USTR Reports On Trade Barriers Affecting SMEs

by Leroy Baker, Tax-News.com, New York

12 November 2010

A report by the United States International Trade Commission (USITC), originally commissioned by the United States Trade Representative Ron Kirk, identifies the trade barriers that disproportionately affect the export performance of US small- and medium-sized enterprises (SMEs).

The report, entitled “Small and Medium- Sized Enterprises: Characteristics and Performance,” shows that SMEs play a larger role in the export economy than is suggested by traditional trade statistics by exporting indirectly through wholesalers and as producers of intermediate inputs.

“America’s SMEs support four million jobs by directly and indirectly exporting goods and services. They account for approximately 40% of all export-supported jobs in the US,” said Kirk. “This USITC report provides us with a deeper understanding of the performance and importance of SME exporters in the US economy. The report also identifies the trade barriers and other impediments that disproportionately affect SMEs.”

Kirk requested the study from the USITC to help guide the US government’s trade policy in a way that boosts US SME exports and creates employment. The findings draw upon information gathered from three public hearings, in addition to testimony and comments from over 250 companies and organizations, and research and analysis of data from the US Census Bureau, the US Bureau of Economic Analysis, and surveys of thousands of US SMEs in manufacturing, services, and agriculture.

Ambassador Kirk noted that “we will use our enhanced understanding of SME challenges and opportunities while negotiating with foreign governments to open their markets and reduce trade barriers, to benefit American workers and businesses of all sizes.”

The report found that burdensome or discriminatory government regulations in many foreign markets disproportionately affect SMEs. US SMEs may lack the staff, expertise, or financial resources to dedicate to foreign compliance.

Standards and certification are important non-tariff hurdles for SME exporters. In particular, licensing, residency requirements, and commercial presence requirements present challenges for SME services providers that export.

Services SMEs reported the greatest disproportionate burdens relative to large firms in areas such as “insufficient intellectual property protection,” “foreign taxation,” and “difficulty establishing affiliates in foreign markets.”

Furthermore, SMEs are more likely than large firms to identify high tariffs as a substantial impediment to exporting. SMEs account for a high share of exports in apparel and certain processed food industries that face generally higher foreign applied tariffs.

Manufacturing SMEs therefore reported greater burdens relative to large firms in most areas, including “customs procedures,” “high tariffs,” and “transportation and shipping costs.”

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