United States International Trade Commission

Investigation No. 332-509

USITC Publication 4169

July 2010

Small and MediumSized Enterprises:

U.S. and EU Export 

Activities, and Barriers and 

Opportunities Experienced 

by U.S. Firms
Address all communications to 

Secretary to the Commission 

United States International Trade Commission 

Washington, DC 20436

U.S. International Trade Commission

COMMISSIONERS 

 

Deanna Tanner Okun, Chairman 

Charlotte R. Lane 

Daniel R. Pearson 

Shara L. Aranoff 

Irving A. Williamson 

Dean A. Pinkert

Robert B. Koopman

Acting Director of Operations

Arona Butcher

Acting Director of Economics

Karen Laney

Director, Office of Industries
U.S. International Trade Commission

Washington, DC 20436 

www.usitc.gov

Publication 4169 July 2010

Small and Medium-Sized Enterprises: 

U.S. and EU Export Activities, and Barriers 

and Opportunities Experienced 

by U.S. Firms

Investigation No. 332-509
Project Leadership 

Justino De La Cruz, Project Leader 

justino.delacruz@usitc.gov

James Stamps, Deputy Project Leader 

james.stamps@usitc.gov

Laura Bloodgood, Office of Industries Coordinator

laura.bloodgood@usitc.gov

Principal Authors

Laura Bloodgood 

Nannette Christ 

Daniel Cook 

Justino De La Cruz 

Michael Ferrantino 

Dennis Fravel 

William Greene 

Katherine Linton 

Brendan Lynch 

Ruben Mata 

Elizabeth Nesbitt 

William Powers 

George Serletis 

James Stamps 

Donald Sussman 

Mihir Torsekar 

Ralph Watkins 

Isaac Wohl 

Primary Reviewers 

Joanne Guth and Joanna Bonarriva 

Special Assistance From 

Tamar Asadurian 

Richard Brown 

Eric Cardenas 

Dylan Carlson 

Judith Dean 

Robert Feinberg 

William Gearhart 

Alberto Goetzl 

Alexander Hammer 

Peg Hausman 

Aimee Larsen 

Linda Linkins 

Andrew Martinez 

Jesse Mora 

Andrew Rylyk 

Patricia M. Thomas 

Alison Weingarden 

Linda White 

Office of Publishing

Interns

Bethany Bengfort, Daniel Mason-D’Croz, Vincent Procacci, and Danielle Trachtenberg 

Under the Direction of 

 Arona Butcher, Chief 

Country, Regional, and Analysis Division 

arona.butcher@usitc.gov 
i 

ABSTRACT 

This report examines the extent and composition of U.S. exports by small and 

medium-sized enterprises (SMEs) and factors that may disproportionately 

impede U.S. SME exports. It compares the exporting activities of SMEs in the 

United States with those of SMEs in the European Union (EU); describes barriers 

and costs associated with exporting, as reported by U.S. SMEs; and identifies the 

benefits to U.S. SMEs from improvements to the exporting environment resulting 

from free trade agreements (FTAs) and other trading arrangements. 

The U.S. market is more integrated than Europe’s, and U.S. firms that export 

tend to be larger than EU firms that export. This helps to explain one of the 

Commission’s findings: that estimated exports by SME manufacturing firms in 

the EU in 2005 amounted to approximately $231–$275 billion in value (about 31 

percent of total EU exports), compared to the $65 billion in exports (about 13 

percent of total U.S. exports) made by similarly defined U.S. SMEs. The study 

found that while there is little difference between U.S. and EU agencies in 

granting medium- and long-term export credits, the United States provides a 

wider range of support for pre-export financing and short-term credit than is 

generally available in EU countries. On the other hand, SMEs in the EU appear 

to have access to more sources and a higher level of assistance in foreign markets 

than U.S. SMEs do, as well as more financial support for participating in 

international trade fairs. 

The barriers to exporting that were noted as the most important by U.S. SMEs at 

the Commission’s public hearings and in written submissions and interviews for 

this investigation were similar to those that have already been identified by the 

Organisation for Economic Co-operation and Development. These included 

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. 

U.S. SMEs identified numerous improvements to the exporting environment 

associated with U.S. FTAs and other trading arrangements, such as mutual 

recognition agreements, bilateral investment treaties, trade and investment 

framework agreements, and World Trade Organization agreements. These 

improvements include tariff reductions, reduction or elimination of nontariff 

barriers, better market access, easier interactions with customs, trade facilitation, 

intellectual property protection, a more efficient and transparent regulatory 

environment, and dispute resolution mechanisms. 

iii 

CONTENTS 

Page

Abstract................................................................................................................................ i 

List of Frequently Used Abbreviations and Acronyms.. xi 

Executive Summary............................................................................................... xiii 

Chapter 1: Introduction.................................................................................... 1-1 

Purpose.................................................................................................................................... 1-1 

 Scope and approach of the report ............................................................................................ 1-1 

 Information sources ................................................................................................................. 1-2 

 SME definition ........................................................................................................................ 1-3 

 Organization of the report........................................................................................................ 1-3 

 Global context for SME exporting activities........................................................................... 1-4 

Chapter 2: Comparison of Exporting Activities of U.S. 

 and EU SMEs.......................................................................................................... 2-1 

 Overview of SME exporting activities in the United States and in other leading 

 economies ......................................................................................................................... 2-1 

 Definition of SME ............................................................................................................ 2-1 

 Cross-country comparison of SME exporting activities................................................... 2-2 

 Share of SMEs that export.......................................................................................... 2-4 

 SME exports as a share of total exports...................................................................... 2-4 

 Export as a share of total revenue ............................................................................... 2-4 

 Destination of SME exports........................................................................................ 2-5 

 A comparison of SME exporting activities in the United States relative to the European 

 Union ................................................................................................................................ 2-6 

 Analytic methods .............................................................................................................. 2-7 

 Structural differences between the United States and the European Union explain 

 differences in SME export performance..................................................................... 2-8 

 U.S. SME exporters are relatively more likely to be intermediaries ................................ 2-10 

 U.S. export-oriented wholesale firms are larger than EU wholesale firms....................... 2-11 

 U.S. and EU employment growth for manufacturing during 2002-06 was better for 

 SMEs than for large firms .......................................................................................... 2-12 

 U.S. SME exports share is lower in nearly every sector................................................... 2-14 

 SME productivity is as high in the United States as in the European Union–– 

 or higher ..................................................................................................................... 2-17 

 U.S. and EU support for SME exporting activities ................................................................. 2-17 

 Information sources .......................................................................................................... 2-17 

 SME business environment in the United States and the European Union ...................... 2-18 

 Barriers to SME exporting activities ................................................................................ 2-20 

 Export promotion for SMEs ............................................................................................. 2-22 

 U.S support for SME exporting activities......................................................................... 2-24 

 National policies and programs supporting SME exporting activities ....................... 2-24 
iv 

CONTENTS—Continued

Page

Chapter 2—Continued 

 State and local programs supporting SME exporting activities........................................ 2-25 

 National Export Initiative .......................................................................................... 2-26 

 EU support for SME exporting activities.......................................................................... 2-26 

 Small Business Act for Europe .................................................................................. 2-27 

 Summary comparisons of U.S. and EU support for SME exporting activities................. 2-29 

 European institutional support for SME exporting activities: Selected EU countries............. 2-31 

 France ............................................................................................................................... 2-32 

 Economic overview .................................................................................................... 2-32 

 SME business environment ........................................................................................ 2-33 

 SME exporting activities............................................................................................ 2-34 

 Exporting constraints facing SMEs............................................................................ 2-36 

 National policies and programs supporting SME exporting activities ....................... 2-37 

 Germany ........................................................................................................................... 2-41 

 Economic overview .................................................................................................... 2-41 

 SME business environment ........................................................................................ 2-42 

 SME exporting activities............................................................................................ 2-44 

 Exporting contraints facing SMEs.............................................................................. 2-45 

 National policies and programs supporting SME exporting activities ....................... 2-47 

 Ireland............................................................................................................................... 2-50 

 Economic overview.................................................................................................... 2-50 

 SME business environment ........................................................................................ 2-51 

 SME exporting activities............................................................................................ 2-53 

 Exporting contraints facing SMEs.............................................................................. 2-53 

 National policies and programs supporting SME exporting activities ....................... 2-56 

 Poland ............................................................................................................................... 2-59 

 Economic overview.................................................................................................... 2-59 

 SME business environment ........................................................................................ 2-60 

 SME exporting activities............................................................................................ 2-62 

 Exporting contraints facing SMEs.............................................................................. 2-63 

 National policies and programs supporting SME exporting activities ....................... 2-66 

Chapter 3: Views of U.S. SMEs on Barriers to 

 Exporting and Strategies to Overcome those 

 Barriers......................................................................................................................... 3-1 

 Introduction ............................................................................................................................. 3-1 

 Domestic barriers to SME exporting....................................................................................... 3-1 

 Access to finance .............................................................................................................. 3-1 

 Trade finance.............................................................................................................. 3-2 

 Working capital........................................................................................................... 3-4 

 U.S. domestic laws and regulations .................................................................................. 3-5 

 Export controls ........................................................................................................... 3-5 
v 

CONTENTS—Continued

Page

Chapter 3—Continued

 Difficulties obtaining U.S. entrance visas .................................................................. 3-8 

 U.S. tariffs................................................................................................................... 3-9 

 Other domestic laws and regulations.......................................................................... 3-10 

 Transport costs.................................................................................................................. 3-10 

 Small scale production...................................................................................................... 3-12 

 Foreign barriers to SME exporting.......................................................................................... 3-12 

 Foreign government laws and regulations ........................................................................ 3-12 

 Protection of intellectual property .................................................................................... 3-15 

 Customs clearance ............................................................................................................ 3-17 

 Foreign tariffs ................................................................................................................... 3-17 

 Foreign government support programs............................................................................. 3-17 

 Exchange rate fluctuations................................................................................................ 3-18 

 Language and cultural barriers.......................................................................................... 3-18

 Knowledge of foreign markets.......................................................................................... 3-19 

 Strategies to overcome barriers to exporting........................................................................... 3-20 

 Trade associations and coalitions with other firms........................................................... 3-20 

 Cooperation with larger companies .................................................................................. 3-22 

 Government programs ...................................................................................................... 3-23 

 Other strategies ................................................................................................................. 3-25 

 SME recommendations for increasing exports........................................................................ 3-27 

Chapter 4: Views of SMEs on Barriers to Exports: 

 Industry Case Studies..................................................................................... 4-1 

 Introduction ............................................................................................................................. 4-1 

Apple industry ......................................................................................................................... 4-1 

 Industry background ......................................................................................................... 4-1 

 Domestic barriers to exporting.......................................................................................... 4-3 

 Foreign barriers to exporting ............................................................................................ 4-4

 SME strategies for exporting ............................................................................................ 4-4 

 Wine industry .......................................................................................................................... 4-5 

 Industry background ......................................................................................................... 4-5 

 Domestic barriers to exporting.......................................................................................... 4-6 

 Foreign barriers to exporting ............................................................................................ 4-7

 SME strategies for exporting ............................................................................................ 4-9 

 High-technology and related manufacturing industries: Chemicals and nanotechnology ...... 4-10 

 Industry background ......................................................................................................... 4-10 

 Domestic barriers to exporting.......................................................................................... 4-11

 Foreign barriers to exporting ............................................................................................ 4-12 
vi 

CONTENTS—Continued 

Page

Chapter 4—Continued

 SME strategies for exporting ............................................................................................ 4-15

 Textiles and apparel industry................................................................................................... 4-15 

 Industry background ......................................................................................................... 4-15 

 Domestic barriers to exporting.......................................................................................... 4-15

 Foreign barriers to exporting ............................................................................................ 4-16 

 SME strategies for exporting ............................................................................................ 4-18

 Medical devices....................................................................................................................... 4-19 

 Industry background ......................................................................................................... 4-19 

 Domestic barriers to exporting.......................................................................................... 4-19

 Foreign barriers to exporting ............................................................................................ 4-20 

 SME strategies for exporting ............................................................................................ 4-21

 Computer services ................................................................................................................... 4-21 

 Industry background ......................................................................................................... 4-21 

 Domestic barriers to exporting.......................................................................................... 4-22

 Foreign barriers to exporting ............................................................................................ 4-23 

 SME strategies for exporting ............................................................................................ 4-24

 Professional services ............................................................................................................... 4-25 

 Industry background ......................................................................................................... 4-25 

 Domestic barriers to exporting.......................................................................................... 4-25

 Foreign barriers to exporting ............................................................................................ 4-26 

 SME strategies for exporting ............................................................................................ 4-27

Chapter 5: Benefits to U.S. SMEs from Increased 

 Export Opportunities..................................................................................... 5-1 

 Introduction ............................................................................................................................. 5-1 

 U.S. participation in free trade agreements and selected other trading agreements ................ 5-2 

 Benefits to SMEs of increased export opportunities ............................................................... 5-2 

 Increased or improved market access ............................................................................... 5-3 

 Market access: Selected examples of trade agreement benefits to U.S. SMEs .......... 5-6 

 Improved trade facilitation................................................................................................ 5-9 

 Customs procedures ................................................................................................... 5-9 

 Standards harmonization and mutual recognition of certifications ............................ 5-9 

 Trade facilitation: Selected examples of trade agreement benefits to U.S. SMEs ..... 5-10 

 More favorable regulatory environment ........................................................................... 5-13 

 Regulatory environment: Selected examples of trade agreement benefits to U.S. 

 SMEs.................................................................................................................... 5-13 

 SME company performance and hurdles.......................................................................... 5-15 

 Widespread benefits of trade agreements for U.S. SMEs................................................. 5-16 

 Anecdotal SME support for FTAs.............................................................................. 5-16 

 Measures of SME support for U.S. trading arrangements.......................................... 5-17 
vii 

CONTENTS—Continued 

Page

Chapter 6: Positions of Interested Parties.................................... 6-1 

 Donald A. Manzullo, U.S. Representative, 16th District of Illinois......................................... 6-1 

 Export-Import Bank of the United States................................................................................ 6-2 

 U.S. Department of Commerce, U.S. Commercial Service, St. Louis.................................... 6-3 

 Aeronautical Repair Station Association................................................................................. 6-4 

 AFRAM Corporation .............................................................................................................. 6-4 

 Air Tractor, Inc........................................................................................................................ 6-5 

 Buhler Quality Yarns Corp...................................................................................................... 6-5 

 CID Bio-Science, Inc. ............................................................................................................. 6-6 

 The Coalition for Security and Competitiveness (CSC) ......................................................... 6-7 

 Dixie Chemical Corporation.................................................................................................... 6-7 

 Dutchman Global .................................................................................................................... 6-8 

 Electrical Geodesics, Inc. ........................................................................................................ 6-8 

 Electron Energy Corporation................................................................................................... 6-8 

 Fanwood Chemical, Inc........................................................................................................... 6-10 

 Foreign Trade Association ...................................................................................................... 6-10 

 Global Products International, Inc........................................................................................... 6-11 

 The Hardwood Federation and American Hardwood Export Council .................................... 6-11 

 HBO Latin America Corporation ............................................................................................ 6-12

 Herkules Equipment Corporation............................................................................................ 6-13 

 The Hosiery Association ......................................................................................................... 6-13 

 Hydra-Power Systems, Inc. ..................................................................................................... 6-14 

 Independent Film and Television Alliance.............................................................................. 6-15 

 Media Wizard, Inc................................................................................................................... 6-15 

 Medical, Laboratory & Technology Consultants .................................................................... 6-16 

 The Merry Hempsters, Inc....................................................................................................... 6-16 

 MidAmerica St. Louis Airport ................................................................................................ 6-17 

 Midwest-China Hub Commission ........................................................................................... 6-18 

 National Association of Manufacturers (NAM)...................................................................... 6-18 

 National Institute for World Trade (NIWT)............................................................................ 6-19 

 National Minority Business Council (NMBC)........................................................................ 6-20 

 NIMS Services, Inc. ................................................................................................................ 6-20 

 North Carolina District Export Council .................................................................................. 6-21 

 Northwest Trade Adjustment Assistance Center..................................................................... 6-21 

 Oregon Department of Agriculture ......................................................................................... 6-22

 Oregon Nanoscience and Microtechnologies Institute (ONAMI)........................................... 6-22 

 Oregon Tourism Commission dba Travel Oregon .................................................................. 6-23 

 Pacific Northwest International Trade Association................................................................. 6-23 

 Pacific Seafoods ...................................................................................................................... 6-24 

 The Port of Portland ................................................................................................................ 6-24 

 RAD-CON............................................................................................................................... 6-25 

 Reddix Corp. ........................................................................................................................... 6-26 

 Roeslein & Associates, Inc...................................................................................................... 6-26 

 Sauereisen, Inc......................................................................................................................... 6-27 
viii 

CONTENTS—Continued 

Page

Chapter 6—Continued

 Secondary Materials and Recycled Textiles (SMART) .......................................................... 6-27 

 Software Association of Oregon ............................................................................................. 6-28 

 Spartan Light Metal Products.................................................................................................. 6-28 

 Sunnen Products Co. ............................................................................................................... 6-29 

 Tiba Medical, Inc. ................................................................................................................... 6-30 

 TradeMoves LLC .................................................................................................................... 6-31 

 U.S. Chamber of Commerce ................................................................................................... 6-31 

 Washington State Potato Commission .................................................................................... 6-32 

 West Coast Seafood Processors Association (WCSPA) ......................................................... 6-33 

 Wine Institute et al. ................................................................................................................. 6-33 

 Zoltek Corporation .................................................................................................................. 6-34 

Bibliography................................................................................................................... Biblio -1

Appendices

A. Request letter........................................................................................................................... A-1 

B. Federal Register notices.......................................................................................................... B-1 

C. Additional information on chapter 2: EU-U.S. SMEs comparison ......................................... C-1 

D. Additional information on chapter 5: U.S. FTAs and selected other trading agreements....... D-1 

E. Overview of the relevant economic literature ......................................................................... E-1 

Boxes

Box 2.1 Why EU firms are so much smaller than U.S. firms ..................................................... 2-10 

Box 2.2 The 2008–09 global recession and its effects on financing in developed countries...... 2-21 

Box 2.3 OECD standards for export credits................................................................................ 2-23 

Box 2.4 Promoting cross-border region-to-region SME exports: The Netherlands-North 

 Rhine-Westphalia INTER-NED program .................................................................. 2-51 

Box 2.5 Small exporters in western Ireland go global ................................................................ 2-57 

Box 2.6 Sweden and Switzerland support Polish SME exporters............................................... 2-68 

Box 3.1 Barriers to exports of services and strategies to overcome the barriers: The case of 

 Systems Integrated ..................................................................................................... 3-21 

Box 3.2 UPS Capital ................................................................................................................... 3-24 

Box 4.1 SME exporters challenged by export control regulations.............................................. 4-12 

Box 4.2 SMEs find new EU chemical regulatory framework a constraint on exports to 

 Europe ..................................................................................................................... 4-13 

Box D.1 Other trading arrangements: WTO, MRAs, BITs, and TIFAs ...................................... D-4 

Figures 

5.1 Trading arrangements create export opportunities with potential to benefit all firms............. 5-3 
ix 

CONTENTS—Continued 

Page

Tables 

ES.1 Comparison of SME exporting activities in the United States and the European 

 Union, 2005 ................................................................................................................... xv 

ES.2 Summary of barriers to exporting and strategies to enhance exporting activities as 

 reported by U.S. SMEs .................................................................................................. xvi 

ES.3 Key barriers and strategies to export reported by highly competitive U.S. SMEs, 

 Selected industries ......................................................................................................... xxi 

2.1 SME definitions in the United States, the European Union, Australia, and Canada............ 2-3 

2.2 Estimated exports and sales for manufacturing firms, by firm size, United States and 

 European Union, 2005 ................................................................................................... 2-9 

2.3 Estimated share of exports by firm size and major industry, 2005 ...................................... 2-11 

2.4 Estimated exports by firm size and major industry, 2005.................................................... 2-12 

2.5 Employment growth, by firm size, United States and European Union, 2002–2006 .......... 2-13 

2.6 Estimated exports for manufacturing sectors, by firm size, United States and European 

 Union, 2005 ................................................................................................................... 2-15 

2.7 Relative productivity by firm size, United States and European Union (European.............

 Union = 1), 2002............................................................................................................ 2-18 

2.8 France, Germany, Ireland, Poland: Selected economic indicators, 2009............................. 2-32 

3.1 Barriers to SME export and suggested strategies and recommendations to overcome those 

 barriers........................................................................................................................... 3-2 

3.2 Policy change recommendations provided by SME representatives.................................... 3-28 

4.1 Key findings on export barriers and suggested strategies to overcome those barriers, 

 selected industries ............................................................................................................. 4-2 

5.1 U.S. FTAs, average tariff rates, by partner .......................................................................... 5-5 

C.1 U.S. government support for SME exporting activities, selected programs ........................ C-3 

C.2 EC institutional support for SME exporting activities, selected programs .......................... C-8 

D.1 U.S. free trade agreements ................................................................................................... D-4 

D.2 U.S. SME-identified export opportunities and benefits ....................................................... D-6 

xi 

List of Frequently Used Abbreviations and 

Acronyms

APEC Asia-Pacific Economic Cooperation 

BIT bilateral investment treaty 

CAB conformity assessment bodies 

CFTA U.S.-Canada FTA 

COPR Canada Organic Product Regulation 

CTG WTO Council for Trade in Goods 

CTRIPS WTO Council for Trade-Related Aspects of Intellectual Property Rights 

CTS WTO Council for Trade in Services 

DR-CAFTA U.S.–Dominican Republic-Central America Free Trade Agreement 

EAR Export Administration Regulations 

EC European Commission 

EEN Enterprise Europe Network 

EIU Economist Intelligence Unit 

EU European Union1

EU-27 All 27 current members of the European Union 

Ex-Im Bank Export-Import Bank of the United States 

FAO United Nations Food and Agriculture Organization 

FDA U.S. Food and Drug Administration 

FDI foreign direct investment 

FTA free trade agreement 

GAO Government Accountability Office 

GATS General Agreement on Trade in Services 

GATT General Agreement on Tariffs and Trade 

HS Harmonized System 

HTS Harmonized Tariff Schedule 

IP intellectual property 

IPPC International Plant Protection Convention 

IPR intellectual property rights 

ISPM 15 International Standards for Phytosanitary Measures Guidelines for 

 Regulating Wood Packaging Material in International Trade 

ITA International Trade Administration, U.S. Department of Commerce 

ITAR International Traffic in Arms Regulations 

IVD in vitro diagnostic 

MAA mutual acceptance agreement 

MAP Market Access Program, U.S. Department of Agriculture 

MFN most favored nation 

MOSS Market-Oriented, Sector-Selective 

MRA mutual recognition agreement 

NAFTA North American Free Trade Agreement 

NEI U.S. National Export Initiative 

 1

 The 27 current members of the European Union are: Austria, Belgium, Bulgaria, Cyprus, Czech 

Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, 

Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the 

United Kingdom. 
xii 

NOP National Organic Program 

NTB nontariff barrier 

NTM nontariff measure 

OECD Organisation for Economic Co-operation and Development 

OPIC U.S. Overseas Private Insurance Corporation 

PCT patent cooperation treaty 

R&D research and development 

REACH Registration, Evaluation, Authorization and Restriction of 

 Chemical Substances program (European Union) 

ROO rules of origin 

SBA U.S. Small Business Administration 

SBA for Europe Small Business Act for Europe 

SME small and medium-sized enterprises 

SMM small and medium-sized manufacturer 

SPS sanitary and phytosanitary measure 

TBT technical barriers to trade 

TCC Trade Compliance Center 

TIFA trade and investment framework agreement 

TRIPS Trade-Related Aspects of Intellectual Property Rights 

TRQs tariff-rate quotas 

TTB U.S. Treasury, Tobacco and Alcohol Tax and Trade Bureau 

UN United Nations 

USCS U.S. Department of Service Commercial Service 

USDA U.S. Department of Agriculture 

USDOC U.S. Department of Commerce 

USDOS U.S. Department of State 

USEAC U.S. Export Assistance Center 

USITC U.S. International Trade Commission 

USTR U.S. Trade Representative 

WI Wine Institute 

WIPO World Intellectual Property Organization 

WTO World Trade Organization 

WWTG World Wine Trade Group 
xiii 

EXECUTIVE SUMMARY 

This report is the second in a series of three interrelated reports by the United States 

International Trade Commission (USITC, the Commission). As requested by the United 

States Trade Representative (USTR), the reports collectively describe the role of small 

and medium-sized enterprises (SMEs) in U.S. exports and identify and fill information 

gaps in the available literature on the subject.1

 This report seeks to assist in the analysis 

of the performance of U.S. SME firms in exporting compared to that of SME firms in 

other leading economies. 

