ITC Says U.S. SMEs Do Not Export as Much as European SMEs

(This report is the second of three regarding the extent and composition of U.S. exports by SMEs and factors that may disproportionately impede U.S. SME exports. See ITT's Online Archives or 12/02/09 news, 09120225, for BP summary of the initiation of this investigation.

The first report described characteristics of domestic small and medium-sized enterprises (SMEs) and the role they play in U.S. exports.See ITT''s Online Archives or 01/22/10 news, 10012225, for BP summary of the first report.

The third report will examine U.S. SMEs engaged in providing services, including the characteristics of firms that produce tradable services, growth in services exports, and the differences between SME and large services exporters. See ITT's Online Archives or 12/11/09 news, 09121135, for BP summary of the initiation of the thiird investigation.)

Report Compares U.S.-EU SME Exporting Activities

As requested by the U.S. Trade Representative, in its report, "Small and Medium Sized Enterprises: U.S. and EU Export Activities, and Barriers and Opportunities Experienced by U.S. Firms," the ITC compares the exporting activities of SMEs in the U.S. with those of SMEs in the European Union.

The report also describes barriers and trade costs associated with exporting, as well as strategies to reduce these barriers and costs. In addition, the report identifies the benefits to U.S. SMEs from improvements to the exporting environment resulting from free trade agreements (FTAs) and other trading arrangements.

Highlights of the report include:

• The share of SMEs in U.S. manufacturing activity and total U.S. exports is smaller than the share of SMEs in EU manufacturing activity and exports. One reason for this is that the U.S. market is more integrated than Europe's and, as a result, the U.S. has larger firms.
• There is little difference between U.S. and EU agencies in granting medium- and long-term export credits; however, the U.S. provides a wider range of support for pre-export financing and short-term credit than is generally available in EU countries. On the other hand, SMEs from the EU appear to have access to more sources and a higher level of assistance in foreign markets than U.S. SMEs do, as well as more financial support for participating in international trade.
• According to U.S. SMEs, the top barriers to exporting include: insufficient access to finance, complex and sometimes nontransparent domestic and foreign regulations, rising and unpredictable transportation costs, the small scale of SME production, tariff and nontariff barriers, time consuming foreign customs procedures, language and cultural differences, and lack of knowledge of foreign markets.
• SMEs identified numerous improvements to the exporting environment associated with U.S. FTAs and other trading arrangements, such as mutual recognition agreements, bilateral investment treaties, trade and investment framework agreements, and World Trade Organization agreements. These improvements include reduced tariffs and nontariff barriers, better market access, easier interaction with customs, trade facilitation, intellectual property protection, a more efficient and transparent regulatory environment, and stronger dispute resolution mechanisms.
• SMEs have developed a number of strategies to overcome some of the domestic and foreign barriers to exporting they identified. These include combining resources with other firms in the same industry, working with larger companies, brokers, or agents, and taking advantage of U.S. federal and state government support programs.

The ITC's report (dated July 2010) is available here.