Mr. Chairman, Ranking Member and distinguished Members, thank you for inviting me to testify today about the Trade Promotion Coordinating Committee’s preliminary report and the role that the U.S. Small Business Administration (SBA) plays in the federal government’s export promotion strategy.
The Bush Administration recognizes the critical link between the U.S. domestic economy and our foreign trade policy. Expanding trade has shown to have many benefits in the United States and around the world. Trade expands markets, grows business and creates jobs. This translates to more choices and better prices for American consumers.
Free and open markets foster economic and political freedom, strengthen democracy and enhance our national security. The Bush Administration is focused on achieving these goals, and it is essential for the Congress and the Administration to work together to increase opportunities for U. S. businesses in international trade.
While the United States is certainly open for business, passage of Trade Promotion Authority will demonstrate to the world that the President and the U. S. Congress are united in their desire to further open trade globally. We need to do as much as possible to give businesses in America every opportunity to succeed by enabling them access to all markets. TPA will remove barriers to allow these businesses involved in international trade to thrive in a global economy through free, fair and open markets, thus allowing U.S. small businesses to become more competitive in the global marketplace.
Currently 97% of U.S. exporters are small businesses, numbering a little over 200,000. However, they account for just under a third of the total value of U.S. export sales. This is why SBA’s role in fostering U.S. small businesses is so important.
Each of SBA’s financial and technical assistance programs can assist businesses interested in exporting and we have specific programs in place to assist in creating markets outside the United States. However, to date, our efforts and results have been sporadic.
I intend to more effectively focus our efforts. Through expanded public/private partnerships we can facilitate access to needed information and capital with the goal of increasing revenue, employment and business longevity. Firms engaged in trade are 20% more productive, pay wages which are 15% higher than non-traders, are 9% less likely to go bankrupt and they experience 20% greater job growth.
The following represents a discussion of SBA’s programs and services which we will be examining as part of the TPCC process and as we listen to our customers:
Access to Capital
SBA has several loan programs tailored to small businesses in search of capital to either start or expand their business in exporting. They are the International Trade Loan Program, the Export Working Capital Program and SBA Export Express. For FY 2001, we approved 419 export loans with a value of $167 million.
The International Trade Loan Program provides long-term financing for fixed assets and working capital up to a maximum of $1.25 million for companies impacted by foreign competition or expanding exports.
The Export Working Capital Program is a short-term (less than a year), transaction-backed guaranty program. The program was established by working closely with the Export-Import Bank of the United States (Ex-Im Bank) to develop a seamless product for all of our customers, including the use of the same application for both programs. SBA’s program has a maximum of $1 million. The Ex-Im Bank program addresses the needs of companies in excess of that amount. In FY 2000, the average SBA EWCP borrower had 9 employees and the average size of the loan was $400,000. The average size Ex-Im Bank loan was $1.6 million.
One example of a firm that has prospered with SBA’s EWCP assistance is American Microwave Incorporated of Frederick, Maryland. American Microwave manufactures electronic components for defense systems. In the early ‘90s, a cash flow problem brought them to the SBA’s Export Working Capital Program. The EWCP program enabled them to expand their export efforts from $40,000 in initial revenues to $2.4 million today.
To help firms with very small export finance needs, on October 1, 2000, the Agency rolled out its pilot export loan guaranty product, called SBA Export Express (Export Express). Export Express provides loan guarantees on export loans of up to $150,000. This product can be used to finance export development costs such as participation in a foreign trade show or translation of product catalogs as well as finance actual orders. We have nearly 300 lenders around the country eligible to participate in Export Express lending. We believe it will provide much-needed financial assistance to the fastest growing sector of the small business export community – the service sector.
Let me give you two examples of how this loan program is being used:
Providing Technical Assistance and Access to Information
Technical assistance and access to information are some of the greatest needs of U.S. small businesses according to the TPCC’s National Export Strategy report. As with our access to capital programs, SBA has public/private partnerships in this area to satisfy these needs.
SBA is a partner with the Department of Commerce (DOC) and Ex-Im Bank in the U.S. Export Assistance Center (USEAC) network, co-located at 19 different sites nationwide. SBA/USEAC personnel serve as the primary delivery mechanism for the Agency’s export assistance programs, including marketing, counseling and processing of loan applications. USEACs also provide a critical link between small business clients and a vast array of export promotion services offered by the federal government.
To help firms become export-ready, SBA took the lead in working with our public/private partners in creating the Export Trade Assistance Partnership (E-TAP) initiative. E-TAP is a customized process of taking a small group of export-ready companies through all the stages of becoming an exporter. These stages include market research, financing, insuring shipments, and dealing with freight forwarders. Many E-TAP courses incorporate foreign trade events as part of the program. Because of the scope of customized assistance, this program would not be possible without the dedicated support of SBA’s private and public sector partners. Partners who provide coordinated assistance include SBA’s Small Business Development Centers (SBDCs), particularly their International Trade Centers, Service Corp of Retired Executives (SCORE), DOC’s Commercial Service, Ex-Im Bank, state and local trade offices, individual freight forwarders, customs brokers, insurance brokers and international attorneys. All bring together essential export information, at little cost to the small business.
In FY 2000, SBA delivered E-TAP training to 328 small business participants, resulting in export sales of $138 million. This initiative made it possible for an E-TAP-trained company in Dallas, Texas to grow their export markets and use SBA’s capital programs. They produce a niche medical product, which essentially allows for the repair rather than the replacement of oxygen sensors used by hospitals for monitoring trauma victims. The company now exports to over 30 countries.
I am excited about prospects for U.S. small business in the global marketplace. We realize the need to reach more of the 25 million small businesses in the U.S. today. We need to do a better job of outreach, and listen to them in order to adapt and create products that meet their changing needs. We are committed to expanding our tradition of enrolling our public and private partners in these efforts and will continue to work toward these goals with our TPCC partners.
It is an exiting time to be involved in international trade, and we have a President who has made it a priority to assist the American businesses in the global marketplace. I look forward to working with our President, other TPCC members and the Congress to assist our small business exporters.
Thank you. I would be happy to answer any questions you may have.
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