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Washington Outlook Archive

Trade Commission Cites Problems With Exports

James A. Morrissey, Washington Correspondent

The U.S. International Trade Commission (USITC) has issued a comprehensive report outlining problems faced by small and medium-size enterprises (SMEs) that want to become more involved in exporting their products. According to the USITC, the small and medium category covers some 88 percent of textile manufacturers and 92 percent of apparel companies.

The report was prepared at the request of the U.S. Trade Representative (USTR), the House Committee on Ways and Means, and the Senate Finance Committee. In reports of this nature, the USITC does not make policy recommendations, but they do serve as the bases for actions that can be taken by Congress or the Administration.

The report says the top barriers to exporting are insufficient access to funding, complex regulations and rising transporting costs. It compares U.S. exporting activities of SMEs in the United States with those in the European Union and describes barriers and costs associated with exporting as well as strategies to reduce those barriers and costs. On a positive note, the report identifies benefits to SMEs from free trade agreements and other special trading arrangements. With respect to trade strategies, the report says some U.S. SMEs have developed a number of strategies to overcome some of the foreign and domestic barriers to exporting.

In a special section dealing with textiles and apparel, the report says the majority of exporting is done by larger firms that have the resources to develop exporting programs. Companies reported that the most significant costs for exporting textiles and apparel are associated with prospecting for foreign customers, understanding foreign customs and regulations and receiving payments from overseas customers. Companies say they do not have the resources or experience to navigate foreign regulations, and few companies are aware of assistance available from the U.S. government in that regard.

A basic problem, the report says, is the fact that textile and apparel SMEs in the United States rely on single or relatively few customers, and, consequently, many companies do not have the sales forces and marketing strategies that can serve as a foundation for building broader international sales.

Many companies providing information for the report say their products are at a competitive disadvantage because foreign governments often subsidize exports through low-cost loans, marketing support, trade missions, tax incentives and currency manipulation. Companies report they also encounter a number of non-tariff barriers, including foreign licensing, standards, and cumbersome labeling requirements. They also cited lax enforcement of intellectual property rights, as they frequently encounter counterfeiting of their products.

Some companies, the report says, have developed export strategies, including selling surplus inventories overseas. Others have had success exporting components to low-wage countries that then manufacture finished products that re-enter the United States. They also say trade fairs are invaluable, as they provide for face-to-face meetings with potential customers.

USTR Ron Kirk said the USITC report "provides us with a deeper understanding of the leading challenges that our SMEs face as they seek new global customers, and it highlights the barriers that some SMEs identified as their biggest hurdles to exporting."

He stressed the importance of small businesses by saying small businesses are the "engine for our economic growth" and that small and medium-sized companies that export grow faster, add jobs faster and pay higher wages than non-exporting companies.

July 20, 2010