Specifically, this report examines the extent and composition of U.S. exports by SMEs, 

as well as factors that may disproportionately impede U.S. SME exports. It compares the 

exporting activities of SMEs in the United States with those of SMEs in the European 

Union (EU). It also describes barriers and costs associated with exporting as reported by 

U.S. SMEs, as well as business strategies that U.S. SMEs adopt to address these 

constraints. Finally, it identifies benefits reported by U.S. SMEs from increased export 

opportunities resulting from free trade agreements (FTAs) and other trading arrangements 

in which the United States participates. 

The Commission’s first report on SMEs (January 2010) found that while more than 99 

percent of U.S. businesses are SMEs, SMEs account for a relatively small share of U.S. 

exports.2

 The present report finds that some of the barriers to exporting that were noted as 

the most important by U.S. SMEs at the Commission’s public hearings and from written 

submissions and interviews for this investigation were similar to those identified in 2009 

by the Organisation for Economic Co-operation and Development (OECD). 3 4 These 

included insufficient access to finance, problems with domestic and foreign regulations, 

high transportation costs, the small scale of SME production, tariff and nontariff barriers, 

burdensome foreign customs procedures, language and cultural differences, and lack of 

knowledge of foreign markets. 

Key Findings 

EU Exports More Dependent on SMEs than U.S. Exports

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.5

 SMEs accounted for 

approximately 19 percent of the value of U.S. sales and almost 40 percent of the value of 

 1

 The first investigation—inv. no. 332-508, Small and Medium-Sized Enterprises: Overview of 

Participation in U.S. Exports—was delivered to USTR on January 12, 2010. The first report defines U.S. 

SMEs as firms that employ fewer than 500 employees. This is the definition employed by official U.S. 

government sources, which define SMEs as manufacturing and services firms that employ fewer than 500 

employees. In addition to an employment threshold, exporting services firms are also subject to certain 

revenue thresholds (≤ $7 million for most services firms, and ≤ $25 million for high-value service firms). See 

also note 5 below. 2

 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, table 2-

1, 2-2. 3

 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7. 4

 The Commission held public hearings in St. Louis, MO, on March 10, 2010; in Portland, OR, on March 

12, 2010; and in Washington, DC, on March 18, 2010. 5

 The data presented in this section are based on a common U.S.-EU definition of SMEs: firms with 

fewer than 250 employees. This study’s data sources, definitions, and approach are described in chapter 1. 
xiv 

EU sales in 2005.6 Similarly, SMEs accounted for approximately 31 percent of the total 

manufactured goods exported by the EU in 2005, whereas SMEs in the United States 

accounted for only 13 percent. However, the export intensity of the two markets was 

comparable. The relatively larger role that European SMEs play in European exports can 

be explained by the fact that historically the U.S. market has been more integrated than 

Europe’s and has produced comparatively larger firms than in Europe. Other key 

differences between U.S. and EU SME exporting activities are highlighted in table ES.1 

below. 

Official Support for SME Exporting: U.S.–EU Comparisons

The governments of most industrialized countries promote SME exporting activities by 

providing export finance assistance, foreign market information, and a variety of business 

support services. Such programs address the costs of becoming an exporter―costs that 

are often too high for small firms. The Commission found the following differences 

between U.S. and EU export promotion programs and policies:7

 Trade financing. Both the United States and the EU countries support a broad 

range of trade financing programs that promote SME exporting activities. There is 

little difference between U.S. and EU export credit agencies with respect to 

medium- and long-term export credits. The United States, however, provides a 

wider range of support than is generally available in EU countries for pre-export 

financing and short-term credit, which is particularly beneficial to SMEs at the 

early exporting stages. In addition, the U.S. Export-Import Bank (Ex-Im Bank) is 

generally competitive in terms of overall project finance assistance among export 

credit agencies of the leading industrialized countries. On the other hand, U.S. 

domestic content and direct shipping requirements are more restrictive than those 

of EU export credit agencies. 

 Representation in foreign markets. Through the multiple worldwide networks of 

assistance centers established at several levels—European Commission (EC), 

national, and regional—SMEs from EU countries appear to have access to a larger 

number of sources and level of assistance in foreign markets than is available to 

U.S SMEs. 

 Support for trade fair participation. EU countries generally provide more financial 

support for SMEs to participate in international trade fairs than is available from 

the U.S. government. Participation in trade fairs was consistently reported by U.S. 

SMEs to be one of the most cost-efficient and effective ways to help SMEs achieve 

international recognition and to make contact with potential foreign customers. 

 Investment promotion. Many EU member countries actively seek and promote for 

inbound foreign investment from small and larger foreign firms as an indirect form 

of export promotion. For example, Germany and Poland seek foreign investors to 

build export-oriented manufacturing facilities in those countries; such investment is 

seen as indirectly supporting the development of exports by local SMEs through 

supply chain linkages. U.S. policies primarily focus on promoting exports. 

 6

 The year 2005 is the most recent year for which a direct comparison can be made. 7

 This information is intended to be neither a comprehensive catalog of official U.S. or EU programs nor 

an evaluation of their respective programs, but rather an illustration of key policies and programs that support 

SME exporting activities. 
xv 

TABLE ES.1 Comparison of SME exporting activities in the United States and the European Union, 2005 

Comparative factor Key findings United States

(percent) 

European 

Union 

(percent) 

SME share of total salesa SMEs account for a smaller share of U.S. 

manufacturing activity. 19 39.6b 

SME share of total exportsa SMEs account for a smaller share of the value of 

U.S. exports. 13 31b 

Exports/sales ratioa U.S. and EU SMEs are approximately equally 

export-intensive. 7.1 8.2b 

Share of SME exports by: 

- manufacturers 

- wholesalers 

- other 

U.S. exporting SMEs are more likely to be 

middlemen (wholesalers). 

39 

41 

20 

51c

24c 

25c

Share of exports by 

wholesalers: 

- SMEs 

- large firms 

In the United States, exporting wholesalers are 

more likely to be large firms. 46 

54 

84 

9.9d

Share of employment 

provided by SMEs:e

- manufacturers 

- wholesalers 

U.S. SMEs account for a smaller share of 

employment. 37 

56 

57c

82c

Source: U.S. Department of Commerce, Eurostat, OECD, and USITC staff estimates. 

a

Manufacturing sector only. 

b

Countries included Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, 

Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Slovak Republic, 

Slovenia, Spain, Sweden, and the United Kingdom. 

c

Countries included Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Hungary, 

Italy, Latvia, Lithuania, Luxembourg, Poland, Slovak Republic, Slovenia, and Sweden. d

Totals do not sum to 100 percent due to missing data on firm size. 

e

Data are for 2006. 

U.S. SMEs’ Views on Trade Barriers and Strategies to Increase 

Exports

U.S. SMEs listed a diverse set of constraints and barriers, as well as strategies they use to 

address these barriers (table ES.2). They also reported export opportunities and 

challenges related to FTAs and other trading arrangements. The most frequently reported 

trade barriers and strategies to exporting include the following: 

Domestic Barriers

 Access to finance. SMEs have difficulty obtaining both trade finance and working 

capital. This problem often prevents them from financing purchases by foreign 

buyers, which encourages foreign buyers to choose suppliers that are able to extend 

credit. SMEs also reportedly lack financing for U.S. exports, particularly pre- 
xvi 

TABLE ES.2 Summary of barriers to exporting and strategies to enhance exporting activities as reported by U.S. SMEs 

Domestic Barriers 

 U.S. government regulation

o Export controls: they require too much paperwork and involve a lengthy, 

cumbersome, and costly process 

o Difficulty obtaining U.S. visas—e.g., in order to bring foreign employees for 

training for sales, customer service, repair, etc., or to bring customers to 

view an SME’s U.S. operations/product lines

o U.S. tariffs on imported intermediate inputs for U.S. products

 Access to finance 

o Lack of financing for U.S. SME exporters, for both trade finance and 

working capital, particularly pre-shipment financing to cover big orders or 

orders for goods that take time to build 

o Lending institutions’ perception of SMEs as higher risk than larger firms 

o Community banks’ lack of familiarity with exporting 

 Transport costs 

o Container shortages; containers are bottlenecked on the East Coast 

o Port bottlenecks to access markets (e.g., having to ship through Houston, 

Miami, or Los Angeles for Latin American markets) 

 Small scale of SME production 

o Lack of economies of scale, which limits export potential 

o Limited ability to supply large orders 

Foreign Barriers 

 Foreign government regulations 

o Varying labeling, certification, quality, and design requirements from 

country to country 

o Costly sanitary and phytosanitary (SPS) regulations 

o Inadequate protection of intellectual property (IP) and enforcement of IP 

laws 

o Lengthy, opaque customs clearance procedures 

o High foreign import tariffs and import restrictions such as quotas and bans 

 Knowledge of foreign markets

o Limited information to locate or analyze foreign markets 

o Inability to contact potential overseas customers 

 Language and cultural barriers 

o Limited ability to market effectively 

o Limited ability to understand traditions 

Suggested Strategies 

 Pool Resources

o Work with other firms through trade associations or less formal coalitions for 

SMEs 

o Work with larger firms, brokers, or agents that provide services such as 

financing and logistics 

 Use U.S. government programs designated to help exporters 

o Use Small Business Administration (SBA) guarantees and small business 

loans

o Use Ex-Im Bank to avoid having to use letters of credit

o Use U.S. Department of Agriculture (USDA) Market Access Program

o Use U.S. Commercial Service 

Source: Hearing testimony, written submissions, e-mails, and interviews (in person and by phone) with Commission staff.
xvii 

shipment financing to cover large orders. Another finance-related barrier 

includes lack of support from banks; since many SMEs are start-ups, with 

minimal collateral, banks often see them as higher-risk than larger firms.

 U.S. government regulations. SMEs in many sectors 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. SMEs 

reported that export controls require considerable paperwork, adding that 

the process is too lengthy, cumbersome, costly, rigid, inflexible, and 

bureaucratic. SMEs are concerned about accidentally violating the 

regulations because of ambiguities in the application of export control 

regulations to many emerging-technology products. SME representatives 

also reported poor coordination of government agencies and conflicting 

advice from different agencies regarding exporting. In addition, they cited 

difficulties in obtaining U.S. entrance visas to bring foreign employees to 

the United States for training related to sales, customer service, repair, and 

other functions, or for potential customers to view the U.S. company’s 

operations and production lines. Tariffs on intermediate inputs can also 

serve as barriers to SME exports, in the view of SME respondents.

 Transport costs. SME executives reported that transportation costs can 

significantly constrain exports, and certain fixed costs place SMEs at a 

disadvantage in exporting compared to larger firms. One key constraint 

cited by SME exporters is container shortages. Data for the Port of 

Portland alone show an annual shortage of approximately 70,000 

containers in 2009. SMEs noted that containers are often bottlenecked on 

the East Coast, and must be repositioned to West Coast ports for use in 

exports.

 Small scale of production. Another key domestic factor limiting U.S. SME 

exports is the small scale of production. This may limit export potential for 

SMEs, as foreign buyers may seek out only suppliers able to fulfill largevolume orders, particularly in the agricultural sector. 

Foreign Barriers

 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 (e.g., administrative paperwork; additional record 

keeping, testing, or certification; and meeting foreign regulations, such as 

sanitary and phytosanitary (SPS) regulations and packing and labeling 

requirements). SMEs stated that unreliable protection of intellectual 

property (IP) was an important barrier to exporting, as SMEs are unlikely 

to have the resources to protect their IP in foreign markets, as large firms 

often do. A number of SMEs singled out China as an export market that 

offered few legal protections against theft of trade secrets, product designs, 

and other IP infringements. In addition, foreign regulations and import 
xviii 

requirements can result in delays at foreign ports, potentially damaging 

perishable food or pharmaceutical products. SMEs also noted that high 

tariffs increase the cost of U.S. exports and that existing trade agreements 

between their export market countries and third countries offer foreign 

exporters preferential treatment over U.S. exporters. 

 Language and cultural barriers. SMEs reported that language and cultural 

differences may be barriers to exporting because such differences make it 

more difficult for firms to identify and service foreign customers and 

markets for their products. This problem may be particularly acute for 

SMEs in the computer services industry, because of the need to provide 

installation assistance and ongoing customer support. 

 Limited knowledge of foreign markets. SMEs reported that their limited 

knowledge of foreign markets is a significant barrier to exports, because 

SMEs do not have the resources to hire staff with the specialized skills 

needed to identify export opportunities, establish relationships with foreign 

buyers, understand regulations and compliance rules of importing countries, 

and obtain export assistance available through various U.S. state and 

federal government programs.

Suggested Strategies to Reduce Trade Barriers

U.S. SMEs have developed a number of strategies to overcome some of the 

domestic and foreign barriers to exporting they had identified. These include the 

following: 

 Combining forces with other firms in the same industry. SMEs reported 

combining resources either through trade associations or through less 

formal consortia. Agricultural commodity and trade organizations provide 

members with support ranging from agricultural research to commodity 

promotion. Industry consortia allow SME manufacturers to share costs and 

risks related to regulatory programs and transportation, as well as 

maximize their foreign market presence. 

 Working with larger companies, brokers, or agents. Larger companies 

help SME manufacturers achieve the economies of scale needed to meet 

foreign customer demand. Larger companies also help SMEs by offering 

professional and legal services to establish business relationships and 

provide referrals in foreign markets. Brokers and agents facilitate SME 

exports by matching producers with foreign buyers and providing advice 

on foreign compliance requirements. Working with global shipping and 

logistics firms can help SMEs access foreign markets, navigate foreign 

customs clearance procedures, and track shipments. 

 Taking advantage of U.S. federal and state government support 

programs. U.S. government programs can be key facilitators of SME 

exports. These include programs offered by the Ex-Im Bank, the U.S. 

Small Business Administration, the U.S. Department of Agriculture, the 

U.S. Department of Commerce, and various state government agencies. 
xix 

SME representatives noted that many small companies are not aware of 

these programs, but those that have used them generally found them very 

helpful in beginning to export and in expanding ongoing exports. 

U.S. SMEs’ Views on the Benefits of Increased Export 

Opportunities from FTAs and Other Trading Arrangements

SMEs have identified numerous export opportunities associated with FTAs and 

other trading arrangements, such as mutual recognition agreements (MRAs), 

bilateral investment treaties (BITs), trade and investment framework agreements 

(TIFAs), and World Trade Organization (WTO) agreements. Factors that 

encourage these expanded opportunities include tariff reduction, reduction or 

elimination of nontariff barriers, increased market access, customs facilitation, 

trade facilitation, IP protection, regulatory environment and transparency 

improvements, and dispute resolution. SMEs most frequently cited the following 

benefits: 

 Increased competitiveness in a foreign market. This is the benefit most 

commonly cited by SMEs, who stated that reduced duties made them more 

competitive or “leveled the playing field” in export markets. 

 Increased market access. SMEs stated that:

o Dominican Republic-Central American Free Trade Agreement (DRCAFTA) rules of origin support the participation of U.S. textile 

SMEs in regional production networks, because for the final 

products to be eligible for reduced duties when exported to the 

United States, they must have a certain minimum share of U.S. 

inputs. 

o U.S. FTAs with Chile, Singapore, and Australia have provided 

market access for remanufactured goods such as machinery, 

computers, cellular telephones, medical equipment, automotive parts 

and equipment, and other devices. 

o Reduced tariff rates on U.S. exports to Canada and Mexico under the 

North American Free Trade Agreement (NAFTA) have allowed 

SMEs to reduce costs and improve their competitiveness in these 

markets. 

o The non-ratification of pending U.S. FTAs with Korea and Colombia 

has cost U.S. SMEs potential exports to competitors from third 

countries that have FTAs with these two nations. 

 Trade facilitation. SMEs identified benefits from trade facilitation 

measures, including improved customs procedures, standards 

harmonization, and mutual recognition of certifications. One company 

decided to start exporting to Canada and Mexico because NAFTA 

“streamlined a lot of paperwork.” 

 Improved regulatory environment. As with other overhead costs, 

regulations may be more burdensome to SMEs than larger firms, which 

can spread out these fixed costs over more products or markets. Trading 
xx 

arrangements can support SMEs by improving and harmonizing 

regulations and making the regulatory environment more predictable. 

 IP protection. For many SMEs, IP issues can impede or preclude exports, 

and trading arrangements that support IP protection and enforcement are 

critical. Some industry representatives stated that they are more 

enthusiastic about exporting to Japan, Singapore, and the EU than to China 

because of IP considerations. 

U.S. SMEs’ Views on Barriers and Strategies to Increase 

Exports: Case Studies in Agriculture, Manufacturing, and 

Services

Specific industry constraints to exporting—as well as strategies to reduce those 

barriers—were noted by U.S. SME representatives in seven industries across the 

agriculture, manufacturing, and services sectors: apples, wine, chemicals and 

nanotechnology, textiles and apparel, medical devices, computer services, and 

professional services (table ES.3). These industries were chosen as case studies 

because in all of them, SMEs are well represented and are competitive actors. 

Trade barriers common to all these industries are (1) limited access to trade 

financing and working capital and (2) complex domestic and foreign regulations. 

Specific barriers to exports of apples and wine include relatively small-scale 

production, SPS measures, and high tariffs. U.S export controls are important 

barriers in computer services and in chemicals and nanotechnology, while 

cultural and language barriers confront the computer services and professional 

services industries. Other barriers cited by SMEs in these industries include 

labeling regulations, greater levels of support given to foreign competitors by 

their home nations, and transportation costs. 

To increase exports of apples, wine, chemicals and nanotechnology, and 

professional services, SMEs create or join industry associations to pool resources 

dedicated to market research, promotion, and services to resolve international 

trade issues. Another strategy adopted by SMEs in these industries, as well as by 

the textiles and apparel industry, is to make use of U.S. government programs 

such as the USDA Market Access Program (MAP) and the U.S. Commercial 

Service. Medical device SMEs seek financing from venture capital firms, while 

SMEs in computer services partner with other firms to overcome some of their 

barriers to export.
xxi 

TABLE ES.3 Key barriers and strategies to export reported by highly competitive U.S. SMEs, selected industries 

Industry Domestic and foreign trade barriers to export Strategies to overcome trade barriers 

Apples  Limited access to capital and financing; small 

volumes and inadequate product varieties; 

and limited sales staffs and resources 

dedicated to exporting. SPS measures are 

the primary barriers that keep U.S. apple 

exports from all producers out of certain 

foreign markets. However, SPS protocols 

have a greater impact on smaller producers 

who are not able to spread the costs of 

implementing those protocols over a larger 

volume of produce. 

 Consolidate product through larger 

packers and marketers to increase 

exporters’ product offerings and minimize 

risk; create industry associations that 

provide market research, promotion, and 

services to resolve international trade 

issues; and use promotion programs and 

services provided by various U.S. 

government programs and agencies. 

Wine  Lack of resources dedicated to exporting; 

relatively small-scale production; and a 

primary focus by SMEs on the U.S. market. 

 

 High tariffs, together with trade agreements 

between competitor nations; compliance 

issues, including SPS measures and labeling 

regulations; limited knowledge of U.S. wine in 

foreign markets; longer contract terms 

abroad; and a higher level of support provided 

by competitor nations to their wine sectors. 

 Organize into regional industry groups to 

pool resources dedicated to market 

research, product promotion, and 

identification of potential export 

customers; and use U.S. government 

export promotion programs, including the 

USDA Market Access Program (MAP). 

SMEs also increasingly employ agents 

and brokers specializing in foreign 

markets to gain export market share. 

Chemicals and 

nanotechnology 

 U.S. export controls; U.S. state and federal 

environmental and health regulations 

(particularly for new products such as 

nanomaterials); and transportation costs. 

 The new EU chemical regulatory system; EU 

directives; labeling requirements; and EU 

member state requests for additional product 

information. 

 Approach issues together with other 

SMEs to share costs and risk and to 

maximize market presence; use U.S. 

Department of Commerce export 

promotion programs. 

Textiles and 

apparel 

 Challenges in prospecting for foreign 

customers; understanding customs and 

foreign regulations; and receiving payment 

from foreign customers. 

 If foreign firms in the sector are highly 

automated, compete with them either by 

addressing niche markets or by 

emphasizing quality. 

Medical devices  Complex regulatory procedures; lack of 

access to capital; and inadequate 

reimbursement from foreign health insurers. 

 Seek financing from venture capital firms;

work with the U.S. Commercial Service 

and private sector consulting firms to 

explore market opportunities abroad. 

Computer 

services 

 Export controls on encryption software; 

limited access to export finance; regulations 

on data security; and language barriers. 

 Partner with other firms and adopt 

innovative pricing models. 

Professional 

services 

 Limited availability of skilled workers; cultural 

and language barriers; and nontransparent 

regulation in many foreign countries. 

 Leverage relationships, join networks of 

SMEs, seek employees with international 

experience, and promote U.S. codes and 

standards abroad. 

Sources: Hearing testimony, written submissions, e-mails, and interviews (in person and by telephone) with 

Commission staff. 

1-1

CHAPTER 1 

Introduction 

Purpose 

This report is the second in a series of three interrelated investigations undertaken by the 

United States International Trade Commission (USITC, or the Commission) in response 

to a request from the United States Trade Representative (USTR). Collectively, these 

reports describe the role of U.S. small and medium-sized enterprises (SMEs) in U.S. 

exports.1

This report provides (1) a comparison of exporting activities of SMEs in the United 

States and European Union (EU) based on information gathered regarding firm 

characteristics, sectoral composition, exporting behavior, and other characteristics that 

highlight differences between U.S. and EU SME behavior; (2) a description of the 

barriers to exporting as reported by U.S. SMEs, including both domestic and foreign 

barriers and trade costs, as well as a description of the strategies adopted by U.S. SMEs 

to overcome these constraints; and (3) a description of the benefits to U.S. SMEs of 

increased export opportunities from free trade agreements (FTAs) and other trading 

arrangements. 

