Overwhelming majority of American Businesses still not exporting
In 2010, President Obama launched the National Export Initiative, designed to increase America’s global economic competiveness and double U.S. exports by 2014. In an increasingly global economy with numerous emerging markets, this initiative aims to enhance America’s long-term prosperity. Exports have become enormously important to economic growth, as a study by the Brookings Metropolitan Policy Program showed. For every $1 billion the United States generates in exports, 5,400 new jobs are created. Exports have been increasing in recent years—$2.2 trillion generated in 2012, compared to $1.28 trillion in 2010—suggesting that Obama’s efforts have paid off. However, a significant body of evidence suggests that the U.S. economy still has a long way to go.
While $2.2 trillion may seem like an awful lot, America’s potential is far greater. Consider this striking statistic: less than 1% of American companies sell abroad. Of this minute fraction of companies that do export, 58% sell only to one country. In 2011, exports as a percentage of U.S. GDP were a mere 14%, far less than that of industrialized countries such as the United Kingdom (32%) and Germany (50%), though this is partly a function of America’s domestic market. Bearing in mind that over 70% of the world’s purchasing power comes from outside the U.S., it is safe to say that American companies have not fully tapped the potential of the global market. American supply has not met global demand.
Furthermore, Brookings research shows that companies in the export sector fare better overall. From 2005-2009, small manufacturing exporters experienced a 37% revenue increase, while their non-exporting counterparts experienced a 7% decline in revenue. These exporters are also 8.5% less likely to go out of business than non-exporters, and export sector jobs typically pay 10-20% more than similar than non-exporting jobs. If the benefits are clear, then why aren’t more companies looking to become exporters?
First, a common misperception is that only large businesses are capable of operating abroad, but the fact is that 98% of U.S. exporters are SME’s (small and medium-sized enterprises). Many small companies may think they don’t have the capabilities to export, while others may be too focused on day-to-day operations to consider the possibility of becoming an exporter. A key problem is that many small businesses simply lack the information to export – whether they don’t know how to develop an export plan or are unaware of government services and resources to help them do so.
The Department of Commerce, specifically the U.S. Commercial Service’s Strategic Partnership Program, offers a variety of services, including trade counseling, market intelligence, commercial diplomacy, and financing assistance, to help American companies become exporters. These services are available in 108 different cities nationwide, but many businesses, particularly smaller companies, don’t know they exist.
Certain cities, including Portland and Seattle, have recognized the importance of international trade and taken initiative to expand exports. Portland’s We Build Green Cities Initiative has found innovative ways to “leverage the city’s green reputation to boost exports.” As part of the effort, city leaders and development agencies work with local business to market and sell their green products abroad. For example, We Build Green Cities recently brought a group of executives from engineering, architecture, and construction companies on a trip to Japan, a country looking to utilize more efficient, reliable energy sources in the wake their recent Tsunami. The initiative has successfully helped Portland sell its unique green brand in Japan, and other international markets.
Programs such as Portland’s are crucial to help American businesses adapt and keep pace in ever-growing global economy. Other cities can learn from Portland and work to develop similar programs to market their products abroad. Additionally, government at all levels can increase its support of export expansion and better promote any programs or services it currently offers. After all, it is more than worth the investment, as the World Bank estimates that every dollar spent on export promotion creates a $40 increase in exports.
American businesses have made progress towards expanding exports and meeting global demand, but their potential is far from reached. Given the clear benefits of export expansion, most business leaders and government officials would agree that less than 1% of American companies is not nearly enough exporters in this day and age.