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STATEMENT

The Honorable Nydia M. Velazquez, Ranking Member

Committee on Small Business

 “U.S. Trade Strategy: What’s Next for Small Business Exporters?”

May 16, 2012

We have heard time and again about the need to put small businesses at the forefront of our economic recovery, but perhaps no other group is more critical to this effort than small exporters.   According to U.S. Treasury Department figures, more than 50 million American workers – or approximately 40 percent of the private sector workforce – are employed by more than 250,000 small and medium-sized companies that export goods overseas.  Small businesses that export grow faster, create more jobs, and pay higher wages than other businesses.  Clearly, in order for the recovery to gain steam, our economy will increasingly depend on foreign trade to fuel new growth.

Despite these advantages, it remains difficult for small businesses to take-up the mantle and enter foreign markets.  By some estimates, just one percent of the 28 million small firms in this country are doing so.  Even though they account for 97 percent of America’s exporting companies, their exports account for only a third of all goods shipped overseas. Most sell their goods to only one foreign country and to only one customer in that country.  Clearly, these firms possess untapped economic potential, and today’s hearing will help us understand how this may be accomplished in the wake of passage of the South Korea, Panama, and Colombia free trade agreements last year.

Balanced free trade agreements have the potential to be a significant driver of prosperity.  By eliminating tariffs and other barriers, these agreements can help small firms expand sales globally and create jobs at home.  In order for these benefits to be fully realized, we must hold our trading partners accountable for unfair practices and ensure that our small businesses receive the level playing field they were promised.   

Unfortunately, our history in this area does not inspire much optimism.  In 1993, before the North American Free Trade Agreement took effect, the U.S. had a $1.6 billion trade surplus with Mexico, which supported 29,400 jobs here at home. Since then, imports from Mexico have grown much faster than U.S. exports, resulting in large trade deficits that have displaced 682,900 jobs nationwide.  Although many of the workers that were laid off due to NAFTA were reallocated to other sectors, the majority were relocated to the service industry, where average wages are a fraction of what they received before. 

As long as the U.S. persists in trying to play by free-trade rules while foreign nations are allowed to play the 400-year old game of mercantilism, we can expect to see similar results.  Still, we must be diligent in our efforts to get it right. 

It is in this spirit that we look to the on-going efforts to reauthorize the Export-Import Bank and to negotiate the Trans-Pacific Partnership agreement.  The Ex-Im Bank plays an important role for small firms, supporting more than 3,000 transactions for more than $6 billion last year.  It is important that the bank continue to build on this progress and develop even more tools and resources for smaller exporters.

In regard to the Trans-Pacific Partnership, this sweeping agreement has the potential to remove numerous barriers and give American small firms access to new markets on the Pacific Rim.  However, there are concerns that it is reaching beyond areas that have traditionally been the purview of trade policy.  Reports have emerged that this agreement may seek to bind the U.S. to new standards for everything from foreign investment to pharmaceutical prices, and copyright protections. 

It will be critical that these issues be discussed in an open and forthright manner before this agreement can be finalized, and it is my hope that the Office of the USTR will make good on its commitment to do so.

Now, more than ever, our country needs policies that encourage fair trade and promote small business growth.  I look forward to hearing how our existing and potential future trade agreements can achieve these goals, as well as how export assistance programs can assist small firms.  I’d like to thank our witnesses in advance for their testimony. I’m pleased they could join us today and look forward to hearing from them.