This report builds on the findings of the first report in this series, published in January 

2010.2

 Specifically, the Commission’s first report provided an overview of the current 

state of SMEs’ participation in U.S. merchandise and services exports. It presented the 

value of overall SME exports; listed the principal products, sectors, and destination 

markets involved; and analyzed the trends of those exports over time. It also described 

SME characteristics, explained their role in generating domestic employment and 

economic activity, and highlighted areas in which data limitations inhibit a more 

comprehensive understanding of SME participation in U.S. exports. A forthcoming third 

report will identify, to the extent possible, ways of overcoming some of the data problems 

described in the first report to provide a fuller understanding of SMEs’ role in overall U.S. 

exports. The third report will also identify trade barriers that may disproportionately 

affect SME export performance, as well as possible linkages between exporting and SME 

performance.3

Scope and Approach of the Report 

This report encompasses SMEs in all sectors of the economies of the United States and 

the European Union. The comparison of exporting activities of U.S. and EU SMEs is 

based on qualitative information supplemented with quantitative information. The 

qualitative analysis focuses on four EU member countries—France, Germany, Ireland, 

and Poland. These countries were selected as representative of the economic diversity 

that characterizes the European Union. A detailed quantitative analysis of U.S. and EU 

 1

 See October 5, 2009, USTR letter to the USITC (appendix A). 

2

 See USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010. 3

 The third SME report, “Small and Medium-Sized Enterprises: Characteristics and Performance,” is to 

be completed by October 6, 2010. For further information see 74 Fed. Reg. 65787 (December 11, 2009). 
1-2

SME exporting activities is also provided, using comparable U.S. and EU economic data 

from the Trade by Enterprise Characteristics (TEC) database of the Organisation for 

Economic Co-operation and Development (OECD). 

The report also presents U.S. SMEs’ views on barriers to exporting, strategies to 

overcome those barriers and other trade costs, and policy recommendations to increase 

U.S. exports. It recounts the views of U.S. SMEs on the U.S. economy as a whole and on 

seven specific industries in the agriculture, manufacturing, and service sectors. The seven 

industries are apples, wine, chemicals and nanotechnology, textiles and apparel, medical 

devices, computer services, and professional services. They were selected because SMEs 

are well represented and highly competitive in all of these industries. 

The report also identifies the benefits to U.S. SMEs of improved export opportunities 

from FTAs and other trading arrangements, such as mutual recognition agreements, 

bilateral investment treaties, trade and investment framework agreements, and World 

Trade Organization agreements. This information is primarily qualitative. 

The information presented in this report on the views of U.S. SMEs reflects the views of 

those particular SME representatives, not the views of the Commission. The Commission 

did not corroborate the views of SME representatives that are presented in this report. In 

most cases, the barriers to exporting discussed in this report are common to all U.S. firms, 

SMEs or otherwise, although SMEs may be especially vulnerable to them. The third 

report will describe trade barriers that affect SMEs disproportionately. 

Information Sources 

This report is based on information from a variety of sources. Information on U.S. SMEs 

was gathered at three public hearings held in St. Louis, MO (March 10, 2010), Portland, 

OR (March 12, 2010), and Washington, DC (March 18, 2010). A total of 33 witnesses 

appeared at these public hearings. The Commission also solicited information through 

written submissions from interested parties (those submissions are summarized in chapter 

6). Commission staff also contacted approximately 260 organizations and companies 

through domestic fieldwork, meetings, telephone interviews, and e-mail exchanges. For 

instance, Commission staff met with representatives of 154 organizations in interviews in 

12 U.S. cities, covering approximately 112 SMEs, 24 trade associations, and 18 state and 

federal organizations. 4 In addition to information obtained from the fieldwork, 

Commission staff contacted 73 companies, 26 organizations, and 7 state and federal 

organizations for the seven industry sectors discussed in chapter 4. 

The information on SME exporting activities was obtained from publicly available 

sources, largely consisting of national business surveys and other economic literature. In 

addition, Commission staff traveled to France, Germany, Ireland, and Poland to collect 

information on EU and individual countries that promote exports by European SMEs. 

Commission staff conducted 30 interviews with representatives of multinational 

institutions, including the European Commission and the OECD; various branches of 

member country national governments; industry associations; academia; 

nongovernmental organizations; and selected SMEs. Other data sources included other 

U.S. and foreign government agencies, private sector surveys, and international 

 4

 Those cities were Irvine, Los Angeles, and Torrance, CA; Boston, MA; New York, NY; Houston, TX; 

Miami, FL; Raleigh, Sanford, Charlotte, and Mt. Airy, NC; and Washington, DC. 
1-3

organizations, such as the OECD and the World Bank, as well as relevant academic 

literature. Information sources also included published information and documents posted 

on official U.S. government and EU and member countries’ Web sites, and interviews 

with U.S. government officials in Washington, DC, including the U.S. Department of 

Commerce Commercial Service, the Small Business Administration (SBA), and the 

Export-Import Bank of the United States. Commission staff also obtained data and other 

information from private organizations such as the U.S. Chamber of Commerce and the 

National Association of Manufacturers. 

The OECD Trade by Enterprise Characteristics (TEC) database provided comparable 

data on U.S. and EU SME trade for the year 2005. Other business data were provided by 

the SBA Statistics of U.S. Businesses database (for U.S. SMEs) and the Eurostat 

Structural Business Statistics database (for EU SMEs). 

SME Definition 

Making a direct statistical comparison between U.S. and EU SME exporters involves 

many challenges. Foremost among them is the fact that the United States and the 

European Union use different definitions for “SME.” Those definitions are described in 

more detail in chapter 2. 

This report defines SMEs in the U.S. economy overall as enterprises with fewer than 500 

employees in the agriculture, manufacturing, and service sectors. The Commission’s 

January 2010 report on SMEs observed that several U.S. government agencies, including 

the SBA, the U.S. Department of Agriculture, and the U.S. Census Bureau, define small 

businesses and small farms in various industries using a variety of employee, revenue, 

and asset criteria. 5 These size categories, however, define which firms are small 

businesses relative to specific industries, rather than the economy as a whole. Since this 

report analyzes the role of SMEs throughout the economy, the Commission has employed 

an economy-wide, rather than industry-specific, definition of SMEs. 

With regard to the agriculture and service sectors, the SME definition used in this report 

differs somewhat from that of the Commission’s January 2010 SME report by focusing 

on the employment limit and not on the annual revenue limit. This is due primarily to the 

nature of the research in the current report, which relies heavily on hearing testimony, 

written submissions, and interviews with individual firms, where the firm’s revenue 

information is generally not available. For agriculture, the $250,000 annual revenue limit 

used as a component of the definition of SMEs in the January 2010 report refers only to 

small farms. However, the discussion of the wine and apple industries in the current 

report refers primarily to agricultural SME exporters that are not small farms (orchards) 

but rather wineries and packers. 

Organization of the Report 

This report contains six chapters. In addition to discussing the objective and scope of this 

report, chapter 1 provides a global context for SME exporting activities. 

 5

 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, 1-2 to 

1-3. 
1-4

Chapter 2 compares SME exporting activities in the United States with those in the 

European Union. It begins with an overview describing SME exporting activities in the 

United States and in other leading economies. It then compares exporting activities in the 

United States and in the European Union, based on such statistics as the SME share of 

manufacturing exports and the exports/sales ratio. The chapter then describes selected 

U.S. and European Commission SME export promotion programs. Finally, to give a more 

complete picture of EU support for SME exporting activities at the national level, the 

chapter concludes with case studies on four EU countries—France, Germany, Ireland, 

and Poland. 

Chapter 3 offers information on domestic and foreign barriers to exporting as reported by 

U.S. SMEs, as well as the strategies that these enterprises reported as effective in 

overcoming such barriers. This chapter also summarizes suggestions for policy changes 

to increase exports that SME representatives offered in the course of the investigation. 

Chapter 4 builds on chapter 3 by giving more detailed information on barriers to SME 

exporting and on strategies to address these barriers in seven industry case studies. The 

case studies represent the agricultural sector (wine and apples), manufacturing sector 

(textiles and apparel, medical devices, and chemicals and nanotechnology), and the 

service sector (professional services and computer services). 

Chapter 5 provides a brief overview of the export opportunities provided by FTAs and 

other selected trading arrangements, such as mutual recognition agreements, bilateral 

investment treaties, trade and investment framework agreements, and World Trade 

Organization agreements. 

Chapter 6 presents the positions of interested parties, based on hearing testimony and 

written submissions. The five appendices at the end of the report include USTR’s request 

letter, the Federal Register notices issued in connection with this investigation, additional 

information on topics covered in chapters 2 and 5, and an overview of the relevant 

economic literature. 

Global Context for SME Exporting Activities 

SMEs are the most common form of business organization and the principal creators of 

jobs in the world. They account for more than 95 percent of manufacturing enterprises 

and an even higher share of firms in many service industries in OECD countries.6

 They 

are also the source of the majority of business and employment in many Asia-Pacific 

Economic Cooperation (APEC) countries7

 and in Latin American countries.8 More than 

99 percent of U.S. businesses are SMEs. 9 SMEs are also closely associated with 

innovation—the development, deployment, and economic utilization of new products, 

 6

 OECD, SME and Entrepreneurship Outlook, 2005, 2005, 9. 7

 APEC, “How APEC SMEs Can Contribute to Inclusive Growth and Benefit from It,” 2009, 1. 8

 SMEs account for 99 percent of all enterprises in Chile and Mexico, and 90 percent of enterprises in 

Colombia. SMEs reportedly account for almost 75 percent of employment in Mexico, while medium-sized 

enterprises account for more than 50 percent of employment in Chile and Colombia. ECLAC, “Proyecto 

CEPAL/GTZ,” 2003. 9

 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, 2-2, 

table 2-1. 
1-5

processes, and services. SMEs conduct an increasing share of research and development 

(R&D), and in some OECD countries SMEs are almost as innovative as large firms.10

SMEs also provide entrepreneurship opportunities for women, minorities, and 

immigrants. U.S. data show immigrant-owned small businesses generate nearly 12 

percent of U.S. business income.11 Another source reported that minority-owned small 

businesses account for 18 percent of all U.S. businesses.12 Given the large populations in 

Africa, Asia, and Latin America and the rapidly growing market of middle-class 

consumers in those countries, “the [U.S.] minority business community represents an 

untapped resource for us in reaching this market that represents approximately 80 percent 

of the world’s population”;13 consequently, according to this source, it is important for 

U.S. government assistance to help make minority-owned SMEs “export ready.” 14

Similarly, data from the European Commission (EC) show that “proportionately more 

migrants and members of ethnic minorities than nationals start small businesses” in 

Europe. 15 A Canadian study likewise reported that a relatively high proportion of 

majority female-owned SMEs engaged in new exporting activities, and that SMEs owned 

by “visible minorities” and immigrants were more likely to begin new exporting 

activities.16

A number of factors can motivate SMEs to become global, including: 

 A small firm’s desire to grow by expanding beyond the domestic market. Specific 

growth-related motives may include a small firm’s desire to expand its business, 

increase its profits, expand its market size, strengthen its market position, and 

reduce its dependence on a single or small number of markets.17 Exporting allows 

SMEs to diversify their business operations and insulates them against periods of 

slower growth in the domestic economy. 18 Growth motives are consistently 

identified among the key drivers of globalization in the economic literature.19 One 

study reported that firms whose owners had expressed growth intentions for the 

firm were more likely to export than those whose owners did not indicate growth 

ambitions.20

 Supply chain linkages to larger exporting firms. Sources in Germany stated that 

successful SME exporters were often associated with being regular suppliers of 

components to larger firms in foreign markets. Larger firms reportedly often prefer 

to maintain such relationships to standardize their product in different markets, 

rather than to rely on slightly differentiated components being supplied in 

individual markets. Sources stated that many German SMEs would not export 

 10 OECD, SME and Entrepreneurship Outlook, 2005, 35; OECD, Promoting Entrepreneurship and 

Innovative SMEs in a Global Economy, 2004, 8–9. 11 SBA, Report to the President: The Small Business Economy, 2009, 2009, iv. 12 Data are for 2002. USITC, hearing transcript, March 18, 2010, 73 (testimony of Fritz-Earle McLymont, 

National Minority Business Council). 13 USITC, hearing transcript, March 18, 2010, 72 (testimony of Fritz-Earle McLymont, National Minority 

Business Council). 14 Ibid., 74. 

15 EC, Directorate-General for Enterprise and Industry, “Migrant Entrepreneurs/Ethnic Minority 

Entrepreneurs,” 2009. 16 Data are for 2004. Orser, Riding, and Carrington, Canadian SME Exporters, 2008, 19. 17 Palich and Bagby, “Trade Trends in Transatlantica,” 2007; Hessels and Terjesen, “Resource 

Dependency and Institutional Theory Perspectives,” 2010. 18 USDOC, ITA, Trade Finance Guide, 2008, 1. 19 OECD, Top Barriers and Drivers to SME Internationalisation, 13. 20 Orser, Riding, and Carrington, Canadian SME Exporters, 2008, 18. 
1-6

without such linkages to larger firms.21 Gaining access to the global supply chains 

of larger firms is one way for SMEs to offset some of their resource constraints.22

However, one study showed that supply chain relationships can sometimes lock 

SMEs into a restrictive relationship, making them overly dependent on 

intermediaries and unable to independently expand their market presence.23

 The “push” effects of a limited or stagnating domestic market. Domestic 

economic conditions can “push” SMEs to export. Firms in a stagnating region of a 

country may be likelier to export than firms in other regions, especially if that 

region has local incentives to export and good export infrastructure. In much the 

same way, firms in one sector may be more apt to export than those in other sectors 

if that sector already has a significant presence of foreign buyers.24

 Knowledge-related competitive advantages. Firms with such advantages appear 

more motivated to pursue international business activities. This seems to be 

particularly true of SMEs whose owners or managers have an international 

background or interest that provides special knowledge about a foreign market, 

such as language skills, an understanding of consumer preferences, and the 

business environment. 25 Firms managed by an individual with an immigrant 

background (which may confer special knowledge about a foreign market) were 

also more likely to export.26 

 Technology-related factors. The search for new technology, skills, and resources 

can be factors that “pull” small firms into global business operations.27 On the other 

hand, small firms that enjoy innovation-related advantages such as a unique 

product or technology may be competitively positioned to enter global markets.28

 Personal connections in other markets. Sources reported that personal 

connections or business contacts were the most important way for SMEs to enter 

foreign markets.29 Business network connections with other firms and even family 

connections abroad have been shown to be important drivers of SME 

internationalization.30

The benefits of SME engagement in international business operations have been well 

documented. For example, exporters have been found to outperform non-exporters in 

terms of number of workers, wages, productivity, and technology intensity.31 The OECD 

also reported that internationalization benefits SMEs through greater access to new 

markets, improved resource utilization and productivity, and increased exposure to 

 21 German academic representatives, interview with USITC staff, April 7, 2010; German industry 

representatives, interview with USITC staff, April 9, 2010. 22 OECD, Top Barriers and Drivers to SME Internationalisation, 15. 23 Tambunan, “Facilitating Small and Medium Enterprises in International Trade,” 2009, 17. 24 Ibid., 14. 

25 Knight, “Entrepreneurship and Strategy in the International SME,” 2001; Orser, Riding, and 

Carrington, Canadian SME Exporters, 2008. 26 Orser, Riding, and Carrington, Canadian SME Exporters, 2008, 18. 27 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 13. 28 Hollerstein, “Determinants of International Activities: Are SMEs Different?” 2005; Lefebvre, Lefebvre, 

and Bourgault, “R&D-Related Capabilities as Determinants of Export Performance,” 1998; and Orser, Riding, 

and Carrington, Canadian SME Exporters, 2008, 18. 29 Chambers and Shaw, “Reaching Out: Exploring SME Exporting Opportunities and Challenges.” 30 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 13. 31 Bernard and Jensen, “Why Some Firms Export,” 2001. 
1-7

international best practices, knowledge, and technology via the pressures—competitive, 

yet also creative—of the international trading environment.32

 32 OECD, Removing Barriers to SME Access to International Markets, 2008, 14. 

2-1 

CHAPTER 2 

Comparison of Exporting Activities of U.S. 

and EU SMEs 

This chapter compares exporting activities of SMEs in the United States to those of 

SMEs in other leading economies, with a particular focus on the countries of the 

European Union (EU). It begins with a cross-country overview comparing SME 

exporting activities in the United States and in other leading economies. Next, a 

quantitative analysis compares U.S. and EU SMEs’ exporting activities in the United 

States and in the EU, based on such statistics as the SME share of manufacturing exports 

and the exports/sales ratio. Following that analysis, selected U.S. and European 

Commission (EC)1

 SME export promotion programs are described. Finally, to provide a 

more complete description of EU support for SME exporting activities at the national 

level, the Commission conducted case studies on France, Germany, Ireland, and 

Poland—countries selected as representatives of the economic diversity that currently 

characterizes the EU. 

Overview of SME Exporting Activities in the United States 

and in Other Leading Economies 

Exporting is typically the way SMEs reach beyond their country’s borders to access the 

global economy. However, as the Organisation for Economic Co-operation and 

Development (OECD) has observed, SMEs use multiple forms of international 

engagement, including subsidiary relationships, importing, and other forms of crossborder cooperation.2

 A significant portion of the economic literature describing SME 

international business operations uses the terms “internationalization” or “globalization” 

of SMEs. In addition to exporting, these broader terms include such activities as foreign 

direct investment (FDI), improving access to new technologies, participation in 

international value chains, and other forms of inter-SME cooperation.3

 For the purposes 

of this report, however, only SME exporting activities are described. 

Definition of SME

There is no single globally accepted definition of SME. 4 Countries use different 

definitions for a variety of reasons, including the need to scale the terms “small” and 

“medium” to meaningful levels, given the typical size of firms and level of economic 

activity in the country. Moreover, some countries’ legal definitions of SMEs differ from 

 

1

 The EC is the executive body of the EU responsible for planning and implementing common policies, 

executing the budget, managing EU programs, and ensuring that EU laws are applied. EC, “Europa Glossary: 

‘European Commission,’” n.d. 2

 OECD, Removing Barriers to SME Access to International Markets, 2008, 19–20. 3

 EC, Directorate-General for Enterprise and Industry, Supporting the Internationalisation of SMEs, 

December 2007, 8. 4

 For a detailed discussion of the U.S. definition of SME, see USITC, Small and Medium-sized 

Enterprises: Overview of Participation in U.S. Exports, 2010, 1–2. 
2-2 

 

the statistical definitions they use.5

 However, definitions typically require SMEs to be 

independent firms, and also are typically based on firm size limits according to the 

number of full-time employees. In addition, definitions of SME sometimes include 

thresholds of firm financial performance, such as the value of annual sales, annual 

revenue, or turnover (total revenue minus indirect taxes). Farms are sometimes excluded 

or separately accounted for in SME definitions (for example, defined by revenue) 

because many “large” farms operate with very few workers. 

In contrast to the proliferation of definitions of SME in most of the world, the EU 

member countries are beginning to converge on a single definition of SME. The EC 

reported that a common definition of SME had been “widely applied” since 20016

 and 

recommended that EU members adopt a standard definition of SME so that enterprises 

would be treated uniformly across the EU.7

 Nonetheless, USITC field investigations at 

various EU institutions suggest that while a harmonization of SME definitions has begun, 

different institutions at national and subnational levels still employ different definitions.8

A new common definition of SME with updated financial thresholds entered into force 

for EU members on January 1, 2005.9

 Use of this definition is voluntary on the part of 

EU members, but the EC is encouraging all member countries “to apply it as widely as 

possible.”10

Table 2.1 compares the statistical definition of SME used by the United States with 

definitions used by selected industrialized countries. 11 The employment threshold for 

SMEs in the United States of fewer than 500 employees is significantly higher than the 

threshold used by most other industrialized countries. 

Cross-Country Comparisons of SME Exporting Activities

Because there is no single globally accepted definition of SMEs, available individual 

country data on SME activities generally are not directly comparable (apart from EU 

countries using the common EU definition of SME) unless a post hoc effort is undertaken 

to make country SME data sets roughly comparable—as is done later in this chapter to 

compare U.S. and EU SME exporting activities using a standard definition for SME as 

having 250 or fewer employees. Nevertheless, the available information on SMEs allows 

certain general observations to be made comparing SME exporting activities globally. 

5

 UN, Department of Economic and Social Affairs Statistics Division, “SME Statistics,” 2004, 8. 6

 Pursuant to EC Recommendation 96/280/EC (April 3, 1996). 

7

 EC, Directorate-General for Enterprise and Industry, The New SME Definition, n.d., 32. 8

 French academic representative, interview with Commission staff, April 12, 2010; OECD official, 

interview with Commission staff, April 14, 2010; Irish academic representative, interview with Commission 

staff, April 15, 2010. 9

 Pursuant to EC Recommendation 2003/361/EC (May 20, 2003). 

10 EC, Directorate-General for Enterprise and Industry. The New SME Definition, n.d., 6. 11 For additional discussion of cross-country definitions of SMEs, see OECD, Promoting 

Entrepreneurship and Innovative SMEs in a Global Economy, 2004, 10–12. 
2-3 

TABLE 2.1 SME Definitions in the United States, the European Union, Australia, and Canada 

Country or 

Region Definition 

Exporting service firmsb All manufacturing firms 

and non-exporting service 

firmsa Most High valuec

Farms 

Number of 

employees 

< 500 < 500 < 500 < 500d

United States 

Annual revenue Not applicable ≤ $7 million ≤ $25 million ≤ $250,000 

Number of employees < 250 

Annual turnovere ≤ €50 million ($61 millionf

) 

European 

Union 

OR 

Balance sheet totalg ≤ €43 million ($52 millionf

) 

SME (nonfarm) 

Number of employees ≤ 200 employees 

Australia 

SME (farm) 

Estimated value of operations A$22,500–A$400,000 ($18,866–$335,400h

) 

Canada 

Number of employees < 250 

Annual revenue < C$50 million ($48 millioni

) 

Sources: USITC, Small and Medium-sized Enterprises: Overview of Participation in U.S. Exports, 2010, table 1.1, 1-3; 

EC, Directorate-General for Enterprise and Industry, The New SME Definition: User Guide and Model Declaration, 

undated, 14 and 16; Government of Australia, Australian Bureau of Statistics, “Definition of Small Business,” April 3, 

2009; Government of Canada, Industry Canada, “Small Business Quarterly,” February 2010; IMF, “Representative 

Exchange Rates for Selected Currencies,” June 1, 2010. 

a

 Includes exporting and nonexporting manufacturing firms and nonexporting services firms. 

b

 Selected by the Commission on the basis of size and export potential, and includes wholesale trade services; 

professional, scientific, and technical services; and finance and insurance services. c

 Computer services was the only sector in this category. 

d

 This threshold was imposed by USITC staff to partially harmonize definitions across sectors. e

 Annual turnover equals the firm’s annual value of income from sales and services less rebates paid; does not 

include value-added tax or other indirect taxes paid. f

 Based on an exchange rate of US$1.00 = €0.8227 (as of June 1, 2010). 

g

 Annual balance sheet total refers to the value of a firm’s main assets. h

 Based on an exchange rate of US$1.00 = A$1.1926 (as of June 1, 2010). i

 Based on an exchange rate of US$1.00 = C$1.0479 (as of June 1, 2010). 
2-4 

 

Share of SMEs That Export

Despite the increasingly significant role of SMEs in their own national economies, SMEs 

are generally underrepresented in world trade. 12 Based on current estimates using 

national definitions of SMEs, 3.9 percent of U.S. SMEs13 and 4 percent of Australian 

SMEs export goods,14 while 8 percent of Canadian SMEs export goods or services.15 On 

average, 8 percent of SMEs in the 27 members of the EU are involved in exports of 

goods or services—ranging from highs of 23 percent of the SMEs in Estonia, followed by 

21 percent in Slovenia and 19 percent in Finland, to lows of 6 percent of the SMEs in 

France, followed by 4 percent in Bulgaria and 3 percent in Spain and Cyprus.16

SME Exports as a Share of Total Exports

Based on the limited amount of available data, SMEs in the United States tend to account 

for a greater share of the value of total exports than SMEs in many (though not all) other 

countries. SMEs accounted for about 30 percent of the value of U.S. merchandise exports 

between 1997 and 2007.17 Various reports estimate that SMEs accounted for nearly 36 

percent of total merchandise exports for Canada,18 29 percent for Thailand, 18 percent for 

Indonesia, 17 percent for the Philippines, and 16 percent for Singapore.19 Data for 2001 

(the most recent data available) show that Canadian SMEs had higher exports per firm 

than U.S. SMEs;20 this likely reflected the relative strength of the U.S. domestic market 

vis-à-vis the Canadian domestic market—U.S SMEs had less incentive to export, mostly 

because of growth opportunities in the domestic market during that period.21

Exports as a Share of SME Total Revenue

Exports tend to account for a relatively small share of firm revenue for SMEs that export. 

