sellers directly - to link foreign affiliates of U.S. multinationals abroad with U.S. suppliers, who are often small and medium-sized exporters looking for project opportunities.

Outreach, Education and Partnering. We can develop the best programs in the world, but if no one knows about them, we will not get very far. We need to do a better job of letting companies know what is available and make it easier for them to participate. Although our study found that awareness is better today than it was five years ago, we can certainly do a better job of connecting with business people who want to take advantage of new trade opportunities. We propose working more closely with state and local trade groups, as well as elected officials, to expand awareness and increase outreach. We will also be leveraging technology to offer simpler Internet solutions for companies looking for help.

We will distribute packages of our export promotion services to the states to prevent duplication and leverage state resources. We will encourage joint strategy sessions on outreach and trade events. We will dedicate more resources to training our state partners in TPCC programs. We will develop joint TPCC agency marketing materials for our state and local partners. We will do a better job of leveraging the information provided by elected officials, who are often the first point of contact for companies seeking government assistance. And we plan to expand education for new-to-export firms and develop a strategy to use trading companies as multipliers of our services.

To sum up, we are placing a much greater focus on what our customers need; we are taking a comprehensive approach to making our companies competitive in the world market; we are actively developing opportunities for our companies; we are building programmatic bridges across the agencies; and we are using training and joint promotional efforts to improve coordination and our effectiveness across the agencies.

Senator, while in many ways I believe we have gone farther than ever before with the TPCC, this is really just the starting point of our work. Some of these recommendations can be implemented immediately; but some will take more time and require a formal benchmarking effort - such as training, information and the speed with which we deliver our services. We also expect to use this report as a tool to fit our resources and programs to key markets where we are negotiating bilateral and regional agreements.

In the meantime, I want to make sure we are held accountable for what we have said we are going to do. Whether it is the number of new project opportunities we generate from these recommendations, or the number of small business working capital loans we undertake, I think it is important Congress knows that we expect to measure our progress. We will report how far we have come next year.

Again, Senator, I appreciate your great interest in the importance of strengthening our trade promotion programs. I intend to continue to use the TPCC not only to coordinate our future efforts, but to generate new initiatives that will help keep America the most competitive exporting nation in the world.