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July 20, 2010 

ITC Issues Report on Export Barriers Encountered by U.S. Small and Medium Sized Businesses

At the request of the U.S. Trade Representative, the U.S. International Trade Commission has published a report entitled "Small and Medium Sized Enterprises: U.S. and EU Export Activities, and Barriers and Opportunities Experienced by U.S. Firms".

The 300 plus page report summarizing the results of the ITC's investigation compares the exporting activities of SMEs in the United States with those of SMEs in the EU. The report also describes the barriers and trade costs associated with exporting, including strategies to reduce these barriers and costs. The ITC's report identifies the benefits to U.S. SMEs from improvements to the exporting environment resulting from free trade agreements and other trade arrangements.
Some of the ITC's major findings included:

*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.

*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.

*With respect to U.S. government regulations, SMEs reported that domestic regulations maintained by the U.S. federal and state governments—particularly export controls and visas for foreign nationals to visit the United States—also serve as barriers to exporting.

*Regarding export controls, although U.S. companies generally agree that such controls are necessary, they consider the paperwork and logistics associated with such controls to be cumbersome, and many companies are concerned about accidentally violating the regulations. Companies also expressed concern that too many
federal government agencies are involved and that the lines of authority between them are not clear. In addition, they stated that the U.S. practice of requiring licenses for particular components, rather than for integrated weapons systems or other final products, makes U.S. producers less competitive vis-à-vis foreign companies subject to export. SMEs noted that the cumbersome nature of the process and the list of products subject to export control regulations are poorly adapted to changing technologies, so that it takes too long for items to be removed from the lists when they no longer pose a threat. Some companies also reported losing sales to foreign competitors due to export licensing delays.

*Regarding foreign government regulations SME representatives reported that the costs of understanding and complying with foreign government regulations can be significant barriers to exporting. Factors that raise costs include the lack of standardized regulations across countries and the administrative costs of compliance.

* U.S. 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.

*Suggested policy changes to enhance the ability of SMEs to export include: (1) increase focus on free trade agreements and other trade agreements; (2) assist more with market access, particularly in India and China; and (3) offer more information, outreach, and educational opportunities related to exporting.

The PDF version of the ITC's report can be found here.

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