The OECD reported in 2008 that 58 percent of the SMEs in its survey received less than 

20 percent of their total revenue from exports, while 12 percent of SMEs surveyed 

generated more than 80 percent of their revenue from exporting.22

On average, exports accounted for 4.6 percent of revenue for SMEs in the EU in 2005; 

average firm revenue shares for SMEs ranged from highs of 15.2 percent in Belgium, 

12 OECD, SME and Entrepreneurship Outlook, 2005, 2005, 39. 13 USITC staff estimate, based on 232,146 U.S. SME exporters in 2006 and 6,004,036 U.S SMEs in 2006. 

USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, 3-6, table 

C.2, and 2-2, table 2.1. 14 Data are for 2001. International Trade Centre, “Australia—Doubling SME Exporters,” 2002. 15 Data are for 2004. Orser, Riding, and Carrington, Canadian SME Exporters, 2008, 15. 16 Share of SMEs gaining any revenue from exports. Data are for 2006. Gallup, Observatory of European 

SMEs: Analytical Report, 2007, 44. 17 USITC, Small and Medium-sized Enterprises: Overview of Participation in U.S. Exports, 2010, 3-1. 18 Data are for 2002. Government of Canada, Industry Canada, “Small Business Exporters: A Canadian 

Profile, Value of Exporters, Canada,” 2009. 19 Tambunan, “Facilitating Small and Medium Enterprises in International Trade,” 2009, 15, table 4. 20 For Canada, exports per firm were C$2.7 million ($2.6 million) for small firms (0–99 employees) and 

C$12.7 million ($12.1 million) for medium-sized firms (100–499 employees). For the United States, exports 

per firm were C$0.9 million ($0.9 million) for small firms and C$4.5 million ($ 4.3 million) for mediumsized firms. Industry Canada, “Small Business Exporters: A Canadian Profile, Comparison with the United 

States,” August 18, 2009. Based on an exchange rate of US$1.00 = C$1.0479 as of June 1, 2010. IMF, 

“Representative Exchange Rates for Selected Currencies,” June 1, 2010. 21 Government of Canada, Industry Canada, “Comparison with the United States,” 2009. 22 OECD, Removing Barriers to SME Access to International Markets, 2008, table 1.8, 43. 
2-5 

 

11.9 percent in Estonia, 11.0 percent in Slovenia, and 9.7 percent in Iceland to lows of 

less than 3 percent of average firm revenue for Latvia, Cyprus, and Greece. 23 While 

Germany, Ireland, Norway, and the United Kingdom ranked above the EU-27 average 

based on the proportion of SMEs with any revenue from exports, these four countries 

ranked below the EU-27 average based on the share of exports in average firm revenue—

suggesting that these countries had many SMEs exporting relatively low values of 

exports.24 A study of Canadian SMEs reported that exports on average accounted for less 

than 25 percent of total firm revenue;25 on the other hand, another study reported that 

one-third of Canadian SME exporters received at least 50 percent of their total revenue 

from exports.26

Comparable data on export revenue at the firm level are not available for the United 

States. However, sources reported that on average, 13 percent of annual revenue of U.S. 

information technology SMEs was earned by exports27 and that exports account for 20–

30 percent of the annual revenue for 99 percent of all wine industry SMEs.28

Destination of SME Exports

China and India—the fastest-growing developing-country markets—and the United 

States rank as the leading destination markets for SME exporters, based on an OECD 

survey of its members. After these three large markets, SMEs appear to target export 

markets based on geographical proximity or shared historic, linguistic, or cultural ties.29

North American Free Trade Agreement (NAFTA) partners Canada and Mexico are the 

leading markets for U.S. SME goods exporters,30 while Canada and the United Kingdom 

are the leading markets for U.S. SME service exporters.31 Canada and Mexico combined 

accounted for 33 percent of U.S. merchandise exports by SMEs in 2007, with exports to 

those two countries valued at $70 billion ($45 billion exported to Canada, and $35 billon 

exported to Mexico).32

Other top markets for U.S. SME merchandise exports in 2007 were China (SME exports 

valued at $21 billion), Japan ($18 billion), the United Kingdom ($15 billion), Germany 

($12 billion), and South Korea ($11 billion). An increasing number of U.S. SMEs are 

exporting to China, with the number of known U.S. SMEs that exported to China rising 

more than sevenfold, from 3,143 in 1992 to 25,949 in 2007. In 2007, SMEs accounted for 

more than one-third of all known U.S. merchandise exports to China. In one recent 

private sector survey focused on information technology, U.S. SMEs ranked China as the 

23 Data are for 2005. Gallup, Observatory of European SMEs: Analytical Report, 2007, 45. 24 Ibid., 44–45.

25 Data are for 2004. Orser, Riding, and Carrington, Canadian SME Exporters, 2008, 34. 26 Data are for 2004. Government of Canada, Industry Canada, “Characteristics of Canadian SME 

Exporters,” 2008. 27 CompTIA, “Small Business Issues.” 

28 USITC, hearing transcript, March 18, 2010, 81 (testimony of James Gore, Clawson International). 

Views of U.S. SMEs on barriers to exports in the wine industry are described in more detail in chapter 4 of 

this report. 29 OECD, Removing Barriers to SME Access to International Markets, 2008, 44–45. 30 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, 3-8, 

figure 3.5. The benefits to U.S. SMEs from increased export opportunities as a result of NAFTA are 

described in more detail in chapter 5 of this report. 31 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, xi. 32 USDOC, ITA, “Small & Medium-Sized Exporting Companies: Statistical Overview, 2007,” n.d. 
2-6 

most important current export market and as the likely most important export market in 

five years.33

Fifty-nine percent of U.S. SME exporters posted sales to only one foreign market in 2007, 

while 54 percent of large U.S. firms that exported recorded sales to five or more foreign 

markets in 2007; this led the U.S. Department of Commerce (USDOC) to conclude that 

many U.S. SMEs could sharply increase their exports by entering new markets. 34

However, the economic literature has extensively reported that the high fixed costs 

associated with entering new markets pose significant financial challenges for SMEs.35

The views of U.S. SMEs on their exporting activities are discussed in greater detail in 

chapters 3 and 4 of this report. 

Most Canadian exports, whether by large firms or small ones, are shipped to the United 

States, which is a natural trading partner for Canadians because of the long, shared U.S.-

Canadian border. The United States was the destination of more than 85 percent of 

Canadian SME exports by value in 2002. The EU ranked as the second leading 

destination for all Canadian exporters, although Japan ranked as a more important export 

destination for Canadian SMEs.36

Exporting to another EU country is a typical way EU SMEs begin as exporters. 37

According to a 2007 survey commissioned by the EC, two-thirds of EU SME exporters 

indicated that other EU countries were the primary destination of their exports, with 12 

percent of firms surveyed indicating Germany as the primary destination of their exports, 

followed by France (10 percent), Spain and the Netherlands (6 percent each), and Italy (5 

percent). A total of 14 percent of EU SME exporters reported that a European country 

outside the EU was the primary destination of their exports, while 7 percent exported 

primarily to Asia, 5 percent primarily to North America, 4 percent primarily to Africa, 

and 1 percent primarily to South America.38

A Comparison of SME Exporting Activities in the United 

States relative to the European Union 

This section presents a quantitatively based comparison of SME exporting behavior in the 

United States and the EU. It shows that: 

 SMEs account for a smaller share of total manufacturing exports in the United 

States than in the EU; 

 The exports/sales ratio for U.S. and EU SMEs appears to be similar; 

 

33 CompTIA, “Small and Medium Size Business Export Insights and Opportunities,” 2010, 14. 

34 USDOC, ITA, “Small & Medium-Sized Exporting Companies: Statistical Overview, 2007,” n.d. 35 Bernard and Jensen, “Why Some Firms Export,” April 1997, revised April 2001; Hutchinson, Quinn, 

and Alexander, “The Intemationalization of Small to Medium-Sized Retail Companies,” 2005, 149–179. See 

also USITC hearing transcript, March 12, 2010, 46 (testimony of Matt Nees, Software Association of 

Oregon). 36 Halabisky, Lee, and Parsley, Small Business Exporters: A Canadian Profile, 2005, 22 and 23, table 7. 37 EU industry representative, interview with USITC staff, April 8, 2010. 38 Gallup, Observatory of European SMEs: Analytical Report, 2007, 48. See also the country profile of 

Ireland later in this chapter. 
2-7 

 

 U.S. SME exporters are more likely to be wholesalers or other intermediaries than 

are EU SME exporters; 

 Patterns of employment for manufacturers and wholesalers differ between each 

other, between the United States and the EU, and between SMEs and large firms; 

 SMEs in the EU play a greater role in manufactured exports relative to the United 

States for almost all manufacturing industries. 

Before presenting comparative estimates applicable to the above parameters, a brief 

description is provided of the methods used to compute these estimates. 

Analytic Methods

The official U.S. data define SMEs as firms employing fewer than 500 workers, while the 

EU data define SMEs as firms employing fewer than 250 workers.39 In order to compare 

the SME exporting activities in the United States with those of the SMEs in the EU, the 

Commission employed OECD data which provides comparable information for U.S. and 

EU SMEs, defining SMEs as firms employing fewer than 250 workers (see table 2.1).40

The comparisons of SME exporting behavior in the United States and the EU were made 

by examining for their respective markets: (1) the total value of SME and large firm 

exports and their exports/sales ratio; (2) differences in SME and large firm exports by 

major industry (manufacturers, wholesalers, and other firms); (3) differences in the 

composition of SME and large firm manufactured exports by sector; (4) differences in the 

composition of SME and large firm employment for manufacturers and wholesalers, and 

(5) differences in SME and large firm labor productivity. 

A detailed description of the methods used for this analysis is provided in appendix C. 

Some key points about the methods are as follows: 

 U.S. exports are compared to EU exports outside of the EU. 

 Data on exports by firm size are generated by a process of merging business and 

trade data. Unless otherwise stated, all comparisons presented here refer to the year 

2005, the most recent year for which internationally comparable merged data are 

available. 

 The OECD Trade by Enterprise Characteristics (TEC) database includes data for 

only 17 EU member countries (EU-17); therefore, the actual trade data 

39 For a detailed discussion of the U.S. definition of SME, see USITC, Small and Medium-sized 

Enterprises: Overview of Participation in U.S. Exports, 2010, 1-2. 40 Trade data were provided by the OECD Trade by Enterprise Characteristics (TEC) database, made 

available by courtesy of the OECD to the Commission in a special pre-release version for the purposes of this 

study. To enable OECD-wide comparability, OECD reclassified EU data to UN classifications using standard 

tables as agreed upon by the OECD-Eurostat Steering Group on TEC. See appendix C of this report for 

additional information on data sources and methods. 
2-8 

 

comparisons in this section are for the EU-17 countries.41 However, in 2005 (the 

most recent year for which data were available), there were 25 EU member 

countries (EU-25).42 As a result, comparisons provided for EU-25 countries are 

based on Commission staff estimates of EU-25 (or EU-24 43 ) and are 

approximations. 

 “SME” in this section only refers to firms with fewer than 250 employees. This is 

the definition used in the TEC database, which is consistent with the employment 

thresholds of the EU SME definition. In some cases, U.S data for firms with fewer 

than 250 employees were estimated to facilitate direct comparisons.44

Structural Differences between the United States and the European 

Union Explain Differences in SME Export Performance

SMEs play a less prominent role in both manufacturing and exports in the United States 

than in the EU. There is also a substantial difference between the role of SMEs in the 

United States and their role in the EU. In value terms, in 2005, exports by EU-17 

manufacturing SMEs—nearly $127 billion—were almost double U.S. manufacturing 

SME exports, valued at $65 billion (table 2.2).45 Among manufacturing firms, SMEs 

accounted for approximately 13 percent of U.S. exports and 19 percent of U.S. sales in 

2005; in contrast, SMEs in the EU accounted for 34 percent of EU exports and 45 percent 

of EU sales in 2005 (table 2.2).46 The structural differences between the U.S. and EU 

economies have long-standing historical antecedents which have led large firms to 

dominate the U.S. market and SMEs to dominate the EU market. Box 2.1 discusses some 

of the economic factors explaining the tendency of EU firms to be smaller than U.S. 

firms. 

41 The EU-17 countries in the TEC database, in descending order of sales of manufactures in 2005, are 

France, Italy, Sweden, Poland, Austria, Finland, Czech Republic, Denmark, Hungary, Portugal, Slovakia, 

Slovenia, Luxembourg, Lithuania, Estonia, Latvia, and Cyprus. TEC data exclude some large members of the 

EU-25, including Germany, the United Kingdom, and Spain. 42 The EU-25 countries were Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, 

France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, 

Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Bulgaria and Romania 

acceded to the EU in 2007 as the 26th and 27th EU members. 43 See Appendix C for the method used to include the EU members not in the TEC database. The EU-24 

countries are the EU-25 countries minus Malta. 44 Sales data for U.S. firms with fewer than 250 employees are USITC staff estimates. 45 EU data are for the EU-17 (actual data). Using Commission staff-estimated data for the EU-24, exports 

by EU-24 SMEs were valued at $253 billion, with an estimated range of $231–$275 billion—almost four 

times the value of U.S. SME exports in 2005. 46 EU data are for the EU-17 (actual data). Using Commission staff-estimated data for the EU-24 

countries, SMEs accounted for almost 40 percent of EU-24 sales and 31 percent of EU-24 exports (table 2.2). 
2-9 

TABLE 2.2 Estimated exports and sales for manufacturing firms, by firm size, United States and European 

Union, 2005 

United States EU-17 (observed)a EU-24 (estimated)b 

Billion $ Percent Billion $ Percent Billion $ Percentc

Exports 

SMEsd 65.0 12.7 126.8 34.1 252.9 

(230.9–274.9)e 31.2 

Large firms 445.2 87.3 221.1 59.5 535.0 

(497.6–572.3)e 65.9 

Total 510.1 100.0 371.6 100.0 811.5 

(728.5–847.2)e 100.0 

Sales 

SMEs 920.0 19.3 1,589.8 45.4 3,096.7 39.6 

Large firms 3,839.8 80.7 1,914.8 54.6 4,727.6 60.4 

Total 4,759.8 100.0 3,504.6 100.0 7,824.3 100.0 

Exports/sales 

SMEs 7.1 8.0 8.2

(7.5–8.9)e

Large firms 11.6 11.5 11.3

(10.5–12.1)e

Total 10.7 10.6 10.4

(9.3–10.8)e

Sources: OECD, TEC database, pre-release for USITC; SBA, Statistics of U.S. Businesses; Eurostat, 

Structural Business Statistics Database; USITC staff estimates. See appendix C for method and further 

details. 

a

 Austria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Hungary, Italy, Latvia, Lithuania, 

Luxembourg, Poland, Portugal, Slovak Republic, Slovenia, and Sweden. b Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, 

Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Slovakia, Slovenia, 

Spain, Sweden, and the United Kingdom. c Some totals do not sum to 100 due to missing data on firm size. d SMEs are defined as firms with fewer than 250 employees. 

e Figures show estimated ranges. 
2-10 

Box 2.1 Why EU firms are so much smaller than U.S. firms 

The structural features of the U.S. economy have been particularly well-suited for the development of large firms over 

time. Generally, the U.S. market is still more integrated relative to the EU market, given the common language and a 

willingness of residents, including immigrants, to adopt similar consumption patterns in different parts of the United 

States. In the late 19th and early 20th centuries, a series of technological and social changes led to U.S. 

predominance in goods produced by mass production and sold by large firms exploiting economies of scale.a

 These 

included the “American system” of interchangeable parts, a nationally integrated system of commercial transport via 

road and railroad, national retailers such as Sears Roebuck, and the assembly line of Henry Ford. Expressions of 

European concern about the competitive advantages of large firms in the United States have been expressed 

repeatedly over time.b

In comparison with the United States, the European market has historically been fragmented. Italy and Germany 

consisted of numerous micro-states separated by internal trade barriers until the mid-19th century; the unification of 

Germany for customs purposes was not completed until 1888. After the economic disruptions of the two World Wars, 

the present phase of European economic integration began in the 1950s. Regulatory union within the EU, often 

thought to have been achieved by 1993 due to the Single European Act, has in fact taken longer, as has the process 

of integrating 12 new EU members in Central and Eastern Europe which acceded to the EU between 2004 and 2007. 

As of 2010, the EU operates with 13 currencies and 23 official languages, despite the development of the euro zone. 

Although the pace of European integration has been rapid considering the associated institutional barriers, its 

economic integration is not yet comparable to that in the United States. This situation has likely limited the 

development of large firms in the EU, explaining the predominance of SMEs in the European market relative to the 

U.S. market. 

_______________ 

a

 Marshall, Industry and Trade (1919), 2009; Nelson and Wright, “The Rise and Fall of American Technological 

Leadership,” 1992, 1931–64. b

 Mackenzie, The American Invaders (1907), 1976; Servan-Schreiber, The American Challenge, 1968.

U.S. SME Exporters Are Relatively More Likely to Be 

Intermediaries

The role of non-manufacturing SMEs is greater for the United States than for the EU. 

Approximately 39 percent of U.S. SME exports are by manufacturers, compared to 51 

percent of EU SME exports; in contrast, 41 percent of U.S SME exports are by 

wholesalers, compared to 24 percent of EU SME exports (table 2.3).47

Large-firm exports in both the United States and the EU are heavily dominated by 

manufacturers. Among large firms, wholesalers comprise a larger share of exports in the 

United States (accounting for 14 percent of exports by U.S. large firms, versus 2 percent 

of EU large-firm exports), whereas firms which are not identified as wholesalers or 

manufacturers were more important in the EU (accounting for 22 percent of exports by 

large EU firms, versus 9 percent of U.S. large-firm exports) (table 2.3). 

In cases where manufactured goods are exported by wholesalers or other types of firms, it 

is not possible to directly observe the firm size of the manufacturer relative to the 

 

47 Almost 20 percent of U.S. SME exports were by other types of firms, compared to 25 percent for EU 

SMEs. Firm activities that are classified as “other” include agriculture, construction, energy, mining, 

transportation, retail trade, finance, real estate, and services. 
2-11 

TABLE 2.3 Estimated share of exports by firm size and major industry, 2005

United States EU-17 

Percent Percent a

Share of SME exports through 

Manufacturers 39.2 51.4 

Wholesalers 41.0 23.8 

Other 19.8 24.8 

Share of large exports through 

Manufacturers 77.4 75.2 

Wholesalers 13.8 2.3 

Other 8.8 22.4 

Share of total exports through 

Manufacturers 68.4 65.3 

Wholesalers 19.7 12.3 

Other 11.8 22.4 

Manufactured goods exports as a share of all goods 

exports, all firm typesb 86.6 88.5 

Implied minimum share of manufactured good exports 

by non-manufacturing firmsb 20.9 26.2 

Sources: OECD, TEC database, prerelease for USITC and USITC staff estimates. See appendix C for method 

and further details. 

a Some totals do not sum to 100 due to missing data on firm size. 

b

 Data are from GTIS, Global Trade Atlas Database and USITC staff estimates. 

intermediary. For example, it is not known whether SME manufacturers use SME or 

large-firm wholesalers or other intermediaries.48

In both the United States and the EU, a major portion of merchandise exports are 

manufactured goods. Manufactures accounted for almost 87 percent of U.S. merchandise 

exports and 89 percent of EU merchandise exports in 2005. These percentages exceed the 

corresponding percentages for exports by manufacturing firms, because some 

manufactured goods are exported by wholesalers or other nonmanufacturing firms. It can 

reasonably be inferred that, at a minimum, 21 percent of exports of manufactured goods 

in the United States and 26 percent in the EU are exported by non-manufacturing firms 

(table 2.3).49

U.S. Export-Oriented Wholesale Firms Are Larger than EU 

Wholesale Firms

Another potentially important difference between the United States and the EU is that 

exporting wholesalers appear to be larger in the United States. In the United States, 

approximately $79 billion (54 percent) of exports of wholesalers were by firms with at 

least 250 employees. In the EU, only about $7 billion of exports by wholesalers were 

made by firms with at least 250 employees, accounting for approximately 10 percent of 

exports by wholesalers (table 2.4). This suggests that SME manufacturing firms in the 

 

48 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, 2010, 3-3. 49 This assumes that all exports by manufacturing firms are in fact manufactured goods. But since a small 

portion of exports by manufacturing firms are nonmanufactured goods (agricultural, mining, or extractive 

products), these estimates can only be close lower bounds.
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TABLE 2.4 Estimated exports by firm size and major industry, 2005

United States EU-17 

Billion $ Percent Billion $ Percent a

Exports 

Total manufacturers 510.1 371.6 

SMEb 65.0 12.7 126.8 34.1 

Large 445.2 87.3 221.2 59.5 

Total wholesalers 147.2 70.0 

SMEb 68.0 46.2 58.6 83.7 

Large 79.2 53.8 6.9 9.9 

Total other 88.1 127.2 

SMEb 32.8 37.2 61.3 48.2 

Large 50.8 57.7 65.9 51.8 

Total, all firms 745.4 568.8 

SMEb 165.8 22.2 246.7 43.4 

Large 575.2 77.2 294.0 51.7 

Sources: OECD, TEC database, prerelease for USITC and USITC staff estimates. See appendix C for method 

and further details. 

a Some totals do not sum to 100 due to missing data on firm size. 

b SMEs are defined as firms with fewer than 250 employees. 

United States may benefit from the export services of large wholesalers to a greater 

extent than do EU SMEs. 

U.S. and EU Employment Growth for Manufacturing during 2002–

06 Was Better for SMEs than for Large Firms

Exporting and nonexporting SMEs in the EU accounted for larger shares of employment 

in manufacturing and wholesale trade than in the United States, which is consistent with 

the predominance of SMEs over large firms in the EU. In 2006, SMEs in the EU 

represented 57 percent of manufacturing employment and 82 percent of wholesale trade 

employment, compared with 37 of manufacturing employment and 56 percent of 

wholesale trade employment in the United States (table 2.5). 

