Testimony of Secretary Donald L. Evans Before the House International Relations Committee May 15, 2002

The overarching goal of the strategy is to make sure all of our export-ready companies can participate in the global economy and "fill in" behind the agreements we negotiate. Let me say at the outset how critical it is that the Congress provide the President with Trade Promotion Authority as soon as possible so that he can implement his trade agenda. With TPA, the President could conclude agreements that might contribute as much as $1.9 trillion to world economic growth. Without TPA, those new markets will go to our trading partners, along with the investment and jobs that those markets will create.

This strategy also supports our broader foreign and economic policy objectives. Helping our companies take full advantage of overseas opportunities raises our standard of living, but it also helps the countries we do business with. They benefit economically as well, and they grow to be stable economic and foreign policy partners. Indeed, the missions of a number of TPCC agencies - the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, the Agency for International Development and the State Department - are dedicated to capturing the important social benefits that spring from the promotion of U.S. trade and investment abroad, which go beyond the purely private returns to U.S. companies.

This report is all about expanding the number of exporters - especially small and medium-sized businesses - and making sure they have the best tools available to take advantage of commercial opportunities. Small exporters count 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 do export, two-thirds are only exporting to one market. By improving customer service and providing new export opportunities, we can tap this unrealized export potential.

For the first time, we took a management approach, starting with our customers. The driving force behind all of these recommendations was 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 3,000 small and mid-sized U.S. firms. We asked them what works and what doesn't. We asked them how they would improve government service and to share their observations of other governments or state and local agencies that do a great job meeting their needs. And we asked non-exporters why they choose not to export.

From our survey and interviews, we came away with some important 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.
• Our clients think government agencies have an important role to play in both trade and investment promotion. They see other governments helping their companies get the best shot at opportunities and providing high-level coordination of small business programs.
• U.S. companies want more than export assistance. They want a trained and skilled account manager to take them from their first transaction, to their first investment, through the life of a project.
• 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, including common requirements for our programs and coordinated client management among the agencies.
• U.S. companies look to the government first for information on market opportunities. The companies that don't 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 the governments of 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 when these firms succeed in foreign markets, they achieve higher growth rates and pay better wages here at home. Our competitors appear to understand the promise of small business too. Several trading partners have coordinated, cabinet-level task forces dedicated to getting small companies into overseas markets. Korea is moving away from support for large conglomerates or chaebols, with a Presidential Commission integrating the programs and budgets of agencies that help small business exporters. France, Canada, Spain and the UK also coordinate high-level programs to promote small business exports.

• Our competitors more actively generate opportunities for their exporters. Many governments cultivate relationships with procurement officials in emerging markets and "cherry pick" projects - presenting their exporters with shopping lists of the best projects.

• Other governments take a more holistic view toward export promotion, combining export and investment promotion programs. Rather than focus strictly on export sales, they focus on their firms' international competitiveness.

• And many countries, including the Swedes, the French and the British have elaborate e- business strategies that drive their trade promotion programs. By next year, the British will have all of their export promotion services online. All of the trade promotion agencies and known exporters will be linked.

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. American companies need: - a more active U.S. government partner finding, winning, and keeping major projects; - better customer service through joint promotion, training, trade finance and information delivery; and, - a government that is working harder, through state and local partnerships, to educate potential exporters about opportunities and services.

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 strategic approach, particularly for major project development, a commercial responses in crisis regions, and advocacy support before and after a project is won. 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, indicate early on the likelihood that we will finance these projects if they go to a U.S. exporter, and actively help U.S. companies through the bidding process. In pilot countries - China, Mexico, Russia, Turkey, South Africa and Brazil - we will use "Early Project Development Teams" to bring buyers and sellers together.

Exporters also told us they want to see the U.S. government more actively counter market distorting uses of tied and untied aid. As a result, we have expanded the tools available to exporters when they compete against it. This includes a more aggressive response to Japanese use of tied and untied aid. We are undertaking a pilot program that would enable the Trade Development Agency to fund engineering studies that often set the standards and specifications for future projects, and often determine who will be the winning bid. We are exploring the design of a pilot project that would provide mixed credits for specific developmentally sound projects.

We are hopeful this initiative, once it's launched, will advance our developmental objectives by leveraging TPCC agency resources so that we can do more projects in sectors like environment, renewable energy, health care, education and water. At the same time, it will create new opportunities for U.S. companies in markets like the Philippines, Egypt, Jordan, Indonesia and possibly Pakistan. In the markets and sectors that meet our developmental criteria for this initiative, OECD statistics indicate other governments' aid agencies financed more than 150 projects worth about $3.6 billion in 2000.

We are going to continue our coordination in crisis regions. As my colleagues will tell you, TPCC agencies have stepped forward with post-September 11 initiatives in Indonesia, Pakistan and Afghanistan. We want the TPCC to serve as a coordinating entity available to national security policymakers for dealing with post-crisis situations, so that our economic security objectives are quickly met and we can speed the involvement of U.S. industry in opportunities that might develop.

We also want to develop a more coherent process of government support for U.S. companies throughout the life of a project. Already we provide advocacy support for companies when they bid for major projects. Exporters told us they would like a similar process that would eliminate the need for multiple contacts with several agencies when they face a problem that unfairly changes the commercial environment that occurs after a contract is signed. This has been particularly true in the case of China.

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 won't get very far. We need to do a better job of letting companies know what's 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 that 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.

Congressman, in many ways I believe we have gone farther than ever before with the TPCC. There are a number of initiatives that break new ground, not only by providing our companies with new tools to succeed in the competitive environment they face, but by making us more effective where our commercial and developmental objectives intersect.

Now that we have a sense of what we need to do to get our programs in tune, our next step will be to turn our attention on how we can focus them on the markets where our commercial opportunities are greatest. China is a good example. Having spent 14 years negotiating with them to get them into the WTO, we want to make sure we are the first to capitalize on this new market. We will put together a strategy that will give our exporters the best possible shot. Already I have doubled our staff in China, and just returned from a trade mission there last month. I plan to return again in the fall.

This is really just the starting point of our work. I feel strongly that we follow through on all of our recommendations and are held accountable for what we have said we are going to do. We expect to measure our progress. We will consult with the Committee as we implement these initiatives, and report how far we have come next year.

Again, Congressman, 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.