Remarks by Israel Hernandez
Assistant Secretary of Commerce and
Director General of the U.S. and Foreign Commercial Service
Discussion of the National Export Strategy
Ronald Reagan Building, Washington D.C.
Friday, September 15, 2006
As Prepared
Thank you for coming here today. I’m Israel Hernandez, Assistant Secretary of Commerce and Director General of the U.S. Foreign and Commercial Service. I oversee a global operation of more than 1,700 members of the U.S. foreign and domestic commercial service located in 47 states and 80 countries. Their mission, as is mine, is to help American companies compete and win in the global marketplace.
In that role, and on behalf of the President and the Secretary of Commerce, I am pleased to have this opportunity discuss with you America’s National Export Strategy (NES).
The NES is the result of the Trade Promotion Coordinating Committee (TPCC), an interagency group chaired by Secretary of Commerce, Carlos Gutierrez. I know that Pat Kirwan, who is here, spoke to many of you as part of a panel about the NES in January. I’d like to take this opportunity to thank Pat and the other members of the TPCC who are here for their hard work on this important plan.
The National Export Strategy serves as the plan for U.S. government’s efforts to encourage exports. The objective of the strategy is to increase American exports so that our economy remains dynamic, growing and globally competitive.
There is a lot of good news to report to you about exports this year. Exports are up, up more than 12 percent overall, with increased exports to 22 of our top 25 export partners. America is the world’s largest exporter, and American workers and industry are world-class competitive, and it shows: we are on track this year to record our nation’s largest volume of exports ever, more than $1.3 trillion.
Exports have contributed to a growing national economy. We have low unemployment and a record number of people working in America this year. To put it in perspective, our unemployment rate is almost half that of Europe, and we have created more jobs than the European Union (EU) and Japan combined in the last three years.
The National Export Strategy
Getting More American Companies to Export
Many of those jobs are in export related industries. The fact is that people who work for companies that export make more than those that don’t, and there is a lot of those companies around, with nearly a quarter of a million American businesses exporting. That’s not enough, however, and we need to do more to encourage them to participate in the global economy.
Although a great many businesses export, that represents only a fraction, about four percent, of the businesses in our country. Even among those that do export, more than half export to just one country. The top priority of the National Export Strategy is to get more businesses – both large and small -- to export, and to get those that do to export to more than just one country.
As the President said in Georgia last week, 95 percent of potential customers for American businesses are outside of the U.S., and American businesses need to tap that potential. However, since the late 1990’s, after a steady rise for many years, the number of companies exporting has leveled off. This is in spite of the fact that it has become progressively easier to export. Goods and increasingly services are exportable; trade barriers have been progressively lowered; and the Internet, cell phones and transportation are all quickly interconnecting economies, regardless of borders.
This is the challenge we confronted when putting together the National Export Strategy, and we have come up with several innovative initiatives designed to increase the number of American exporters that I’d like to tell you about.
International Trade Promotion Partnerships
The centerpiece of the National Export Strategy is a focus on partnerships. One of our nation’s greatest strengths are the capabilities, reach and resources of American enterprises engaged in activities that touch buyers and sellers around the world, such as express delivery companies, banks, and web-based marketplaces. Those businesses can be great teachers and facilitators for other American companies wanting to export more, or export better. Already a number of great American companies have stepped forward to participate, and have offered to assist us in our efforts to increase American exports.
The first group of strategic partners are: Dow Jones through their Asia Wall Street Journal unit, eBay, FedEx and PNC Bank. As a result of their efforts, which include hundreds of marketing events and placement of trade information on their websites and in their newsletters, hundreds of thousands of companies have been exposed to our services.
We are beginning to engage with these strategic partners in targeted marketing strategies. For example, FedEx is helping us identify and inform U.S. exporters to Mexico of opportunities about new business opportunities in Central America, which have come about as a result of recent Free Trade Agreements that we have signed with these countries.
These private sector partners join our traditional interagency partners, such as SBA, The Export-Import Bank, the Overseas Private Investment Corporation, and state and local governments in our effort to educate, inform and assist companies. In addition to telling you about the success of partnerships already in place, the report also serves as an open invitation from us to form new partnerships with the private sector in the future.
These partnerships work because both the government’s and the private partners’ goals are achieved when U.S. companies make foreign sales.