From 2002 to 2006, overall employment increased by 6.7 percent in the United States and 

by 5.2 percent in the EU. U.S. employment by SMEs in all sectors grew by 34.3 percent, 

while employment by large firms in the United States declined by 15.3 percent over the 

period (table 2.5).50

The picture for manufacturing employment in the United States was quite different from 

that in the EU. Total U.S. manufacturing employment declined by 5.3 percent from 2002 

to 2006. Large firms experienced the greater setback, with employment declining by 

more than 7 percent, compared to a 1 percent decline for SMEs. During the same period, 

 

50 Comparable data for the EU are not available. 
TABLE 2.5 Employment growth, by firm size, United States and European Union, 2002-2006 

2002 2006 2002–06 

SMEsa Large Total SMEs Large Total SMEs Large Total 

Millions of employees SMEs share of total Millions of employees SMEs share of total % change b

United States

Manufacturing 5.1 9.3 14.4 35.1 5.0 8.6 13.6 36.6 -1.2 -7.5 -5.3 Wholesale trade 3.3 2.6 5.9 56.4 4.2 3.3 7.5 55.6 26.2 30.5 28.1 All sectors 49.9 62.6 112.4 44.3 66.9 53.0 119.9 55.8 34.3 -15.3 6.7 

European Union 

Manufacturingc 17.0 13.9 31.0 55.0 18.4 13.9 32.3 57.0 8.2 -0.5 4.3 Wholesale traded 6.4 1.3 7.7 83.0 8.0 1.8 9.8 82.1 25.1 33.8 26.6 All sectors (e) (e) 204.3 (e) (e) (e) 214.9 (e) (e) (e) 5.2 

Sources: SBA, Statistics of U.S. Businesses; Eurostat, Structural Business Statistics Database; USITC staff calculations. See appendix C for method and 

further details. 

a SMEs are defined as firms with fewer than 250 employees. b Data for percentage changes in the European Union are based on country with available data for both 2002 and 2006, and thus do not correspond to the 

employment figures in millions. 

c 2002 figures based on employment data for the EU–27, less data for Belgium, Cyprus, Greece, Luxembourg and Poland. 2006 figures are for the EU–27, 

less data for Malta. 

d 2002 figures are for the EU–27, less data for Bulgaria, Estonia, Finland, Luxembourg, Malta, and Slovakia. 2006 figures are for the EU-27, less data for 

Bulgaria, Estonia, Finland, Luxembourg, Malta, and Slovakia. 

e Data for employment in all sectors disaggregated by firm size are not available for the European Union. 

2-13 
2-14 

however, total manufacturing employment in the EU increased by 4.3 percent; 

employment by EU SMEs expanded by 8.2 percent, compared to a slight decline in 

employment by large firms (table 2.5). 

Employment growth in the wholesale trade sector outpaced manufacturing sector 

employment growth for both U.S. and EU SMEs. Wholesale sector employment grew by 

28 percent in the U.S. economy overall, and by 26 percent for U.S. SMEs. Wholesale 

sector employment grew by 27 percent in the EU, and by 25 percent for EU SMEs (table 

2.5). These data suggest that the expanding sector of wholesale trade played a greater role 

in generating employment in both the United States and the EU during this period than 

did manufacturing. 

U.S. SME Exports Share Is Lower in Nearly Every Sector

For most manufacturing sectors, SMEs made up a smaller share of sector exports in the 

United States than in the EU. The average share of exports by SMEs was 12 percent for 

the United States and 34 percent for the EU (table 2.6, last panel). In 18 of the 22 sectors 

reported in table 2.6, the SME share of total exports was higher for the EU than for the 

United States. 

Some of the more capital-intensive sectors had the lowest SME shares in both the United 

States and EU—including motor vehicles, tobacco products, and paper and paper 

products. For the United States, the sectors of machinery and equipment not elsewhere 

classified (n.e.c.), other nonmetallic mineral products, and rubber and plastics products 

had SME export shares of or below 10 percent. For the EU, the sectors of radio, TV, and 

communication equipment, other transport equipment, and coke and refined petroleum 

products also had relatively low SME export shares of below 20 percent (table 2.6). 

The United States broadly appears to have exported more from industries with low SME 

export shares, while the EU exported slightly more from industries with high SME export 

shares. Thus, table 2.6 shows: 

 Industries with low SME export shares in both the United States and EU (paper and 

paper products, tobacco products, and motor vehicles) recorded $70.7 billion in 

total exports in the United States in 2005, compared to $44.4 billion in the EU. 

 Industries with high SME export shares in both the United States and EU (wearing 

apparel, wood products, and furniture manufacturing) recorded $28.2 billion in 

total exports in the EU in 2005, compared to $10.3 billion in the United States. 
2-15 

TABLE 2.6 Estimated exports for manufacturing sectors, by firm size, United States and European Union, 2005 

Sector Firm type United States EU 17 

Billions of $ % of sector total Billions of $ % of sector total

SMEsa 2.6 16 4.5 23 

Basic metals Large firms 13.6 84 14.6 76 

 Total 16.2 100 19.3 100 

SMEs 8.3 12 16.4 35 

Chemicals and chemical Large firms 62.3 88 30.9 66 

products Total 70.6 100 47 100 

SMEs 1.4 60 0.7 6 

Coke, refined petroleum Large firms 0.9 40 9.4 82 

products and nuclear fuel Total 2.3 100 11.4 100 

SMEs 3 27 5 30 

Electrical machinery and Large firms 8 73 11.4 69 

apparatus Total 11 100 16.5 100 

SMEs 2.9 14 8.1 40 

Food products and beverages Large firms 18.5 86 11.2 56 

 Total 21.5 100 20.2 100 

SMEs 0.9 45 8.1 64 

Furniture manufacturing Large firms 1.1 55 4.3 34 

 Total 1.9 100 12.7 100 

SMEs 9.5 10 27.2 44 

Machinery and equipment n.e.c. Large firms 90.1 90 35 56 

 Total 99.7 100 62.4 100 

SMEs 4.3 13 5.5 40 

Medical, precision and optical Large firms 28.7 87 8.1 60 

instruments Total 33 100 13.6 100 

SMEs 5 24 9.4 63 

Metal products, exc. machinery Large firms 16 76 5.4 37 

and equipment Total 21 100 14.8 100 

SMEs 0.7 1 2.6 8 

Motor vehicles, trailers and Large firms 52.2 99 20 59 

semi-trailers Total 52.9 100 33.6 100 

SMEs 1.9 14 0.7 21 

Office, accounting and Large firms 11.8 86 2.3 71 

computing machinery Total 13.6 100 3.2 100 

SMEs 1.7 9 3.8 40 

Other nonmetallic mineral Large firms 17.4 91 5.8 60 

products Total 19.1 100 9.6 100 

SMEs 1.9 32 2.2 9 

Other transport equipment Large firms 4.2 68 22.4 88 

 Total 6.1 100 25.5 100 

SMEs 0.8 5 1.9 18 

Paper and paper products Large firms 16.2 95 8.6 81 

 Total 17 100 10.6 100 

SMEs 0.5 24 1 58 

Publishing, printing and reprod. Large firms 1.7 76 0.6 36 

of recorded media Total 2.2 100 1.7 100 

SMEs 3 41 3 13 

Radio, TV and communication Large firms 4.2 59 12.8 55 

equipment Total 7.2 100 23.2 100 

SMEs 3.3 8 5.5 49 

Large firms 39.6 92 5.3 48 Rubber and plastics products 

 Total 42.9 100 11 100 
2-16 

TABLE 2.6 Estimated exports for manufacturing sectors, by firm size, United States and European 

Union, 2005—Continued

Sector Firm type United States EU 17 

Billions of $ % of sector total Billions of $ % of sector total

Tanning and dressing of leather SMEs 1.9 11 6.1 68 

Large firms 15.1 89 2.7 30 

 Total 17.1 100 9 100 

SMEs 4.7 11 5.9 61 

Textiles Large firms 38 89 3.5 36 

 Total 42.6 100 9.7 100 

SMEs 0 4 0 1 

Tobacco products Large firms 0.8 94 0.1 68 

 Total 0.8 100 0.2 100 

SMEs 2.9 47 5.5 59 

Wearing apparel, dressing and Large firms 3.2 53 3.7 40 

dyeing of fur Total 6.2 100 9.3 100 

SMEs 0.9 40 3.2 51 

Wood, products of wood and Large firms 1.3 60 3 48 

Cork, except furniture Total 2.2 100 6.2 100 

SMEs 62.1 12 126.4 34 

Large firms 445.1 88 221.2 60 All manufactured goods 

(Total) Total 507.3 100 370.9 100 

Source: OECD, Trade by Enterprise Characteristics database (TEC), prerelease for USITC; Comtrade; USITC staff 

calculations. See appendix C for method and further details. 

a SMEs are defined as firms with fewer than 250 employees. 

These data suggest that the greater export intensity of EU SMEs relative to U.S. SMEs 

might be, in part, related to a difference in U.S. and EU industry composition. 

In the EU, SMEs accounted for more than 50 percent of exports in seven manufacturing 

sectors.51 Three of these sectors also accounted for the highest SME export shares in the 

United States,52 but because of the lower SME presence, in general this corresponded to 

SME export shares in the range of 40–48 percent. In both regions, exports of wearing 

apparel products had relatively high SME shares. The other top industries for SME 

exports in the United States and the EU were wood products and furniture manufacturing. 

Exports of leather manufactures were dominated by SMEs in the EU (export share of 68 

percent) but not in the United States, where the SME export share was just 11 percent. 

The role of leather products such as shoes in Italy, Europe’s largest country for SME 

exports, is particularly interesting, and has historically featured dynamic clusters of 

SMEs in local industrial districts. A case study of the Italian footwear and leather 

industry is provided in appendix C. 

 

51 Those seven sectors were furniture manufacturing; metal products; publishing, printing, and 

reproduction of recorded media; leather products; textiles; wearing apparel; and wood products. 52 Those three sectors were furniture manufacturing, wearing apparel, and wood products. 
2-17 

SME Productivity Is as High in the United States as in the 

European Union—or Higher

Firms in the United States have higher labor productivity than their European 

counterparts, with the exception of purchasing power parity (PPP)-adjusted productivity 

of SMEs in the manufacturing sector.53 Table 2.7 reports two versions of relative labor 

productivity between firms in the United States and EU in 2002, one using the nominal 

exchange rate and the other adjusted for PPP. Both versions define labor productivity as 

sales per worker and are not limited to exporting companies.54

The productivity lead that U.S. firms have over European firms is greatest when 

comparing productivity of all firms in a sector, and is greater for large firms than for 

SMEs. In all instances, U.S. firms engaged in wholesale trade have a greater productivity 

lead over their European counterparts than U.S. manufacturing firms have relative to their 

European counterparts.

U.S. and EU Support for SME Exporting Activities 

This section describes selected U.S. government and EC programs that promote SME 

exporting activities and highlights key differences between the programs.55 This section 

begins with a discussion of the SME business environment in the United States and the 

EU, followed by a discussion of barriers to exporting experienced by SMEs in developed 

economies such as the United States and the EU countries. Next, key U.S. and EC export 

promotion programs are described. Finally, to provide a more complete description of EU 

support for SME exporting activities at the national level, the chapter concludes with case 

studies on France, Germany, Ireland, and Poland. 

Information Sources

Information presented in this section is based on published information and documents 

posted on official U.S. government and EU Web sites. Additional information on U.S. 

programs was obtained from hearings held by the Commission in conjunction with this 

report and from interviews with U.S. government officials in Washington, DC. The 

Commission also collected information on EU programs from interviews with European 

government officials, industry associations, private sector representatives, and academics. 

 

53 The price correction using PPP takes into account the overall price level in the economy, which 

includes services. Using specific price corrections for manufacturing, or individual manufacturing sectors, 

may yield different results. The comparison is also sensitive to the choice of the year for comparison, since 

PPP exchange rates are influenced by the nominal exchange rate between the euro and the U.S. dollar. 54 According to Bernard et al., exporting firms are more productive than non-exporters. In their study, 

exporters have 119 percent more employment, 148 percent higher shipments, and 26 percent higher value 

added per worker than do non-exporters. These differences are still significant after controlling for industry 

fixed effects and company size. Bernard et al., “Firms in International Trade,” 2007, 110. 55 The private sector in the United States and in the EU countries also is actively engaged in supporting 

SME exporting activities through industry associations, chambers of commerce, and other activities. 

Examples of such private sector initiatives are described in more detail in chapters 3 and 4 of this report. 
2-18 

TABLE 2.7 Relative productivity by firm size, United States and European Union (European Union = 1), 2002

Relative productivity 

(2002 nominal exchange rate) 

Relative productivity 

(adjusted for 2002 PPP) 

Manufacturing (SMEs)a 1.09 0.88 

Manufacturing (large firms) 1.31 1.08 

Manufacturing (total) 1.42 1.17 

Wholesale trade (SMEs) 1.40 1.16 

Wholesale trade (large firms) 2.01 1.66 

Wholesale trade (total) 2.15 1.80 

Sources: SBA, Statistics of U.S. Businesses; Eurostat, Structural Business Statistics; USITC staff 

calculations. PPP was calculated using data from the World Bank’s World Development Indicators. See 

appendix C for method. 

a SMEs are defined as firms with fewer than 250 employees. 

The information presented in this section is not intended to be either a comprehensive 

catalog of official U.S., EC, or EU member state programs or an evaluation of those 

programs, but rather is presented as a brief description of key U.S. and EU policies and 

programs intended to support SME exporting activities. The referenced sources should be 

consulted for more complete information. 

SME Business Environment in the United States and the European 

Union

The United States has one of the most favorable business climates in the world and is 

generally ranked significantly higher than most EU member countries by the leading 

global indexes that compare business environments. In recent international comparisons: 

 The United States ranked as the 2nd most globally competitive economy for 2009–

10, with an overall score closely behind that of Switzerland.56 The United States 

ranked particularly high in categories related to innovation (investment in research 

and development [R&D], the presence of high-quality scientific research 

institutions, collaboration in research between universities and industry, and the 

protection of intellectual property) and business sophistication (the quality of a 

country’s overall business networks and the quality of individual firms’ operations 

and strategies).57

 The United States ranked 4th in the world in 2010 (behind Singapore, New Zealand, 

and Hong Kong) in terms of ease of doing business, based on an overall composite 

index. The United States ranked 10th with respect to ease of getting credit; the only 

EU countries ranking higher were the United Kingdom (ranked 3rd) and Bulgaria 

(ranked 5th). However, the United States ranked 18th in the category of ease of 

trading across borders, which measures procedural requirements for exporting and 

 

56 Switzerland’s overall score was 5.60; the U.S. score was 5.59. World Economic Forum, The Global 

Competitiveness Report, 2009–2010, 2009,14. 57 World Economic Forum, The Global Competitiveness Report, 2009–2010, 2009, 321. 
2-19 

 

importing by ocean transport, behind EU members Estonia, Finland, Denmark, 

Sweden, Norway, the Netherlands, Germany, and the United Kingdom.58

 The United States ranked 8th in the world in 2010 in terms of economic freedom, 

based on a composite index that included factors such as business freedom, trade 

freedom, investment freedom, financial freedom, and the protection of property 

rights. Ireland (ranked 5th) was the only EU country ranking higher than the United 

States on this index.59

The EC has observed that European workers appear to have a less entrepreneurial focus 

than U.S. workers. “Europe needs more entrepreneurs. Unlike in the United States, 

however, this career path is rarely first choice for people in Europe.” 60 European 

entrepreneurship is encumbered relative to the situation in the United States because “[i]n 

Europe, there is a perceived lack of money, too much complexity and insufficient 

information and all three have increased.” 61 According to one source, U.S. SMEs have a 

competitive edge because they “are able to react faster, due to a less regulated labor 

market” than in Europe, and U.S. manufacturing costs are generally lower; however, 

European firms have certain labor advantages with respect to overtime pay, greater 

availability of skilled lower management and technical staff, and better credit costs.62 

Moreover, even in areas where European firms are thought to have an advantage, such as 

greater ability to work with foreign languages, global factors may work to provide a more 

level playing field. According to one source, “even the European nations, whose citizens 

often speak three or four languages fluently, realize that they lack sufficient fluency in 

the languages of the rising world economies” such as China.63 Testimony at USITC field 

investigations stated that while fluency in several languages is a competitive advantage 

for EU SMEs relative to their U.S. counterparts, the depth of technical language 

knowledge necessary for legal contract work, understanding government regulations, and 

prospecting export markets is nonetheless a barrier to EU SMEs relative to larger firms or 

firms that possess specialized staff.64

58 The U.S. ranking for ease of trading across borders seemed to be driven largely by import costs. With 

respect to exporting, the United States ranked only slightly above the OECD average for number of 

documents needed to export, below the OECD average for export costs per container, and significantly below 

the OECD average for number of days required to export. World Bank. Doing Business 2010, 2009, 33 and 

160. See also the World Bank “Economy Rankings,” 2010. 59 Heritage Foundation, “2010 Index of Economic Freedom: Finland,” January 20, 2010, 195, 

http://www.heritage.org/index/Country/Finland. 60 EC, Directorate-General for Enterprise and Industry, Putting Small Business First: Europe Is Good for 

SMEs, 2008, 17, Another EC source reported that European workers have a greater preference for being 

employees, while U.S. workers report a greater preference for being self-employed. Gallup, Entrepreneurship 

Survey of the EU (25 Member States): Analytical Report, April 2007, 9. 61 Gallup, Entrepreneurship Survey of the EU: Analytical Report, April 2007, 100. 62 Bieri, prehearing brief for the USITC, February 9, 2010, 2. 

63 USITC hearing transcript, March 18, 2010, 62 (testimony of Spencer Ross, National Institute for 

World Trade). 64 Polish industry association representative, interview with USITC staff, April 7, 2010; German 

government official, interview with USITC staff, April 7, 2010; EU private sector official, interview with 

USITC staff, April 7, 2010. 
2-20 

 

Barriers to SME Exporting Activities

The world over, SMEs face similar resource constraints that affect their ability to export. 

Fixed costs, such as the costs of exploring and testing new markets, R&D, product 

localization, compliance with foreign technical standards, and transportation and other 

costs, can have a significant impact on the limited financial resources of small firms.65 As 

a result of these financial constraints, SMEs are often unable to hire personnel with skills 

in specialized domains, such as law, foreign languages, trade finance, and trade 

compliance. Small firms, particularly recently established ones, encounter greater 

difficulties obtaining bank credit than larger and longer-established companies. These 

financial constraints were exacerbated by the 2008–09 global recession, as discussed in 

more detail in box 2.2. Small firms generally are small producers; with their limited 

output, SMEs often report that they are at a disadvantage in competitively pricing their 

products. 66 At the same time, small firms are often reported to be more nimble in 

responding to shifting customer preferences.67

Numerous country-specific studies have identified and ranked barriers to exporting by 

SMEs as a first step toward creating effective policies to support SME 

internationalization. In its 2008 report, based on a survey of its members, the OECD 

found that the four top barriers to SME access to international markets were: 

 shortage of capital to finance exports; 

 problems identifying foreign business opportunities; 

 limited information to locate and analyze markets; and 

 inability to contact potential foreign customers.68

In its 2009 report, the OECD further analyzed these top four barriers and added a fifth 

one: lack of managerial time, skills, and knowledge.69 The OECD concluded that “the 

continuing salience of the previously identified top barriers to SME internationalization 

challenges policymakers and executors to intensify ongoing efforts at removing these 

resilient barriers, specifically limitations in finance and related resources, international 

contacts, and relevant managerial knowledge.”70

65 For example, see Dejo-Oricain and Ramírez-Alesón, “Export Behavior: A Study of Spanish SMEs,” 

2009. 66 A study of SME exporters in Western Australia found that, given the absence of scale economies, 

many SMEs turned to combinations of premium pricing, niche marketing, product differentiation, 

customization, and innovation to become successful exporters. Western Australian technology and Industry 

Advisory Council, A Snapshot of Exporting Activity in Western Australia’s SME Sector, 2006. 67 Freund and Pierola, “Export Entrepreneurs: Evidence from Peru,” 2009. See the literature review in 

appendix E of this report. See also Bernard and Jensen, “Why Some Firms Export,” April 1997, revised April 

2001. 68 OECD, Removing Barriers to SME Access to International Markets, 2008, 47, figure 1.9. 69 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7. 70 Ibid., 8. 
Box 2.2 The 2008–09 global recession and its effects on financing in developed countries 

The recent global recession has been the deepest economic contraction since the 1930s. Nearly every major 

developed country experienced an economic downturn beginning in the first half of 2008, although for most 

countries, real GDP growth had resumed by the second half of 2009. Trade was particularly hard hit by the 

recession—the developed economies’ annual output shrank by about 3 percent in 2009, but their annual 

exports fell by more than 12 percent.a

 The magnified effect on trade was due to a combination of factors, 

including large demand declines in heavily traded sectors and reduced demand for intermediate inputs. To a 

smaller extent, trade also fell because of the reduced availability of trade financing. 

Impact on financial markets. Global financial markets declined along with declines in real output. Lower 

production of goods reduced the demand for corporate financing; in addition, lower availability of financing 

reduced companies’ ability to produce. The September 2008 collapse of Lehman Brothers provoked a global 

credit market freeze, further reducing the availability of financing while driving the cost of obtaining funds 

markedly higher. The crisis negatively affected every type of financing that companies use to fund their 

domestic production and international trade. Companies get financing in many ways, such as by issuing 

bonds or equity, obtaining bank loans, or self-financing through retained earnings. All of these channels were 

undermined by the crisis: interest rates on bonds and loans rose, while equity prices and profits (and hence 

retained earnings) fell.b

Decline in availability of trade financing. Exporters (particularly SME exporters) rely on banks to provide 

working capital financing while goods are in transit, while importers often use banks to guarantee payment for 

items that are shipped. Lack of access to trade financing can reduce trade and worsen economic downturns. 

The financial crisis decreased the supply of available trade financing and increased the perceived risks 

associated with international transactions. The availability of trade financing declined and financing credit 

standards tightened for firms worldwide.c

 Between the second quarter of 2008 and the same quarter of 2009, 

the supply of trade credit fell 22 percent and the use of trade financing fell by 12 percent.d

 To counter this 

trend, policymakers supplied over $250 billion in additional trade financing during the recession through 

national governments, multilateral development banks, and export credit agencies.e

Impact on SMEs. Although all types of firms were harmed by the downturn, SMEs have been particularly 

vulnerable because of their more limited access to funds. Larger companies obtain much of their financing in 

equity and bond markets—sources that smaller firms largely cannot access. Banks are the main source of 

external finance for SMEs.f

 During the downturn, bank loans for smaller U.S. companies have been harder to 

obtain and more costly than loans for larger firms, despite the greater importance of such financing for small 

firms.g Internal funds are also a “critical” source of financing for SMEs.h With sharply reduced (or negative) 

profits, however, many companies have had limited ability to self-finance their operations. Finally, credit 

cards are an increasingly important source of funds for U.S. SMEs, and personal credit cards are the most 

common source of funds for the smallest U.S. businesses. Because household wealth has declined in the 

downturn, the ability of many small business owners to borrow has likely been impaired, and credit card 

loans have also been increasingly hard to obtain throughout the period.i

_______________ 

a

 IMF, “World Economic Outlook Update,” 2010, table 1.1. b

 Guichard, Haugh, and Turner, “Quantifying the Effect of Financial Conditions,” 2009, 27. 

c

 Mora and Powers, “Did Trade Credit Problems Deepen the Great Trade Collapse?” 2009. 

d

 The change in supply and use do not match because the data are not comprehensive. Supply is measured by 

issuance of export credit insurance (short run). Use is measured by gross external debt, trade credits (short term, other 

sectors). The data are reported by countries through the World Bank’s JEDH database. e

 Auboin, “Restoring Trade Finance during a Period of Financial Crisis,” 2009, 2. f

 Ou and Williams, “Lending to Small Businesses,” 2009, 26. 

g

 Japan has similarly reported a greater tightening of lending standards to small firms than to large firms, but the EU 

has not reported this pattern. See Federal Reserve, “Senior Loan Officer Opinion Survey,” 2010, table 2; ECB, “Euro Area 

Bank Lending Survey,” 2010, charts 1 and 6; and Bank of Japan, 2010, “Tankan,” tables i and j. h

 Haynes and Brown, “How Strong Is the Link between Internal Finance and Small Firm Growth?” 2009, 1. i

 Federal Reserve, “Senior Loan Officer Opinion Survey,” 2010, figure 4; Federal Reserve Governor Elizabeth Duke, 

Testimony to the House Committee on Financial Services, February 26, 2010.

