Testimony of Secretary Donald L. Evans

Senate Banking, Housing and Urban Affairs Committee

October 2, 2001

Mr. Chairman, and other Members of the Committee, my colleagues and I appreciate this opportunity to share with you our vision for the Trade Promotion Coordinating Committee (TPCC) and the work we will be doing over the next several months.

Let me say at the outset that it is my belief and that of the President that the events of September 11 make it even more imperative that we move our trade agenda forward and encourage U.S. firms to enter international markets. We have seen the impact of recent events on a number of industries - and the truth is that no one will escape from this tragedy unaffected. Small companies are no exception, and our trade promotion agencies need a coordinated response to the new environment U.S. exporters now face.

Whether it is a higher perceived risk in international markets, slower growth abroad or less available financing from the private sector, it is now even more critical that our trade promotion agencies are aware of the needs of our customers and can quickly respond to them with appropriate programs and initiatives. While all of us are making adjustments after last month's events, we cannot let the scourge of terrorism become an obstacle to America's and the world's economic growth and progress.

The Administration has made Trade Promotion Authority (TPA) a priority for this legislative session. We believe TPA will speed the negotiation of trade agreements that are fundamental to our country's and the world's economic future.

The 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 is, what slice of this growing pie of commercial opportunities will belong to U.S. companies?

Of course the answer to that question will primarily depend on the innovation and ingenuity of our companies. But it will also be affected by our ability to deliver necessary state-of-the-art export promotion programs to help our exporters realize the benefits from the agreements we negotiate.

From the perspective of a small U.S. company wanting to export, negotiating new trade agreements is really only part of the battle. New agreements are meaningless to a company if it does not have the information, expertise, and financing it needs to do the deals.

As a former businessman, I am well aware of two things: that U.S. companies are the most competitive in the world, and that they have to slug it out everyday in the global market to keep ahead of the curve. On everything ranging from major project competitions to small product sales, our exporters are competing not only on the basis of price and quality of their products, but also against the quality and government support behind their foreign competition.

We know today that our major competitors have made export promotion a priority, both in terms of the resources they put behind it and the strategic approach they take. Many of their programs are customer-driven and focused on satisfying their customer's needs.

And we know that despite gains in many markets, we are losing market share in the world's fastest-growing markets. Over the last ten years, our overall share of total exports to developing countries dropped from about 14 to 12 percent. This is a significant change.

These high-growth markets are also the markets where trade barriers are highest, especially for small companies. And many of our trading partners have an edge in these markets, because they have already negotiated trade agreements to help their companies get in on the ground floor.

But while some of our small exporters have discovered these markets and see their potential, many more could. We still face an export gap for small- and medium-sized companies. Only one percent of U.S. Small and Medium-Sized Business Enterprises (SMEs) export, compared to 5 percent of French SMEs.

For all of these reasons, the strategic approach of our competitors, falling market share where our commercial opportunities are greatest, and the unmet export potential of our small firms, I believe our export promotion programs should be reevaluated from the ground up.

I would like your support over the next several months as we undertake a benchmarking exercise to help us learn more about what our customers really want from their export promotion programs and to examine best practices of export promotion services. This study will give us more information to answer the question of why more U.S. companies do not export and how best to take advantage of fast growing markets.

Our vision, in short, is to use the TPCC as a management tool to improve our programs so that they respond to customer needs and the competitive environment. Our goal is to make sure our companies can take full advantage of the new commercial opportunities we expect to see in the next decade resulting from new trade agreements negotiated with TPA. At the outset, we want to make sure that we have the right programs, and that these programs are effective, strategically focused and coordinated. At the end of the day, we want to deliver the world's best export promotion services.

March 2002 National Export Strategy

Our goal is to deliver to you in March a set of recommendations we believe will get us to world-class standards in export promotion service by 2004. Between now and March, we will develop information on three fronts:

First, we will spend the next several weeks assessing customer satisfaction with our programs. We will do this in two ways.

We have commissioned a survey of the business community - respondents will include exporters, some who use our services and some who do not, and businesses who are not exporters. The goal is to get a handle on a number of issues related to the question of why more small businesses do not export. For example, among other things, the survey will try to discover what else government programs could be doing to encourage exporting, and what does government do best? What is government's comparative advantage vis-a-vis private sector providers of similar services?

We will also meet with numerous "focus groups" - made up of users of all of our agencies' services - to try to understand what aspects of our programs work and what aspects do not. We will meet with small, medium and large exporters, trade associations and banks. We plan to talk to companies in Los Angeles, Baltimore, New York, Atlanta, Chicago, Boston and Philadelphia. We will ask questions that will help us get to broader issues holding back our export potential, such as finance risk and under-utilization of our trade finance programs. We will ask all of these exporters about the competitive environment they face and what they think the world's best export promotion services should look like.