Trade Liberalization and Priority Markets
Another element of the National Export Strategy is the continuing resolve of the U.S. government to lower trade barriers through Free Trade Agreements (FTA’s). Since 2001, the U.S. has signed a dozen FTA’s, and is in negotiations with Peru, Malaysia and Korea right now. This Administration has also sought to improve already existing FTA’s, such as NAFTA.
I’d like to point out a key fact that dramatically illustrates the positive impact of Free Trade Agreements: although countries that the U.S. has FTA’s with only represent 7.1 percent of world GDP, they represent more than 42 percent of U.S. trade. Trade agreements work for America because they keep America working.
The National Export Strategy also prioritizes efforts to open up large, developing markets like China and India. Exports to both of these markets are sizzling. In fact, China is poised to become the third largest export market for the U.S., beating out Japan for that position and exports to India are growing more than 30 percent last year. These two countries have been designated as a high priority in the NES; in fact, the Commercial Service has more representatives in these two countries than any other.
Secretary Gutierrez will be leading a trade mission to China in November, and Under Secretary Lavin will be leading a mega-mission to India at the end of November. Companies tell us they would like to see the U.S. Government provide better access to these fast-growing, but often challenging markets. These missions are an answer to those calls. While the deadline for participating in the China mission is today, companies have until October 2 to apply for the India mission. I’ll be happy to answer questions about these missions later.
Commercial Diplomacy- Measuring Success
Often companies encounter difficult hurdles when trying to do business in even far less challenging places than India and China. In the past the efforts of the Commercial Service have been measured primarily by “export successes” tied to specific export transactions of client companies. That’s an important measurement, and we will continue to do that.
However, the Commercial Service also devotes a lot of time and resources to working behind the scenes to resolve problems, reduce trade barriers, and cut red tape. Such activities are what we call “commercial diplomacy.” Commercial diplomacy benefits not only our clients, but also all U.S. exporters by opening doors and creating paths to success for other exporters to follow.
For example, in Bulgaria, the Commercial Service succeeded in having a packaging waste penalty removed that was costing U.S. companies like Coca Cola, Kraft, and Proctor and Gamble millions of dollars. Similar efforts helped to get Bulgarian legislation passed to better protect intellectual property protection (IPR). There are hundreds of such examples every year and all around the globe and we want to encourage those who have blazed trails and knocked down barriers to do this more often and to acknowledge their important work.
Small Businesses
The success of the National Export Strategy will also depend on our ability to serve more small and medium-sized enterprises. While these companies account for 70 percent of new jobs in America, they account for only a small share of the total export value of U.S. goods’ exports.
With the help of organizations like WITA, the Commercial Service can both raise general awareness and provide individual companies the help they need to realize their export potential. The greater Baltimore/Washington area has hundreds of companies with export potential.
One such company is Excel Holdings, a small firm in Leesburg that is a client of our Northern Virginia Export Assistance Center. Excel makes machines that convert moisture from the air into drinkable water. Through our Gold Key program, Excel met with pre-screened distributors, and now has agreements covering six Asian countries. Its first sale in Asia was worth $50 million. Participation in a Commercial Service trade mission to Mexico led to a $35 million sale.
Another example is Sea-Fire Marine, a small manufacturer of fire extinguishers and fire suppression systems in Baltimore who has been working with our Export Assistance Center (EAC) for many years. Since 1996, Sea-Fire has seen its export sales grow from 3 percent to 40 percent of total sales – aided by our export counseling, trade shows, and catalog events.
In 2005, the Commercial Service helped generate nearly 12,500 export successes worth billions of dollars in U.S. export sales. Our goal is to put our network of offices across the U.S. and in more than 80 countries to work for as many U.S. companies as possible.
Let me leave you with one final thought: it is easier today to export than ever before. The National Export Strategy is designed to help businesses take advantage of foreign markets, markets that are within reach now more than ever.
The priorities set out in the National Export Strategy are a guide, and the resources of the International Trade Administration are the tools that can help businesses reach their exporting objectives, keeping America’s economy strong and the envy of the world.
The trade promotion agencies and the U.S. Commercial Service stand ready to help you. I encourage you to check us out at export.gov, the government’s trade assistance portal. We would also like to hear from you in our U.S. Export Assistance Centers. In Baltimore, you can reach us at (703) 235-0331 [Anne Grey, Director]. In Northern Virginia, our number is (703) 235-0331.
Thank you. I will now be happy to answer your questions.