2-21 
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Export Promotion for SMEs

In light of the identified barriers to SME exporting activities, the governments of most 

industrialized countries have programs to promote SME exports by providing export 

finance assistance, foreign market information, and a variety of business support services, 

such as export counseling, business-to-business matchmaking, advocating on behalf of 

firms, and advising firms on how best to market their products in foreign markets. 71

Countries provide export promotion assistance both domestically and abroad through 

their networks of foreign embassies and industry association outposts.72 

The economic arguments made to justify government involvement in export promotion 

typically cite the need to address asymmetries of information or other market failures, 

because most small firms see the fixed costs of becoming an exporter as too high without 

some form of public support.73 For example, a discussion of export promotion by the U.S. 

Government Accountability Office (GAO) says: 

In addition to macroeconomic considerations of job creation and economic growth, 

microeconomic considerations exist for government programs to address “market 

failures”—where conditions such as imperfect information and entry barriers prevent 

markets from generating the most efficient outcome. Rationales may also exist for 

export programs based on achieving broader trade policy objectives, such as helping 

U.S. exporters overcome foreign trade barriers that make it difficult for U.S. products 

to penetrate foreign markets.74

Some studies have shown that “SMEs are likely to benefit disproportionately from the 

pro-competitive effects of internationalization.” 75 However, one source reported that 

there is limited empirical research as to whether foreign trade promotion helps SMEs 

overcome trade barriers.76

Export promotion programs vary widely from country to country. The OECD reported 

that most of its member countries provide programs to address financial barriers to SME 

exporting activities through such measures as export credit guarantees, pre-shipment 

financing, and facilities to augment working capital, and that these programs largely 

comply with OECD voluntary standards (see box 2.3).77 Many OECD members also 

71 For additional information, see GAO, International Trade: Observations on U.S. and Foreign 

Countries’ Export Promotion Activities, 2009, 3–4. 72 The existence of government-supported trade promotion agencies dates to 1919. EC, DirectorateGeneral for Enterprise and Industry, Supporting the Internationalisation of SMEs: Good Practice Selection, 

2008, 7. 73 USITC hearing transcript, March 18, 2010, 17 (testimony of the Honorable Donald A. Manzullo, U.S. 

Representative, 16th District, IL). See also Lederman, Olareaga, and Payton, “Export Promotion Agencies: 

What Works and What Doesn’t,” 2006, 2; EC, Directorate-General for Enterprise and Industry, Supporting 

the Internationalization of SMEs: Good Practice Selection, 2008, 7; and OECD, Top Barriers and Drivers to 

SME Internationalisation, 2009, 15. 74 GAO, International Trade: Observations on U.S. and Foreign Countries’ Export Promotion Activities, 

2009, 3. 75 EC, Directorate-General for Enterprise and Industry, Supporting the Internationalisation of SMEs, 

2007, 17. 76 Hauser and Werner, “The Impact of Foreign Trade Promotion on the Foreign Sales Intensity of SMEs,” 

2009, 5. 77 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 15–16. 
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BOX 2.3 OECD standards for export credits 

An export credit is a loan or other financing arrangement extended to finance a specific purchase of goods or 

services from within the creditor country. The OECD further defines export credits as any combination of (1) export 

credit guarantee or insurance (i.e., an export credit that carries a guarantee or insurance issued by an export credit 

agency protecting the creditor against political, commercial, or transfer risks in the debtor country that may prevent 

the remittance of debt-service payments—so-called “pure cover”) or (2) official financing support including direct 

credit and/or financing and refinancing, or interest rate support (where the government supports a fixed interest-rate 

for the life of the credit).a

Both the United States and the EU are signatories to the OECD “Arrangement on Guidelines for Officially Supported 

Export Credits” (OECD Arrangement). According to the OECD, the main purpose of the Arrangement “is to provide a 

framework for the orderly use of officially supported export credits” provided by or on the behalf of a government 

through providing for “a level playing field . . . whereby exporters compete on the basis of the price and quality of their 

products rather than the financial terms provided . . . and reducing subsidies and trade distortions related to officially 

supported export credits.”b

 The OECD Arrangement sets out limitations on terms and conditions that may be officially 

supported. Among other things, the Arrangement places limits on the conditions (interest rates, term to maturity, 

down payment required, repayment schedule), under which credits may be granted. The OECD Arrangement is often 

referred to as a “Gentleman’s Agreement” that is open to OECD members, but participation in it is voluntary.c

China, India, and Brazil are not OECD members and are not signatories to the OECD Agreement. According to a 

U.S. Export-Import Bank official, “there are again times when sadly we will see a deal slip away because of 

concessional financing offered or other measures that sadly do not allow U.S. companies to be as competitive as 

companies from some of the nations who are just not governed under the OECD rules.”d

_______________ 

a

 OECD, “Officially-Supported Exporter Credits and Small Exporters,” 5–6. 

b

 OECD, Arrangement on Officially-Supported Export Credits, 2010. c

 Ibid. 

d

 USITC hearing transcript, March 18, 2010, 31 (testimony of Diane Farrell, Export-Import Bank of the United 

States).

provide support programs to help SMEs identify foreign business opportunities, locate or 

analyze markets, and contact potential foreign customers and partners.78 In conjunction 

with export promotion, some governments also work to reduce procedural and 

bureaucratic obstacles to exporting or seek other ways to simplify the exporting process 

and facilitate trade.79 The OECD identified several countries that offered export-focused 

programs to improve SMEs’ managerial skills and knowledge, including programs at the 

national level and below.80 The OECD also observed that there is “an increasing tendency 

to take a sub-national approach to promoting SME internationalization” in several 

countries, including the United States and the EU member countries. 81 USITC field 

investigations have confirmed this for the EU, and observed that EU and national SME 

support mechanisms are often administered at the subnational level.82

Despite the apparent proliferation of government support programs for SME exporting 

activities, the OECD also noted that there are “persisting low user-level perceptions of 

 

78 Ibid., 18. 

79 Laird, “WTO Rules and Good Practice on Export Policy,” 1997, 17–19. 80 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 20–21. 81 Ibid., 22. 

82 Polish government official, interview with USITC staff, April 6, 2010; German academic official, 

interview with USITC staff, April 7, 2010. 
2-24 

 

the effectiveness of public sector support programs.” 83 These could be the result of 

several factors, including inadequate input from program users, inadequate levels of 

awareness of specific programs among the target user communities and other 

stakeholders, and low-quality implementation and delivery of program services. 84 One 

study found that “both exporters and non-exporters reported a lack of awareness of 

available export assistance programs.” 85 Another study found that although export 

promotion programs on average have a positive and statistically significant impact on a 

country’s exports, there were “important decreasing returns to scale in resources devoted 

to export promotion, and even negative marginal returns for budgets above a certain 

level.”86

U.S. Support for SME Exporting Activities

National Policies and Programs Supporting SME Exporting Activities 

The U.S. government supports SME exporting activities through several agencies and 

programs. To support U.S. firms doing business in foreign countries, as well as gather 

data and information about these local markets, the Foreign Agricultural Service (FAS) 

of the U.S. Department of Agriculture (USDA) has 101 offices in 81 countries, and the 

U.S. Commercial Service a part of the USDOC, has 126 offices in more than 80 countries. 

In addition, U.S. Department of State personnel provide in-country services at 

approximately 100 embassies overseas where either the USDA or the USDOC lacks a 

presence. 87 Key institutions involved in providing financial support for exporting 

activities include the Export-Import Bank of the United States (Ex-Im Bank), the 

Overseas Private Investment Insurance Corporation (OPIC), and the U.S. Small Business 

Administration (SBA). Information on these and other institutions is provided in 

appendix table C.1. 

The U.S. government supports exporting activities by U.S. SMEs through three basic 

types of financial assistance: 

 Financing (including loans, lease financing, and loan guarantees). The U.S. 

government offers financing for exporting activities in four categories: export 

development and working capital financing; facilities development financing; 

financing for international buyers; and investment project financing.88

 Insurance. The U.S. government provides U.S. companies with insurance and risk 

mitigation policies that cover export transactions and overseas investments. 

83 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 30. See also EC, DirectorateGeneral for Enterprise and Industry, Supporting the Internationalisation of SMEs, 2007, 19. 84 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 30. 85Moini, “Small Firms Exporting: How Effective Are Government Export Assistance Programs?” 1998, 

12. 86 Lederman, Olareaga, and Payton, ”Export Promotion Agencies: What Works and What Doesn’t,” 2006, 

3. 87 GAO, International Trade: Observations on U.S. and Foreign Countries’ Export Promotion Activities, 

2009, 4. 88 USDOC, “U.S. Government International Financing Programs.”
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Coverage includes losses from nonpayment, currency inconvertibility, asset 

expropriation, and political violence.89

 Grants. The U.S. government provides funds to enable U.S. firms to conduct 

feasibility studies on infrastructure projects and to train the foreign business 

community and government officials on U.S. business practices, regulatory reforms, 

and other economic development activities.90

The United States also supports SMEs’ exporting activities through a range of export 

promotion programs. These non-financial assistance measures take the form of online and 

customized market research; support for U.S. exhibitors taking part in selected overseas 

and domestic trade shows to attract qualified business partners; fee-based programs to 

introduce exporters of U.S. products to qualified buyers and distributors; individualized 

counseling and advocacy; and training programs, as described in appendix table C.1.91

State and Local Programs Supporting SME Exporting Activities 

In addition to federal government efforts, U.S. states and cities maintain their own 

domestic and foreign trade offices to support SME exporting activities. Services offered 

vary by state,92 but typically include some form of export counseling; market research; 

market entry strategy development; product and pricing information; searches for agents 

and distributors; foreign company background checks; foreign trade missions; trade 

shows; and training programs and seminars. State and local programs are more limited 

than those offered by USDOC, and states’ trade offices often collaborate with the U.S. 

Commercial Service (USCS) to ensure that firms have access to all U.S. government 

export promotion services. 93 In addition to partnering with USCS, some states’ trade 

offices also work closely with their local U.S. Export Assistance Centers (USEACs).94

State programs are both fee-based and non-fee-based, although most states do not charge 

fees for most of the services they offer. 95 In addition, some states provide grants or 

payments to SMEs to help defray the costs of USCS fee-based export promotion services, 

such as attending international trade shows and trade missions, USCS Gold Key 

Service, 96 and export training. 97 In a recent U.S. government survey of state export 

89 USDOC, “International Finance,” http://www.export.gov/finance/index.asp (accessed April 8, 2010). 90 Ibid. 

91 USDOC, Export Programs Guide, 2009, iii; USTR, “Export Assistance,” April 6, 2010 

http://www.ustr.gov/trade-topics/trade-toolbox/export-assistance. 92 USITC, hearing transcript, March 12, 2010, 16–17 (testimony of Tim McCabe, Oregon Business 

Development Department). 93 GAO, Export Promotion, March 2009, 21 and 13. 94 USEACs are a national network of USDOC, Ex-Im Bank, and SBA offices located in major 

metropolitan areas throughout the United States. See appendix table C.1 for additional information. GAO, 

Export Promotion, 2009, 13. 95 Ibid., 19. 

96 USCS Gold Key Service provides such services as customized market and industry briefings, 

customized market research, appointments with prospective trade partners, assistance in developing 

marketing strategies, help with travel, accommodations, and interpreter service. USDOC, USCS, “Gold Key 

Matching Service,” http://www.export.gov/salesandmarketing/eg_main_018195.asp (accessed April 16, 

2010). 97 GAO, Export Promotion, 2009, 3 and 7; GAO, International Trade: Observation, 9–10. 
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promotion services, 19 of 45 states reported that they provided grants to SMEs to help 

defray the costs of USCS export promotion programs and services.98

Some states are very actively engaged in export promotion. An official from Oregon 

stated that Oregon was recently the only state with its own exhibit at an annual food 

export show in Tokyo.99 One recent U.S. government survey reported that each state has 

about 5 five foreign offices or representatives, on average.100

National Export Initiative

On March 11, 2010, President Obama signed Executive Order 12870, the National 

Export Initiative (NEI). Among other things, the NEI established an Export Promotion 

Cabinet to develop programs to enhance export assistance to SMEs, including programs 

to improve information and other technical assistance to first-time exporters and assist 

current exporters in identifying new export opportunities.101 Key provisions of the NEI 

include: 

 An increase in the Ex-Im Bank’s budget for fiscal year (FY) 2011 to help it expand 

the financing it makes available to SMEs. 

 An increase in the USDA FY 2011 budget to enhance export promotion activities. 

 An increase in the USDOC International Trade Administration’s FY 2011 budget, 

in order to expand the number of trade experts available to serve as advocates for 

U.S. companies; to put a special focus on increasing the number of SMEs 

exporting to more than one market by 50 percent over the next five years; to 

increase the presence of U.S. SMEs in emerging markets such as Brazil, China, and 

India; and to develop a comprehensive strategy to identify market opportunities for 

U.S. SMEs in fast-growing sectors such as environmental goods and services, 

renewable energy, health care, and biotechnology.102

EU Support for SME Exporting Activities

The EU supports exporting activities by European SMEs through financial assistance—

grants, loans, and loan guarantees—as well as through non-financial assistance measures 

in the form of business support programs and services. EU support for SME exporting 

activities is available either directly from EC institutions or through EC-funded programs 

managed by EU member states at the national, regional, or local level103 to help member 

states “develop policies aimed at promoting entrepreneurship, improving the situation of 

98 GAO, Export Promotion, 2009, 3. 99 USITC hearing transcript, March 12, 2010, 13 (testimony of Tim McCabe, Business Development 

Department of Oregon). 100 GAO, Export Promotion, 2009, 22. 101 White House, “Executive Order: National Export Initiative,” March 11, 2010, 

http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative; 75 Federal Register

12433, March 16, 2010. 102 USDOC, “Commerce Secretary Gary Locke Unveils Details of the National Export Initiative,” press 

release, February 4, 2010. 103 EC, Directorate-General for Enterprise and Industry, European Union Support Programmes for SMEs, 

November 2008; EC, Directorate-General for Enterprise and Industry, “Small and Medium-sized Enterprises 

(SMEs),” http://ec.europa.eu/enterprise/policies/sme/index_en.htm (accessed April 19, 2010). 
2-27 

. 

 

SMEs throughout their life cycle, and helping them to access new markets.” 104 EC 

support for SME exporting activities is directed at all forms of cross-border trade—i.e., 

SMEs exporting to other EU countries (intra-EU exports) as well as SMEs exporting 

outside of the EU market (extra-EU exports). The EC has over 130 delegations and 

offices around the world that help gather data about local markets.105 Key EC programs 

to support SME exporting activities are summarized in appendix table C.2

In addition, the Enterprise Europe Network (EEN), partially funded by the EC and by 

European institutions at the national level, “comprises about 600 partners in 44 countries 

employing around 4,000 experienced staff helping to increase the competitiveness” of EU 

SMEs.106 The EEN characterizes itself as “a one-stop shop for all . . . [SME] business 

needs.” 107 It helps European SMEs by arranging meetings with potential business 

partners; facilitating commercial access to technological research; facilitating access to 

business and research financing; providing advice on legal, trade, and intellectual 

property issues; and advocating on behalf of European SMEs in foreign markets. 108

However, sources contacted by the Commission stated that the EEN was minimally 

effective because it merely created an agency made up of existing organizations and 

agencies.109

Individual EU member countries also maintain their own support programs for SMEs at 

the national and regional/local levels, some of which are funded or co-funded by the EC. 

EU member countries also provide officially supported export credits through private or 

government-supported export credit agencies. Most EU countries, however, have largely 

privatized the business of extending short-term credits. 110 In addition to the EC’s 

delegations worldwide, EU countries maintain their own national embassies around the 

world that, among other things, support firms from those countries as well as gather data 

and information about local markets. Semiprivate and private national organizations, such 

as chambers of commerce and industry associations, also play a significant role in export 

promotion programs for some EU countries. Some German states have their own foreign 

commercial service branches as well. For example, the German states of Bavaria and 

North Rhine-Westphalia both have promotional offices outside of Germany.111

Small Business Act for Europe

In addition to the financial and non-financial assistance it provides for SMEs, the EC has 

implemented a legal framework to support European SMEs. The EC adopted the Small 

104 EC, Directorate-General for Enterprise and Industry, “Small and Medium-Sized Enterprises (SMEs),” 105 EC, “External Service.” 106 EC, Directorate-General for Enterprise and Industry, “Enterprise Europe Network,” December 12, 

2009, 107 EC, Directorate-General for Enterprise and Industry, “Enterprise Europe Network: Our Mission,” 

http://www.enterprise-europe-network.ec.europa.eu/about/mission (accessed April 20, 2010). 108 EC representative, interview with USITC staff, April 8, 2010; EC, Directorate-General for Enterprise 

and Industry, “Enterprise Europe Network: Our Services,” http://www.enterprise-europenetwork.ec.europa.eu/services/overview (accessed April 19, 2010). 109 EU private sector representative, interview with USITC staff, April 8, 2010; EU private sector 

representative, interview with USITC staff, April 9, 2010. 110 OECD, “Officially-Supported Export Credits and Small Exporters,” 6. 111 For further information, see the Germany country profile later in this chapter. Government of 

Germany, Bavarian Ministry for Economic Affairs, Infrastructure, Transport and Technology Web site, 

http://www.bavaria.org/ (accessed April 16, 2010); Ministry of Economic Affairs and Energy, North RhineWestphalia Web site, http://www.economy.nrw.de/ministerium/index.php (accessed April 16, 2010). 
2-28 

 

Business Act for Europe (SBA for Europe) in June 2008,112 with the stated objectives to 

“put SMEs at the forefront of decision-making, to strengthen their potential to create jobs 

in the EU and to promote their competitiveness both within the Single Market and in the 

global markets.” 113 Among the concerns about European SMEs cited in the SBA for 

Europe were that “EU SMEs still have lower productivity and grow more slowly than 

their counterparts in the United States,” and that SMEs in the United States provided 

greater longer-term employment and were more successful sources of business 

innovation.114

The SBA for Europe applies to all EU-defined SMEs (independent companies with fewer 

than 250 employees; see table 2.1). 115 Technically not a legal instrument within the 

EU,116 the SBA for Europe comprises several different elements designed to improve the 

legal and administrative environment for SMEs throughout the EU. It includes a set of 10 

common principles to guide policies at the EU and national levels, as well as legislative 

proposals for future implementation.117 The main elements of the SBA for Europe are: 

 Provisions to design SME-friendly legislation at the EU and at the national level. 

The “think small first” principle directs that legislation made at the EU and 

national levels take SMEs’ interests into account at the very early stages of 

policymaking in order to make legislation more SME-friendly.118

 The “SME test” to ensure that the interests of SMEs are taken into account at the 

earliest possible stage of the policymaking process. The SBA for Europe directs 

that all new legislative and administrative proposals be subjected to a review to 

assess their impact on SMEs. A number of EU countries, including Belgium, 

Denmark, Finland, and Germany, have integrated an “SME test” into their national 

decision-making process.119

 A provision to appoint an SME envoy, whose role is to open channels of 

communication between the EC and SMEs and their representative organizations. 

The envoy also is to act as the promoter of SMEs’ interests throughout the whole 

EC to ensure that the “think small first” principle is being applied effectively.120

112 EC, “Frequently Asked Questions (FAQ) about the ‘Small Business Act’ for Europe (SBA),” 113 EC, Commission Working Document: Report on the Implementation of the SBA, 2009, 1. 114 EC, Communication from the Commission, 2008, 3. 115 EC, Directorate-General for Enterprise and Industry, “‘Small Business Act’ for Europe,” 

http://ec.europa.eu/enterprise/policies/sme/small-business-act/ (accessed February 16, 2010). 116 EC, “Frequently Asked Questions (FAQ) about the ‘Small Business Act’ for Europe (SBA),” 

http://ec.europa.eu/enterprise/policies/sme/files/docs/sba/sba_faq_en.pdf (accessed February 3, 2010). “The 

symbolic name of an “Act” given to this initiative underlines the political will to recognize the central role of 

SMEs in the EU economy and to put in place for the first time a comprehensive policy framework for the EU 

and its Member States.” EC, Communication from the Commission, 2008, 4. 117 EC, Directorate-General for Enterprise and Industry, “‘Small Business Act’ for Europe,” 

http://ec.europa.eu/enterprise/policies/sme/small-business-act/, accessed February 16, 2010; and EC, “‘Small 

Business Act’ for Europe,” http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm. 118 EC, Directorate-General for Enterprise and Industry, “‘Think Small First’ Principle,” 

http://ec.europa.eu/enterprise/policies/sme/small-business-act/think-small-first/index_en.htm (accessed 

February 16, 2010). 119 EC, Commission Working Document: Report on the Implementation of the SBA, 2009, 3. 120 EC, Directorate-General for Enterprise and Industry, “SME Envoy,” 

http://ec.europa.eu/enterprise/policies/sme/small-business-act/sme-envoy/. 
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 To promote entrepreneurship through the “Erasmus for Young Entrepreneurs” 

program. The program aims to help young entrepreneurs gain experience and 

insight by spending up to six months working in an SME in a different country.121

 To support and encourage SMEs to benefit from the growth of markets outside the 

EU. The SBA for Europe calls for the creation of Market Access Teams in key 

export markets to bring together EU countries’ trade councilors and EU business 

organizations to improve SMEs’ access to information on markets outside the EU. 

