Obama Encourages Small Firms to Go Global
President Barack Obama wants small firms to think big and export their way out of recession -- but a new survey says the companies don't think they know enough about exporting and worry about foreign customers paying up.
The president's (ambitious) goal is to double U.S. exports to $3 trillion within five years. To achieve it, he'll need the help of small businesses. Currently, fewer than one percent of the nation's 29 million small businesses export, though small business exports accounted for 30 percent of total U.S. exports in 2007, just slightly higher than a decade earlier, according to an International Trade Commission report.
To help, the Administration hopes to make exporting easier for small businesses by helping them "find their way through the labyrinth" of bureaucracy, Small Business Administration head Karen Mills said last week.
Translation: the administration is moving to improve access to resources and financing -- welcome news for the some 40 percent of small business owners who said in the recently released Small Business Export Survey that they couldn't tap foreign markets because they weren't sure where to start. The survey was conducted the first week in March among 250 members – both exporting and non-exporting – of the National Small Business Association.
On Thursday, Obama announced five steps the administration is taking as part of the New Export Initiative, first mentioned during his State of the Union address in January. Among them: the creation of a Cabinet-level focus on US exports (called, not surprisingly, the Export Promotion Cabinet) and a new facility at the Export-Import Bank to provide up to $2 billion a year in trade finance to small and medium-sized businesses. Most businesses that export currently rely on earnings and savings of their business, as opposed to bank loans or government back programs, but the bank's chairman Fred Hochberg said recently that no deal is too small to consider. The bank's recent transactions ranged from $11,000 to a $1 billion deal with Air India.
With lagging consumer spending and the specter of a jobless economic recovery, "exporting may be one of the few areas remaining where small businesses can grow right now," said Todd McCracken, president of the National Small Business Association.
Why then -- besides lack of knowledge -- aren't small business owners diving into international commerce? Nearly a third are worried about getting paid from a foreign customer, the survey revealed. (Nearly half said if this concern were addressed they'd consider exporting. Another part of the Obama plan: Loading up on trade officers in embassies -- the 2011 budget includes 238 positions.) Among current exporters, the biggest concerns were extracting payment and the red tape and complexity of international finance.
Commerce Secretary Gary Locke said in a Georgia speech in February that one of the administration's prime targets is businesses who only export to one country – six out of 10 exporters fall into this category. (The single country is usually Canada or Mexico.)
"I think we get more bang for the buck focusing on those who are now exporting," Locke told the Los Angeles Times. "They are primed and ready to, let's say, go to Europe. And if they are in Europe, then we need to help them export to Latin America. If in Latin America, then Asia."
To help, Locke announced partnerships with FedEx Corp. and United Parcel Service Inc. to offer seminars for small businesses who already are exporting to one country.
Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.
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