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Using the Trade Deficit to Your Advantage
 

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Jan. 14, 2005--With America's record-breaking trade deficit at epic proportions, and with the outlook equally bleak for 2005, members of the Small Business Administration (SBA) and the National Federation of Independent Businesses (NFIB) say there's good news there for small businesses.

According to the Department of Commerce the national trade deficit for 2004, totaled through November, is sitting at $561.3 billion, demolishing the previous record of $496.5 billion set in 2003. With December's numbers still to come, predictions have the total for 2004 eclipsing $600 billion. Despite these dismal numbers, experts say entrepreneurs aren't taking advantage of a favorable exporting climate, and a study published by the NFIB supports their claims.

With the dollar currently riding a three-year decline against some currencies, a 2.3% dip in American exports in November (bringing the year total to meager $66.5 billion) and with monthly foreign imports reaching all-time highs in November ($19.4 billion) the demand for American goods hasn't declined, but the prices customers' pay for them overseas has.

"Although more business is transacted across international borders today than at any time in recorded history, the American small-business sector is not taking advantage of this sales surge," William Dennis, a senior research fellow at the NFIB, said. "There are barriers, of course, but these business owners are also ignoring some valuable, free resources."

According to the NFIB's survey only 13% of the all businesses surveyed have done business outside of the U.S. in the last three years, and according to data from the SBA, only 235,000 of the 25 million U.S. small businesses do business overseas, less than 1%.

"American goods are in demand overseas," Dennis added. "It's great climate to export your goods and services."

The survey highlights the difficulty of locating prospects and sales reps as two of the largest obstacles to doing business overseas. Forty-seven percent were concerned about the initial cost of developing a foreign market and the same percentage blamed their lack of knowledge in exporting. But if you listen to John Nevell, a regional manager of international trade programs in Chicago for the SBA, entrepreneurs are just being lazy.

"Almost every program the Department of Commerce and the SBA offer are free--or very inexpensive," Nevell said. "It's a whole new market out there, and they need to start taking advantage of it."

Nevell points to a lack of awareness regarding the programs offered by government agencies and the survey supports his conclusion. A scant 10% said they turn to the International Trade Administration (ITA) for assistance and even fewer, 4%, relied on the SBA for help. Also noteworthy is the fact that 70% of those who said they export admitted that exports accounted for 5% or less of their total business.

With the American economy growing at an annualized rate of 4% through the third quarter, with more than 2 million jobs created in 2004 and with experts projecting about the same over the next year, the economy is growing at a healthy clip and the trade deficit seems irreversible, and according to Nevell, that's a good thing.

"Small businesses that export are 15% to 20% more profitable than those that don't. It's that simple."





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