It also calls for the establishment of business support centers in China and India to 

help European SMEs achieve greater access to these markets.122

In its most recent report on the implementation of the SBA for Europe, the EC observed 

that a number of EU countries have “transposed” the SBA into their national policy 

programs, and that even some subnational regions, such as Catalonia (Spain) and North 

Rhine-Westphalia (Germany), have implemented measures similar to those of the SBA 

for Europe.123

Summary Comparison of U.S. and EU Support for SME Exporting 

Activities

Based on information received for this investigation through hearing testimony, written 

submissions, and interviews, key differences between U.S. and EU export promotion 

programs and policies include: 

 U.S. trade finance programs offer broad support for SMEs: 

o The United States generally supports a broad range of trade-financing 

programs to support SME exporting activities, 124 while many European 

countries offer no provisions in such areas as foreign exchange risk cover, 

direct lending, and working capital.125

o There are notable differences with respect to pre-export financing126 and 

short-term credit. The United States provides a wider range of support, 

particularly at the early exporting stages.127 EU countries generally do not 

provide pre-export financing comparable to the Ex-Im Bank’s working 

capital guarantee program; the United Kingdom reportedly is considering a 

121 EC, Directorate-General for Enterprise and Industry, “Erasmus for Young Entrepreneurs,” 

http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/erasmus-entrepreneurs/index_en.htm. 122 EC, Commission Working Document: Report on the Implementation of the SBA, 2009, 3; EC, 

“European Small Business Portal: EU SME Policy,” http://ec.europa.eu/small-business/policystatistics/policy/index_en.htm (accessed May 17, 2010). 123 EC, Commission Working Document: Report on the Implementation of the SBA, 2009, 2–3. 124 The United States offers all of the following: short-term insurance, medium- and long-term export 

credit; fixed-rate financing; foreign exchange risk cover; direct lending; investment insurance; bond support; 

unfair calling insurance; letter of credit guarantee; and working capital. USITC hearing testimony, March 18, 

2010 (Diane Farrell, Export-Import Bank of the United States, PowerPoint slide 6). 125 USITC hearing transcript, March 18, 2010, 28 (testimony of Diane Farrell, Export-Import Bank of the 

United States). 126 Pre-export working capital financing provides a firm with a guarantee to obtain a loan that will 

facilitate the export of goods or services in advance of the actual exports. Ex-Im Bank, “Working Capital 

Guarantee,” http://www.exim.gov/products/work_cap.cfm (accessed May 15, 2010). 127 USITC hearing transcript, March 18, 2010, 27 (testimony of Diane Farrell, Export-Import Bank of the 

United States). 
2-30 

 

pre-export financing program. 128 One source reported that EU countries 

generally do not provide official short-term credit comparable to that of ExIm Bank except for Germany’s Euler-Hermes export guarantee program129

and an EC-authorized short-term export credit program available in 

France. 130 There is little difference between U.S. and EU export credit 

agencies with respect to medium- and long-term export credit, as they all 

adhere to OECD guidelines.131

o The Ex-Im Bank requires that at least 51 percent of the content of a project 

be made in the United States and shipped from the United States to receive 

short-term financing.132 This requirement excludes exports with a lower U.S. 

content and could exclude U.S. SMEs seeking international expansion 

through other means than exporting goods. The U.S. SBA export working 

capital program does not have a U.S. content requirement.133

 The EU provides greater support for trade fair participation: Participation in 

trade fairs is consistently reported to be one of the most cost-efficient and effective 

ways for helping SMEs achieve international recognition and make contact with 

potential foreign customers.134 The U.S. Trade Fair Certification program provides 

U.S. government endorsement, oversight, promotional support, marketing 

facilitation, and other assistance at international trade fairs, and the USDA provides 

fee-based support for U.S. food and beverage exporters at trade shows.135 However, 

the U.S. federal government generally does not provide funding for SMEs to 

participate in international trade fairs as many EU countries do, although funding 

on a cost-share basis may be available at the U.S. state level. Co-financing for trade 

fair participation is available in most EU countries from national and local 

government agencies. For example, Germany offers co-financing for participation 

in trade fairs for firms that produce products in Germany or that manufacture 

abroad under several programs.136

 The EU offers extensive networks of assistance in foreign markets: SMEs in 

both the United States and the EU have access to a broad network of official 

government assistance in foreign markets. However, through the multiple 

128 Ibid. 129 So named because management of the guarantees is provided by Euler Hermes KreditversicherungsAG (Euler Hermes) and PricewaterhouseCoopers AG WPG. For further information, see Euler Hermes, 

“Export Guarantees,” http://www.eulerhermes.ru/en/export-guarantees/export-guarantees.html (accessed May 

15, 2010). See the Germany country profile later in this chapter for additional information. 130 USITC hearing transcript, March 18, 2010, 27–28 (testimony of Diane Farrell, Export-Import Bank of 

the United States). 131 OECD guidelines are discussed in box 2.4 above. USITC hearing transcript, March 18, 2010, 27 

(testimony of Diane Farrell, Export-Import Bank of the United States). 132 Ex-Im Bank, “Foreign Content Policy for Short-Term Exports,” 

http://www.exim.gov/products/policies/foreign_short.cfm (accessed April 20, 2010). 133 SBA, Export Working Capital Program (EWCP),” 

http://www.sba.gov/financialassistance/borrowers/guaranteed/7alp/EXP_WORK_CAPITAL_7A-LOANPROG.html (accessed April 20, 2010). 134 USITC hearing transcript, March 12, 2010, 64 (testimony of Tim McCabe, Business Development 

Department of Oregon). 135 USDOC, ITA, Export Programs Guide, 2009, 50. 136 German government official, interview with USITC staff, April 7, 2010; Government of Germany, 

Ministry of Economics and technology (BMWi), Federal Office of Economics and Export Control (BAFA), 

“Funding for Trade Fairs and Foreign Trade Aid,” http://www.foerderinfo.bund.de/en/653.php (accessed 

May 15, 2010). 
2-31 

worldwide networks established at the EC, national, and regional levels and the 

EEN, SMEs from EU countries appear to have access to more extensive networks 

of assistance in foreign markets than U.S. SMEs. Assessing the effectiveness of 

that assistance was beyond the scope of this investigation. Beginning in 2007, 

USDOC Commercial Service (USCS) implemented a plan to “strategically realign 

resources from developed markets . . . to developing markets, such as India and 

China.” 137 According to one source, this realignment “leaves established global 

markets for SMEs without [USCS] presence in some cases.”138

 EU programs for SMEs target measures to counter the perceived “lag” behind 

U.S. SMEs: As discussed above, EC documents cite a perceived “lag” behind U.S. 

SMEs with respect to productivity and innovation as a key factor driving the SBA 

for Europe.139 This also appears to be related to long-standing EC concerns about 

any possible adverse economic impacts on SMEs of EU enlargement and resulting 

increased competition within the single EU market.140

 The EU uses investment promotion to support SME exporting activities: Some 

EU countries actively seek and promote opportunities for inbound FDI as part of 

their efforts to promote exports. For example, Germany and Poland seek foreign 

investors to construct export-oriented manufacturing facilities; once operational, 

these facilities develop supply chain linkages with domestic SMEs, thereby 

contributing to SME indirect exports.141

European Institutional Support for SME Exporting 

Activities: Selected EU Countries

It was not possible within the time frame for this investigation to collect and analyze 

information for each of the 27 EU member countries on their programs to support SME 

exporting activities. To provide an admittedly limited overview of EU activities and 

programs at the national level, the Commission conducted case studies on four EU 

countries—France, Germany, Ireland, and Poland. These countries were selected as 

representative of the economic diversity that characterizes the EU. Selected economic 

indicators for these countries are presented in table 2.8. 

Each country profile has five main sections: (1) country economic overview, (2) the SME 

business environment, (3) SME exporting activities, (4) exporting constraints facing 

 

137 USDOC, ITA, “Department of Commerce Announces Plan to Shift Resources to World’s Emerging 

Markets,” March 28, 2007. 138 GAO, Export Promotion, 2009, 12. 139 EC, Communication from the Commission, 2008, 3; Council of the European Union, “Conclusions on 

‘Think Small First—A Small Business Act for Europe.’” 140 EC, Observatory of European SMEs, The Impact of EU Enlargement on European SMEs, 2003, 7. 141 Polish industry official, interview with Commission staff, April 6, 2010; Polish academic official, 

interview with Commission staff, April 6, 2010; German government official, interview with Commission 

staff, April 7, 2010. See the case studies of Germany and Poland later in this chapter. 
2-32 

TABLE 2.8 France, Germany, Ireland, and Poland: Selected economic indicators, 2009

France Germany Ireland Poland 

GDP (nominal, US $ billion) 2,677 3,354 221.6 441.9 

Real GDP growth (%) –2.2 –5.9 –7.0 1.7 

Population (million) 62.6 82.8 4.3 38.1 

GDP per capita ($ at PPP) 33,717 33,339 41,416 18,006 

Goods exports (US $ billion) 472.7 1,159 109.7 128.4 

Goods imports (US $billion) –538.9 –966 –66.9 –133.0 

Merchandise trade balance (US $ billion) –66.2 192 42.7 –4.6 

Services balance (US $ billion) 16.5 –40 –8.1 5.1 

Source: EIU, France: Country Report, 2010,17; Country Report: Germany, 2010,17; Country Report: 

Ireland, 2010,14; Poland Country Report, 2010, 17. 

SMEs, and (5) national policies and programs promoting SME exporting 

activities.142 The constraints facing SMEs are discussed relative to the top five barriers 

identified by OECD cross-country surveys as discussed earlier in this chapter. Those top 

constraints are: 

 shortage of capital to finance exports; 

 problems identifying foreign business opportunities; 

 limited information to locate and analyze markets; 

 inability to contact potential foreign customers; and 

 lack of managerial time, skills, and knowledge.143

France 

Economic Overview 

With a GDP of nearly $2.7 trillion, France ranked as the 2nd largest EU economy after 

Germany in 2009.144 France ranked 30th out of 43 European countries in 2010 based on a 

composite index of economic freedom that included factors such as business freedom, 

trade freedom, investment freedom, financial freedom, and the protection of intellectual 

property rights (IPR).145 Although it ranked above the world average on the overall index, 

economic freedom in France “remains curtailed by the pervasive presence of the state in 

 

142 The discussions of EU member country exporting activities in this section refer to all cross-border 

trading activities, including trade within and trade outside of the EU market. 143 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7; OECD, Removing Barriers to 

SME Access to International Markets, 2008, 54. 144 EIU, France: Country Report, 2010, 17. 145 Among all countries, France ranked as the 64th freest economy. Heritage Foundation, “2010 Index of 

Economic Freedom: France,” 197. 
2-33 

 

economic activity,” as “the government’s dominance continues in major sectors of the 

economy.” 146 France’s ranking reflected a lack of transparency in standards and 

regulations, barriers to services market access, and pharmaceutical sector restrictions that 

exceed those mandated by the EU. Nevertheless, France’s regulatory environment 

reportedly makes it relatively easy to establish and run a business, and IPR protection in 

France is very strong.147

France has a diversified economy. The financial and business services sector (including 

banking, insurance, real estate, and other business services) make up more than one-third 

of the French economy, the largest among the countries studied in this report. 

Government services account for 25 percent of the French economy, also the largest 

among the countries studied in this report. Other leading sectors of the French economy 

include transport, trade, and hotels and restaurants (19 percent), industry (14 percent), 

construction (6.5 percent) and agriculture (about 2 percent).148

France’s leading goods export sectors in 2009 by value were electrical, mechanical, and 

electronic machinery (20 percent of total manufactured exports); transportation 

equipment, including motor vehicles and parts and aircraft parts (20 percent); chemicals, 

perfumes, and cosmetics (12 percent); and food and beverage products (10 percent).149

The EU was the primary destination market for French exports in 2009, with Germany 

and Spain the leading country markets. The United States ranked as the sixth leading 

market for French goods exports and the leading non-EU market in 2009.150 France has 

long benefited from a surplus on trade in services due largely to receipts from tourism.151

SME Business Environment

SMEs account for approximately 99.8 percent of all enterprises in France, identical to the 

EU average; 92.3 percent of French enterprises are micro enterprises. SMEs account for 

61.3 percent of national employment, below the EU average (67.1 percent); micro-sized 

enterprises employ a marginally larger share of the workforce than small and mediumsized firms. 152 SMEs in France account for 48.4 percent of total value added, below the 

EU average (57.9 percent).153

According to a recent EC assessment of SME activities, France ranked above the EU 

average in the categories of internationalization and skills and innovation, and on par 

with the EU average with respect to entrepreneurship, responsive administration, and 

finance. In particular, the EC observed: 

146 Heritage Foundation, “France,” 2010 Index of Economic Freedom, 198. 147 Ibid. 148 Data are for 2007. OECD, “Country Statistical Profiles 2009.” 149 Government of France, Ministry of the Budget, Aperçu du commerce extérieur de la France, 2009. 150 Ibid. 151 EIU, France: Country Profile, 2008, 36 and 39. 152 Based on data for 2004 and 2005. EC, SBA Fact Sheet: France, 2008, 1. According to the EC, micro 

enterprises have fewer than 10 employees and an annual turnover or balance sheet of less than €2 million 

($2.4 million). Medium-sized enterprises have 50–249 employees with either annual turnover ≤ €50 million 

($61 million) or a balance sheet ≤ €43 million ($52 million). EC, Directorate-General for Enterprise and 

Industry, The New SME Definition: User Guide and Model Declaration, n.d., 14 and 16. See also table 2.1. 

Based on an exchange rate of Based on an exchange rate of US$1.00 = €0.8227 as of June 1, 2010. IMF, 

“Representative Exchange Rates for Selected Currencies,” June 1, 2010. 153 Based on data for 2004 and 2005. EC, SBA Fact Sheet: France, 2008, 1. 
2-34 

 

 Internationalization: A much larger share of French SMEs gained income from 

subsidiaries and/or joint ventures abroad than SMEs in other EU countries. 

Moreover, France ranked as having more efficient procedures for exporting and 

importing than the EU average. 

 Skills and innovation: More than 80 percent of all French SMEs provided training 

for their staff (compared to the EU average of 66.5 percent), with even very small 

(micro) enterprises in France reporting higher participation rates in learning 

activities than the EU average. French SMEs reportedly spent more time on 

continuous vocational training than the EU average. 

 Entrepreneurship: A substantially larger share of the population was reported to 

have participated in entrepreneurship education in France than the EU average, 

although there were fewer women entrepreneurs in France than the EU average. 

 Responsive administration: The time required to start a business and the costs 

required to set up and close a business were lower in France than the EU average. 

The costs of enforcing contracts also were lower in France than the EU average. 

 Finance: Access to venture capital and guarantees for SMEs in France was 

reported to be on par with the EU average.154

According to one French source, services accounted for more than one-half of French 

SME economic activity in 2008, followed by wholesale/resale trade (23 percent) and 

industry (21 percent).155 Approximately 23 percent of SME workers were engaged in 

providing business services in 2008, followed by wholesale/retail trade (20 percent), 

personal services (15 percent), and construction (10 percent). Among the manufacturing 

industries, 8 percent of SME workers were engaged in the production of intermediate 

goods in 2008; the production of industrial equipment, food and beverages, and motor 

vehicles each accounted for less than 5 percent of French SME employment.156

SME Exporting Activities 

SMEs in France are less likely to participate in cross-border trade than SMEs in other EU 

countries,157 with only 6 percent exporting in 2007 (the 4th lowest in the EU) compared 

to the EU average of 8 percent, according to EC survey data.158 Data from the French 

government show that the propensity for French firms of all sizes to export is below that 

of Germany but greater than those of the United Kingdom and Spain.159

154 EC, SBA Fact Sheet: France, 2008, 2–3. 155 CGPME, “Les PME, une place majeure dans l’économie nationale,” June 2008. 156 OSEO, PME 2009: Rapport OSEO sur l’évolution des PME, deuxième partie, 2009, 60, table 1. 157 French government official, interview with USITC staff, April 14, 2010. 158 Gallup, Observatory of European SMEs: Analytical Report, 2007, 44. 159 Government of France, Ministry of the Economy, DGTPE, “The Many Faces of the French Export 

Setup,” March 2009, 2. 
2-35 

 

Exports by French SMEs were valued at €108 billion ($131 billion) in 2008, or about 26 

percent of the total value of French exports of €408 billion ($496 billion),160 and about 

one-half of SME exports by value were industrial goods.161 French data suggest that trade 

intermediaries conduct a significant amount of indirect trade, particularly for bulk exports 

of agricultural and food industry products, and that “firms specializing in international 

trade tend rather to act on behalf of small and very small businesses that have neither the 

resources nor the means to handle their foreign sales unaided.”162

French SMEs tend to export to a few nearby markets.163 Almost 68 percent of French 

SME exports were shipped to other EU countries. Other markets included non-EU 

European countries (8 percent), Asia (8 percent), Africa (7 percent), and the Americas (7 

percent).164 One-half of nonsubsidiary French SME exporters shipped goods to just one 

foreign market. Belgium and Switzerland were especially popular markets for French 

SME exporters, indicating “a clear preference for exporting to the markets that are 

geographically and culturally closest.”165

French SME exporting activity shows evidence of an exporting learning curve—greater 

experience in exporting tends to lead to greater success in exporting. First-time French 

SME exporters tend to be smaller than more experienced exporters, and exported on 

average to just two foreign markets.166 In contrast, “regular” SME exporters (firms that 

exported for at least five consecutive years) shipped to seven foreign markets.167 French 

SMEs surveyed had been exporting for about 2.7 years on average. More than two-thirds 

of French SMEs that began exporting in one year no longer exported the following year. 

More than two-thirds of French exports by value in 2008 were conducted by SMEs that 

had been in business five years or more.168

French government data provide additional insight into the characteristics of innovationoriented SMEs and their exporting activities. Based on a survey of approximately 6,500 

innovation-oriented SMEs, one study reported that innovation-focused SMEs had a 

greater propensity to seek markets outside of France than non-innovation focused 

firms.169 That study reported that about one-half of innovation-oriented SMEs in business 

for three years or more exported (compared to one in 20 of all French firms), and onefourth of innovation-oriented SMEs in business for less than three years (young SMEs) 

regularly exported. One-half of young SMEs in the survey received at least 33 percent of 

their sales from exports in 2008, while SMEs in business three years or more received 28 

percent of their sales from exports. The report observed that young SMEs were more 

160 OSEO, PME 2009: Rapport OSEO sur l’évolution des PME, deuxième partie, 2009, 119. Based on an 

exchange rate of US$1.00 = €0.8227 as of June 1, 2010. IMF, “Representative Exchange Rates for Selected 

Currencies,” June 1, 2010. 161 Ibid., 120. 162 Government of France, Ministry of the Economy, DGTPE, “The Many Faces of the French Export 

Setup,” 2009, 3. 163 Ibid., 4. 164 OSEO, PME 2009: Rapport OSEO sur l’évolution des PME, deuxième partie, 2009, 124. 165 Government of France, Ministry of Economy, DGTPE, “The Many Faces of the French Export 

Setup,” 2009, 4. 166Ibid., 7. 167 Government of France, Ministry of the Economy, DGTPE, “The Many Faces of the French Export 

Setup,” 2009, 6. 168 OSEO, PME 2009: Rapport OSEO sur l’évolution des PME, deuxième partie, 2009, 123. 169 Ibid., 75. 
2-36 

 

likely to develop innovations that were more applicable to a wider client base, giving 

them the greater opportunity to service markets beyond French borders. 170

Exporting Constraints Facing SMEs 

According to a French government source, “[e]ven when exporting to nearby countries, 

the obstacles are considerable.” The reason cited for this is “the persistence of ‘frontier 

effects,’ resulting in particular from fixed export costs caused by market imperfections, 

even within an integrated area such as the European Union.” The source further reported 

that “for a small independent French SME, it is much ‘easier’ to sell its products to a 

customer in a different part of France than to sell them to a foreign customer.” 171

According to an EC survey, the most frequently reported constraints to exporting by 

French SMEs were tariffs in the destination market (reported by 11 percent of French 

SMEs), lack of knowledge of foreign market (7 percent), and lack of capital (5 

percent).172

Using the most important barriers to SME exporting activities identified by the OECD as 

a guideline,173 the Commission identified the following barriers reported by French firms: 

 Shortage of capital to finance exports: Many sources identified inadequate 

availability of financing as a significant barrier to French SME exporters,174 and 

recommended that improved access to export credit guarantees and other export 

financing is essential to increasing exports by French SMEs.175 The problems of 

inadequate financing for French SMEs were reported to have been exacerbated by 

the 2008–09 global economic recession (see also box 2.2).176

 Problems identifying foreign business opportunities: One source reported that 

French micro-sized firms are unlikely to export and that such firms rarely 

investigate foreign market possibilities.177

 Limited information to locate and analyze markets: One source reported that 

improved access to foreign market information would enable French SMEs to 

make more informed decisions about entering new markets.178

 Lack of managerial time, skill, and knowledge: Sources identified inadequate 

managerial capacity at the firm level as a barrier to exporting by French SMEs, and 

170 OSEO, PME 2009: Rapport OSEO sur l’évolution des PME, deuxième partie, 2009, 75–76. 171 Government of France, Ministry of Economy, DGTPE, “The Many Faces of the French Export 

Setup,” 2009, 7–8. 172 Gallup, Observatory of European SMEs: Analytical Report, 2007, 53. 173 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7; OECD, Removing Barriers to 

SME Access to International Markets, 2008, 54. 174 French government official, interview with USITC staff, April 14, 2010. See also CGPME, “Les PME 

et l’exportation ” ; Comité Richelieu, “Le Comité Richelieu renouvelle ses demandes,” May 13, 2008; 

Government of France, Economic and Social Council, SMEs and Foreign Trade, 2007, 19. 175 Government of France, Economic and Social Council, “Note de présentation: PME et commerce 

extérieur”; Government of France, Economic and Social Council, SMEs and Foreign Trade, 2007, 19. 176 Banque de France, “La situation des entreprises en 2008,” 4th quarter 2009; IFOP, Baromètre sur le 

financement pour et l’accès au crédit des PME, 2010. 177 French government official, interview with USITC staff, April 14, 2010. 178 Ibid. 
2-37 

 

recommended creating advisory, coaching, and networking services to assist SME 

managers.179 One French government report also identified insufficient technical 

knowledge, especially knowledge of foreign languages, as a constraint on exporting 

by French SMEs. The report recommended that technical foreign trade advisors be 

assigned to work with French SMEs. The report also discussed the importance of 

developing an entrepreneurial class in France that was willing to travel to foreign 

markets.180

Another barrier to French SME exporting activities identified by the Commission 

was: 

 Low use of public sector support programs: To explain the low level of 

exporting by French SMEs, one source reported that France had numerous 

institutions involved in supporting SME exporting activities, resulting in confused, 

overlapping, and ambiguous roles of various national and local public 

institutions. 181 Recommendations included establishing a “single window” for 

SME exporters to address the personnel and knowledge limitations that keep SMEs 

from properly managing the administrative requirements of exporting.182 Another 

source recommended that France develop diagnostic tools to identify SMEs with 

export potential and provide those firms with long-term support in their exporting 

activities.183

National Policies and Programs Supporting SME Exporting Activities 

The Government of France supports SME exporting activities primarily through the 

Ministry of Economy, Industry, and Employment (Ministry of Economy) and its Office 

of Competitiveness, Industry, and Services (DGCIS).184 Also working under the Ministry 

of Economy to support SME exporting activities is its international business development 

agency Ubifrance, which provides foreign market information and accompanies French 

firms on international trade missions.185 Other key agencies include: 

 Coface, a private multinational financial services company that provides trade 

credit information and trade credit finance and insurance worldwide. Coface also 

provides trade credit guarantees to French firms on behalf of the French 

government.186 As a provider of official trade credit for the French government, 

Coface adheres to OECD guidelines for export credits.187

179 Government of France, Economic and Social Council, SMEs and Foreign Trade, 2007, 19. 180 Ibid., 19–20. 181 Government of France, Economic and Social Council, “Note de présentation: PME et commerce 

extérieur.”. 182 Comité Richilieu, “Huit mesures pour développer l'exportation des PME françaises.” 183 Government of France, Economic and Social Council, “Note de présentation: PME et commerce 

extérieur.” 184 Ministère de l’Économie, de l’industrie et de l’emploi and La Direction générale de la compétitivité, 

de l’industrie et des services (DGCIS). 185 French government officials, interview with USITC staff, April 14, 2010. 186 Coface, “Garanties gérées pour le compte de l’État.” 187 French government officials, interview with USITC staff, April 14, 2010. 
2-38 

ment.

