Small and Medium-sized Enterprises (SMEs) represent 97 percent of all U.S. exporters. However, only approximately 1 percent of all SMEs are currently exporting. Of those companies exporting, over 85 percent export their goods to four countries or less. Many SMEs have products or services that could be sold globally, and there is a substantial untapped market of SMEs that are export-capable and export-ready. Furthermore, there is enormous market growth potential for those already exporting.
Through the negotiation of bilateral and regional Free Trade Agreements (FTAs), the United States is working together with our trading partners to obtain easier access for U.S. small business into more markets. FTAs are designed to benefit small businesses, which typically have limited access to investment capital and are disproportionately impacted by trade barriers. FTAs reduce the cost of doing business overseas and allow SMEs to become global players and grow at a much faster rate. FTAs provide the following benefits for small businesses:
Lowering or Eliminating Tariffs: A lower tariff rate on your goods, or on products made with your goods, makes your product available at a lower price than your competitors’ without sacrificing your profit margin.
Updating and enforcing laws on IPR: FTAs work towards updating and enforcing laws on intellectual property rights, and with many SMEs involved in the technology sector, FTAs offer better protection of U.S. intellectual property rights such as patents, copyrights, and trademarks.
Customs facilitation: A main goal of FTAs is to harmonize customs procedures, standards, and licensing and inspection requirements. This reduces fees, delays, and unnecessary paperwork. For example, in the Free Trade Area of the Americas (FTAA) the United States is working to modify fixed cost licensing and inspections, which are costly for small businesses on a per unit basis, and may hinder them from doing business. NAFTA, for example, has combined necessary documents and has simplified procedures for low value shipments. Furthermore, information is more readily available, transparent, and is provided at no cost. Technical assistance is provided on-site to ensure smooth facilitation of trade.
Address Market Access Issues for Specific Industries: In negotiating FTAs, the U.S. Government is dedicated to leveling the playing field for U.S. industry. For example, American steel, agricultural, and textile products are given open access to markets in FTAs without allowing for dumping in return, and harm on the American market.
Free Trade Agreements allow SMEs to conduct business within a framework that is extremely open, governed by clear rules and accessible enforcement mechanisms, with the goal of greater economic integration and cooperation. Entering the overseas marketplace offers many benefits for small businesses, including:
- additional markets for growth and new product development
- increased profits
- extended product/service life cycles
- increased numbers of customers
- improved competitiveness
- advocacy and marketing of product/service abroad
The challenges inherent in international trade are significant. However, the benefits and opportunities for growth are enormous. Many bilateral and regional FTAs have already proven to reduce the risks and lower the costs of exporting such as: North American Free Trade Agreement (NAFTA), U.S.-Chile FTA, U.S.-Australia FTA, U.S.-Singapore FTA, CAFTA-DR, and more. For more information on current and future free trade agreements, please visit http://www.ita.doc.gov/td/tic/fta/index.htm.
The information in this article was compiled by Heather Tomasetti of the U.S. Department of Commerce’s Global Diversity Initiative. The Global Diversity Initiative office may be reached by phone at 202-482-4792 or by e-mail at global_diversity@ita.doc.gov .