The second part of this exercise will be a search for best practices, looking at how the governments of our major competitor countries go about promoting exports. We already know they dedicate more resources - that is not the only issue. We want to learn more about their most effective programs, and apply any lessons that are appropriate to our own programs. We will be looking for best practices in the private sector as well, and applying any lessons we learn.

We have already gathered initial data from embassy posts on the export promotion services of our G-7 trading partners, plus South Korea, the Netherlands, Spain and Sweden. This information will help us send out a more specific request for State economic officers and our commercial service officers to provide a more detailed analysis of some of the most intriguing best practices.

One of the first things we already know is that many of our competitors have benchmarked their programs and are copying as best practices some of our own programs. South Korea's trade promotion agencies have adopted the products and nomenclature of U.S. business matchmaking services such as our Gold Key, International Company Profile, Customized Market Analysis and International Partner Search services. Italy has established a network of regional "one stop shops" similar to the U.S. Government's Export Assistance Center strategy. And nearly all the competitor governments we are looking at have established centralized call centers and Internet portals similar to our own.

We have developed some excellent programs, and validation of some of these efforts is important. But the main purpose of looking at programs in other countries is to learn how we might improve our programs. Governments in these countries have many of the same goals and face many of the same challenges as the United States. To the extent they have developed innovative solutions, we should be open to learning and to change.

We have discovered some interesting themes. A core mission of all of these countries is to promote the exports of small business. For example, despite recent budget cuts, the French have modernized their export promotion services and focused them on SMEs. The South Korean government is now committed to moving away from the dominance of "chaebols" (conglomerates) as its foundation of export strength and is focusing its programs on small business. They have a number of innovative programs, including a Small Business Corporation (with a budget of $4 billion funded through lottery tickets) to provide SMEs with financial and technical assistance to improve their competitiveness.

Not only do these governments focus their programs on small business, but in many cases they target these initiatives to developing countries. In 2000, the French targeted Eastern Europe and other emerging markets for the export of high-tech services. Canada has packaged services to help exporters enter emerging markets, and recently focused on South America. Spain has a "Master Plan" for increasing access to the Asia Pacific region, coordinated through a number of ministries.

A second theme is that a number of countries' export and investment promotion programs are more integrally linked. For example, Japan's new "region to region investment promotion program" links complementary regions rather than working with individual firms. Recently they matched a Japanese region known for making eyeglasses with an Italian city known for high fashion.

Third, there is an enormous emphasis on leveraging the Internet to promote exports. In Sweden, the Trade Council's Web sites have become the most important source of information to exporters. The free-to-user advice service has become increasingly sophisticated since it was initiated in 1996, with over 80 percent of users responding that they always find what they are looking for. The British also have a comprehensive e-business strategy, including e-business services, e-business infrastructure, Market Access Online and Trade Partners UK.

It will be very interesting to see how our recently launched "Buyusa.com" on-line matchmaking operation stacks up. By applying U.S. leadership in Internet utilization to export promotion, this unique partnership with IBM puts the full network of the U.S. and Foreign Commercial Service's 1,800 experienced professional trade specialists around the world and throughout the United States behind each business relationship and transaction.

Fourth, a number of competitors place a heavy emphasis on technical assistance to promote exports. In the United Kingdom, the government helps toward the cost of bringing decision-makers in key countries to the United Kingdom for training by British companies. It is designed to help new business contacts in export markets familiarize themselves with British technology, production methods and management skills. Japan's International Cooperation Agency - with a budget of $1.9 billion - administers grants that fund technical training of potential foreign buyers in Japan and dispatches technical experts abroad.

The final phase of our benchmarking study will be our analysis and comparisons of our programs with other best practices. We have broken down all of our programs into a short list of export promotion "processes," such as providing information, marketing, small business trade finance, investment insurance, linking policy and promotion, and evaluation of our services and coordination. Our goal is to benchmark each of these processes with the best practices we identify, and develop recommendations that will put us on a course toward world class export promotion services. We expect these recommendations will be both strategic and programmatic and identify what we do best while responding effectively to our competition. They will address both duplication and gaps in our services and attempt to leverage opportunities between agencies, the private sector and other export service providers. We intend for this to be an ongoing program of review that will provide us with continuous feedback on the scope and quality of our programs, so that they reflect the changes our exporters face everyday in the global marketplace.

Mr. Chairman, we hope this vision is consistent with what you intended the TPCC to be when you created it in 1992. I am sure I speak for my colleagues when I say that we appreciate the fact that there is such a vehicle available to help us improve and better coordinate our programs at this important juncture.