 

 OSEO, 188 an agency jointly managed by the Ministry of Economy and the 

Ministry of Higher Education and Research, that was established to support 

innovation and growth in French SMEs. Its main goal is to provide loans to French 

SMEs to support innovation and develop 189

 The Union of French Chambers of Commerce and Industry Abroad (UCCIFE)190

network, which represents 114 French Chambers of Commerce (CCIF)191 and has a 

presence in 78 countries. Both the UCCIFE and the CCIF assist French companies 

in foreign markets by providing a variety of services, such as foreign market 

analyses and business-to-business matchmaking.192 One of the main activities of 

the CCIF is to identify export-ready SMEs and to send them to Ubifrance for 

export-related commercial services.193

Government financial assistance programs in support of SME exporting activities

Direct government support to help finance French SME exporting activities include two 

programs by Ubifrance: 

 Export development loans: Financing of €20,000–€80,000 ($24,300–$97,240) for 

up to 6 years (with 1 year deferral) to cover the costs of tangible and intangible 

goods and services needed for French SMEs to establish an international market 

presence.194

 SIDEX program: 195 Short-term aid for SME export project finalization for a 

maximum period of fifteen days for French firms located in France. Maximum of 

€7,500 ($9,116) for a maximum period of 15 days; limited to 3 different projects 

per establishment per year.196

OSEO also provides several financial assistance programs for SMEs: 

 Export investment guarantees and financing to expand production and production 

capacity in order to export.197

 Credit guarantees for pre-export financing and export credit risk guarantees.198

188 OSEO (its official name) is a French government agency established in 2005 as the result of the 

merger of a French government research agency and a government SME banking agency. OSEO, “OSEO: le 

nom du nouvel ensemble issu du rapprochement de l’ANVAR et de la BDPME.” 189 Ibid. 190 L’Union des Chambres de Commerce et d’Industrie Françaises à l’Etranger (UCCIFE). 191 Chambres de Commerce et d’Industrie Françaises à l’Etranger (CCIF). 192 UCCIFE, “What Is UCCIFE?” 193 French government officials, interview with USITC staff, April 14, 2010. 194 Ubifrance, “Prêt pour l’export OSEO.” Based on an exchange rate of $1.00 = €0.8227 as of June 1, 

2010. IMF, “Representative Exchange Rates for Selected Currencies,” June 1, 2010. 195 Soutien Individualisé à la Démarche Export des PME et TPE (SIDEX) [Individualized Support to 

Promote SME Exports]. For further information, see Ubifrance, “Prospection ou Contract.” 196 Ubifrance, “SIDEX prospection ou contrat ;” and Société d’Encouragement aux Métiers d’Art, 

“SIDEX.” Based on an exchange rate of $1.00 = €0.8227 as of June 1, 2010. IMF, “Representative Exchange 

Rates for Selected Currencies,” June 1, 2010. 197 OSEO, Supporting Growth and Innovation for SMEs, 2008, 4–6. 198 Ibid. 
2-39 

 

 Loans for export of €20,000–€80,000 ($24,300–$97,240) for up to 6 years for 

SMEs to develop exports or set up a business operation in another country.199

 International development contract loans of €40,000–€400,000 ($48,620–$486,200) 

for up to 6 years (with 1 year deferral) for SMEs in business 3 years or longer 

seeking to export for the first time or already exporting a product. Loans are to 

cover intangible project costs such as costs for localization of product to foreign 

market, attending foreign trade fairs, relocating materials, and creating a foreign 

branch.200

Export promotion programs 

There are a wide range of programs to promote exporting activities by French SMEs. The 

majority are also the responsibility of Ubifrance: 

 In 2008, under the rubric of L’Équipe de France de l’Export (Team France Export), 

Ubifrance began working with such bodies as the Ministry of Economy’s Office of 

the Treasury and Political Economy, the CCIFE, the UCCIFE, and others to realign 

all of France’s existing systems for supporting SME exporting activities with the 

goal of defining their respective roles and reducing duplication of 

responsibilities.201 Beginning in 2009, the French government began placing the 

economic missions of French embassies worldwide under the management of 

Ubifrance, to enable Ubifrance to offer SME exporters a coordinated plan for 

entering international markets.202 The Programme France 2010 was launched in 

October 2009 to further consolidate the activities of Team France Export and 

increase the effectiveness of export support through international trade fairs, 

business-to-business networking, foreign trade missions, and the establishment of 

technological partnerships.203

 Since 2000, the VIE (international company volunteers) program204 has made it 

possible for individuals between 18 and 28 years of age (typically, recent graduate 

students) to work abroad on an SME company-specific export project (e.g., setting 

up a local presence or a local distribution network) for 6 to 24 months. The 

volunteers’ work is free to the SMEs; volunteers receive a monthly stipend from 

the French government.205 One source referred to the VIE program as France’s 

“hidden secret,” seeing it as an effective export promotion policy instrument that 

199 Ibid., 9. Based on an exchange rate of $1.00 = €0.8227 as of June 1, 2010. IMF, “Representative 

Exchange Rates for Selected Currencies,” June 1, 2010. 200 OSEO, Supporting Growth and Innovation for SMEs, 2008, 10. Based on an exchange rate of $1.00 = 

€0.8227 as of June 1, 2010. IMF, “Representative Exchange Rates for Selected Currencies,” June 1, 2010. 201 Ministry of the Economy, “L’équipe France de l’export.” The Ministry of Agriculture provides export 

promotion for French agricultural products via the Association for the Development of International 

Exchanges in Agriculture and Agrifood Products and Techniques, and export promotion for French food and 

beverage products is provided by the Agency for the Expansion of Sales of Food and Agricultural Products. 

Government of France, Ministry of Agriculture, Agenda de l’exportateur 2010, part 1, January 2010. 202 Government of France, Ministry of the Economy, “L’équipe France de l’export.” 203 Government of France, Ministry of Agriculture, “Le Programme France 2010 réunit les actions de 

l’Équipe de France de l’export.” 204 Volontariat international en entreprise (VIE). 205 Ubifrance, “V.I.E. en bref.” 
2-40 

MEs.

 

helps improve the skill level of SMEs as well as increase the skill level and 

international orientation of future French managers.206

 Ubifrance’s “Label France” program offers reduced costs for eligible SMEs to 

participate in international trade fairs.207

 Ubifrance’s managerial capacity building program for SMEs provides coaching 

and educational training in areas such as international logistics, customs, and legal 

issues; trade finance; international negotiations; and international business cultures. 

This complimentary program is sponsored by Ubifrance, Coface, and other French 

institutions.208

 Ubifrance offers SMEs personalized foreign market presence services, including 

foreign market intelligence and legal advice; business-to-business networking and 

technology partnerships; and assistance with press releases, local market publicity, 

translation and other localization requirements.209

 Ubifrance export strategy planning provides: 

o “Pre-diagnostic analysis” of individual firms’ intellectual and industrial 

property needs to assist SMEs in developing an international growth strategy. 

The analysis is performed by the French National Institute of Industrial 

Property (INPI). 210 Analysis is financed by INPI or cofinanced at the 

regional level, and offered free of charge to S 211

o Market prospect analysis, which includes various services offered by 

Ubifrance to allow French SMEs to test the viability of future exports in 

foreign markets, identify a customer base, and build business contacts.212

 The Ubifrance-Quebec program encourages partnerships between French and 

Quebecois SMEs. Co-financed by Ubifrance and Quebec’s Ministère du 

Développement Economique, de l’Innovation et de l’Exportation du Québec 

(Ministry of Economic Development, Innovation, and Exports).213

Also significant is the new mission entrusted to OSEO—the Pacte PME (SME Pact). 

OSEO launched this program in 2007 to encourage cooperation between large firms and 

innovation-oriented SMEs to support the SMEs’ growth and development. An 

internationalization component was added in 2009 to extend the reach of innovationoriented French SMEs into foreign markets. Actions by larger firms to support SME 

exporting activities include covering foreign lodging costs for a SME worker or 

international company volunteer and providing market advisory services.214

206 French government officials, interview with USITC staff, April 14, 2010. 207 Ubifrance, “Label France—Labellisation,” 2008. 208 Ubifrance, “Formation Export [Formatex].” 209 Ubifrance, “Contacts.” 210 Institut national de la propriété industrielle (INPI). 211 Ubifrance, “Pré-diagnostic INPI.” 212 Ubifrance, “Prospection de marché.” 213 Ubifrance, “Programme Ubifrance-Québec.” 214 OSEO, “Pacte PME international : Lancement offficiel.” 
2-41 

 

Germany 

Economic Overview 

With a GDP of almost $3.4 trillion, Germany ranked as the largest EU economy in 

2009.215 Germany was ranked 12th out of 43 European countries in 2010 by a composite 

index of economic freedom that included factors such as business freedom, trade freedom, 

investment freedom, financial freedom, and the protection of property rights.216 Germany 

scored highest in protection of property rights, ranking second worldwide in a tie with 

several other countries. Clear and evenly enforced regulations helped Germany to rank 

significantly above the world average for investment freedom.217 Germany ranked among 

the bottom half of EU members with respect to financial freedom, with private banks 

accounting for less than 30 percent of the German market and weak representation of 

foreign banks. 218 Tax regulations, labor rules, access to financing, tax rates, and 

government bureaucracy were rated as the most problematic factors for doing business in 

Germany.219

The provision of nongovernment services accounts for more than half of German 

economic activity, and industrial production makes up more than one-fourth of the 

German economy. 220 The industrial machinery, automotive, chemical, and 

telecommunications sectors rank as Germany’s main manufacturing industries. 221

Germany has many large, internationally known manufacturing firms, but the backbone 

of the German economy is often considered to be the Mittelstand—Germany’s vast 

network of primarily family-owned SMEs.222

Germany was the second largest exporter of goods in the world in 2009 behind China.223

Germany’s leading goods export markets in 2009 were France (which received 10.1 

percent of German exports), the Netherlands (6.7 percent), and the United States (6.7 

percent); about 63 percent of all German exports were destined for other EU countries. 

Machinery was Germany’s leading export in 2009, accounting for 15.1 percent of total 

exports, followed by motor vehicles and parts (14.9 percent) and chemical products (9.1 

percent).224 Germany has registered deficits on its services balance for a number of years; 

a major reason is the foreign exchange outflows associated with German travel abroad.225

215 EIU, Germany: Country Report, 2010,17. 216 Among all countries, Germany ranked as the 23rd freest economy. Heritage Foundation, “2010 Index 

of Economic Freedom: Ranking the Countries,” 217 Heritage Foundation, “Germany,” 2010 Index of Economic Freedom, 205. 218 Ibid., 206. 219 World Economic Forum, The Global Competitiveness Report, 2009–2010: Germany, 2009, 152. 220 Data are for 2007. OECD, “Country statistical profiles 2009.” 221 EIU, Germany: Country Profile, 2008, 18. 222 Ibid., 22. The German word “Mittelstand” is generally translated into English as “middle class.” 

However, the economic literature considers Mittelstand firms as types of German family-owned business, 

although Germany has a number of very large family businesses with annual sales of €50 million or more. 

“Family businesses play a pivotal role in Germany and . . . almost all of them are Mittelstand companies. . . . 

[W]e therefore use the terms Mittelstand companies/SMEs and family businesses synonymously.” Deutsche 

Bank Research, Germany’s Mittelstand—An Endangered Species? 2007, 5. 223 OECD, StatExtracts Database. 224 Government of Germany, Federal Statistical Office (FSO), “Germany’s Most Important Goods Traded 

in 2009,” February 3, 2010. 225 EIU, Germany: Country Profile, 2008, 28. 
2-42 

l trade sector.

 

SME Business Environment

SMEs account for approximately 99.5 percent of all enterprises in Germany, very close to 

the EU average (99.8 percent). 226 They account, however, for 60.1 percent of German 

national employment, significantly below the EU average (67.1 percent), and for 53.2 

percent of value added, below the EU average (57.9 percent). Micro enterprises 

accounted for 83 percent of employment in Germany’s SME sector, below the EU 

average of nearly 92 percent. 227 Small and medium-sized firms account for a greater 

share of SMEs in Germany than in the EU as a whole. 228 German SMEs are most 

prevalent in the construction and the hotel and restaurant sectors, in which they account 

for more than 90 percent of employment and more than 80 percent of total financial 

turnover. SMEs also account for most of the employment and turnover in the real estate 

and rental sector and the wholesale and retai 229

German SMEs are highly innovation-oriented, reflecting Germany’s relatively high 

ranking on many global indicators of innovation, such as patent filings and scientific and 

technical publications. 230 One source estimated that 43 percent of German SMEs are 

innovative in that they bring new or improved products into the market; according to this 

source, German SMEs have high potential for increasing their exports through the 

expansion of the production of knowledge-intensive goods and services.231

According to a recent EC assessment of the policy environment for SMEs, Germany 

generally ranked on a par with the overall EU average. Germany ranked above the EU 

average in the categories of responsive administration, regulatory environment, and skills 

and innovation, but below the EU average in the categories of entrepreneurship, 

internationalization, and some aspects of finance. In particular, the EC observed: 

226 The Institute for SME Research in Bonn (IfM Bonn), a federally funded German research institution, 

defines SMEs as enterprises with an annual turnover of less than €50 million ($61 million) and fewer than 

500 employees. Within this category, small businesses have annual turnover less than €1 million ($1.2 

million) and fewer than 10 employees; medium-sized enterprises have annual turnover of €1 million ($1.2 

million) to €50 million ($61 million) and 10 to 499 employees. Government of Germany, Ministry of 

Economics and Technology, “Small Business Policy: Priorities of German SME Policy,” 2010. Based on an 

exchange rate of $1.00 = €1.21559 as of June 1, 2010. IMF, “Representative Exchange Rates for Selected 

Currencies,” June 1, 2010. 227 Based on data for 2004 and 2005. EC, SBA Fact Sheet: Germany, 2008, 1. According to the German 

government, “the SME sector provides approximately 70% of all jobs and 80% of all training positions in 

Germany.” Government of Germany, Ministry of Economics and Technology, “Small Business Policy: 

Priorities of German SME Policy.” According to the EC, micro enterprises have fewer than 10 employees 

and an annual turnover or balance sheet of less than €2 million ($2.4 million). Medium-sized enterprises have 

50–249 employees with either annual turnover ≤ €50 million ($61 million) or a balance sheet ≤ €43 million 

($52 million). EC, Directorate-General for Enterprise and Industry, The New SME Definition: User Guide 

and Model Declaration, n.d., 14 and 16. See also table 2.1. Based on an exchange rate of $1.00 = €1.2155 as 

of June 1, 2010. IMF, “Representative Exchange Rates for Selected Currencies,” June 1, 2010. 228 Based on data for 2004 and 2005. EC, SBA Fact Sheet: Germany, 2008, 1. Data for 2007 from a 

different source indicate that SMEs account for 99.7 percent of German enterprises and 70 percent of total 

employment. Deutsche Bank Research, Germany’s Mittelstand—An Endangered Species? 2007, 7. 229 Government of Germany, FSO, “Enterprises and Local Units: Small and Medium-sized Enterprises in 

Germany,” 2008. 230 Commission of Experts for Research and Innovation (EFI), Research, Innovation, and Technological 

Innovation in Germany, 2009, 100–101. 231 Ibid., 12, 57, and 112. 
2-43 

 

 Responsive administration: Germany performed above the EU average, with data 

suggesting that the costs to close a business and to enforce contracts are lower in 

Germany than the EU average. 

 Regulatory environment: Germany ranked above the EU average with respect to 

legal rights and access to credit information. However, Germany ranked 

significantly below the EU average in the degree of support among SMEs for 

current regulations.232

Several German sources contacted by the Commission reported that a complex regulatory 

environment has an adverse impact on the general business climate in Germany. “The 

complexity of the German tax system is the greatest deterrent to setting up a business 

there . . . SMEs are particularly dependent on a transparent, uncomplicated and 

comparatively light-load tax system.”233

 Skills and innovation: While on a par with the EU average with respect to 

providing vocational training and learning activities, German SMEs performed 

above the EU average in terms of introducing organization innovation and using 

the Internet. 

 Entrepreneurship: Germany lagged the EU average in participation in 

entrepreneurship education and in the desire to become self-employed. 234 One 

source contacted by the Commission stated that Germans tended to be biased 

against business ownership and more inclined toward working for a larger, more 

established firm. 235 Another source described the tendency for German SME 

managers to be risk averse as an impediment to new business ventures such as 

exporting.236

 Internationalization: German SMEs reported a lower share of turnover 

originating from exports than the EU average, and reported a lower share of income 

from subsidiaries and/or joint ventures abroad than the EU average. German SMEs 

also recorded a smaller share of intra-EU exporting than the EU average. German 

SMEs required substantially fewer days to import and export (7 days) than the EU 

average (13 days), suggesting that Germany has relatively more efficient 

procedures for international trade. 

 Finance: While generally performing on par with the EU average, Germany ranked 

below the EU average with respect to the extent of guarantees available for 

SMEs.237

232 EC, SBA Fact Sheet: Germany, 2008, 2–3. 233 Deutsche Bank Research, Germany’s Mittelstand—An Endangered Species? 2007, 12–14. 234 EC, SBA Fact Sheet: Germany, 2008, 2–3. 235 German government official, interview with USITC staff, April 7, 2010. 236 German industry representative, interview with USITC staff, April 9, 2010. 237 EC, SBA Fact Sheet: Germany, 2008, 2–3. 
2-44 

 

SME Exporting Activities 

German SMEs are relatively active exporters. Approximately 12 percent of German 

enterprises, or a total of 350,000 firms, engage in exporting activities, and about 98 

percent of those exporters are SMEs.238 With 9 percent of SMEs receiving revenues from 

exporting, Germany ranks marginally above the EU average (8 percent) in SME 

exporting activities, according to EC survey data.239 SMEs are not just important for the 

German domestic market, but “they also represent an important mainstay of the German 

export industry.”240 Confirming the observation in the economic literature that exporting 

activity increases with firm size, one source reported that in 2006 only 3 percent of 

German micro-sized enterprises received revenues from exporting, while 9.9 percent of 

small SMEs and 16.9 percent of medium-sized SMEs received revenues from 

exporting.241 However, the value of German SME exports appears to be relatively small, 

with the overall share of SME turnover originating from exports estimated to be 3.5 

percent, below the EU average of 4.6 percent.242 Many sources explained that these data 

do not appropriately reflect the indirect exports many German SMEs participate in, 

especially among the medium-sized firms that supply the larger exporting firms with 

intermediary inputs. 

Exporting is most important for German SMEs in the transportation goods and 

manufacturing sectors, in which exports on average account for more than one-fifth of 

total sales.243 Like their larger counterparts, German SMEs also focus on high-technology, 

R&D-intensive, high-value exports. As a result, having low price margins is not as 

imperative for German SME exporters to be globally competitive as it is for exporters in 

other countries.244 One source observed that many German SMEs work closely with large 

firms and depend on large firms for the market-expanding opportunities created by 

exporting. This source stated that the German motor vehicles, machinery, and chemical 

industries were examples of sectors with mutual interdependence between SMEs and 

large firms.245

EC survey data show that other EU countries, particularly the newer EU members of 

Eastern Europe, accounted for 81 percent of German SME exports; 11 percent of German 

SME exports were shipped to non-EU Europe, and 8 percent of SME exports were 

shipped outside Europe.246 German SMEs are also significant indirect exporters through 

their extensive supply-chain linkages with larger firms and industry clusters. For example, 

238 Deutsche Bank Research, Germany’s Mittelstand—An Endangered Species? 2007, 8. These data are 

generally consistent with another source, which states that “345,049 of the German SMEs were involved in 

exports in 2006—this amounts to 11.2 % of all SMEs and 97.8 % of all enterprises involved in cross-border 

trade.” Hauser and Werner, “Fostering International Entrepreneurship: Are SMEs Targeted Adequately?” 

2009, 4. 239 Based on 2005 data. Gallup, Observatory of European SMEs: Analytical Report, 2007, 44. 240 Deutsche Bank Research, Germany’s Mittelstand—An Endangered Species? 2007, 8. 241 Hauser and Werner, “Fostering International Entrepreneurship: Are SMEs Targeted Adequately?” 

2009, 4, table 1. 242 EC, SBA Fact Sheet: Germany, 2008, 3. 243 Data are for 2004. Deutsche Bank Research, Germany’s Mittelstand—An Endangered Species? 2007, 

9. 244 German government official, interview with USITC staff, April 7, 2010. 245 German academic official, interview with USITC staff, April 7, 2010. 246 Data are for 2005. Gallup, Observatory of European SMEs, Analytical Report, 2007, 48; and Institute 

for SME Research Bonn, The Importance of the Foreign Trade Activities for German SMEs, 2007, 2. 
2-45 

MEs.

 

one source reported that a German SME was retrofitting handicapped chairs to fit into 

Audi motor vehicles.247

Exporting Constraints Facing SMEs

In an EC report, the most frequently reported constraints to exporting by German SMEs 

were different regulations in other EU countries (reported by 14 percent of German 

SMEs), lack of knowledge of foreign markets (12 percent), and tariffs in destination 

markets (11 percent).248

Using the most important barriers to SME exporting activities identified by the OECD as 

a guideline, 249 the Commission identified the following barriers reported by German 

firms: 

 Shortage of capital to finance exports: Sources generally cited the lack of 

financing as the most significant constraint to German SME business expansion 

generally, including exporting activities.250 Sources noted that although financing 

was difficult to obtain before the 2008–09 global economic downturn, SMEs 

tended to borrow from nontraditional banking sources; as a result, SMEs suffered 

less than larger firms from the reduced availability of bank financing.251

 Limited information to locate and analyze markets: While German SMEs 

generally were reported to have better access to information about potential foreign 

markets than SMEs in other European countries, 252 one German government 

official stated that the lack of foreign market information was by far the greatest 

impediment faced by SMEs. 253 Other sources also identified the lack of 

information about foreign markets as a problem for German SME exporters.254 To 

improve information about foreign markets, Germany embassies, domestic and 

foreign commercial services, and industry associations provide a strong support 

network for German S 255

 Lack of managerial time, skill, and knowledge: Sources contacted by the 

Commission did not indicate that this OECD-identified barrier had a significant 

adverse impact on SME exporting activities in Germany. 

247 German government official, interview with USITC staff, April 7, 2010. 248 Gallup, Observatory of European SMEs: Analytical Report, 2007, 52. 249 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7; OECD, Removing Barriers to 

SME Access to International Markets, 2008, 54. 250 German government official, interview with USITC staff, April 7, 2010; German government official, 

interview with USITC staff, April 7, 2010; German government official, interview with USITC staff, April 9, 

2010. 251 German government official, interview with USITC staff, April 7, 2010. 252 German industry official, interview with USITC staff, April 9, 2010. 253 German government official, interview with USITC staff, April 7, 2010. 254 German academic official, interview with USITC staff, April 7, 2010; Institute for SME Research 

Bonn, The Importance of the Foreign Trade Activities for German SMEs, April 2007, 4. 255 German industry official, interview with USITC staff, April 9, 2010. 
2-46 

 

Other barriers to German SME exporting activities identified by the Commission include: 

 Low use of public sector support programs: One source reported that “a 

significant characteristic of SME promotion in Germany is the abundance of 

programmes with numerous sources of funding that have created a complex and 

non-transparent system of SME promotion.” 256 Concerns raised included the 

complex structure of the German export promotion system for SMEs, which 

effectively required that firms have some prior knowledge about the export 

promotion system, putting SMEs at a disadvantage relative to larger firms; the fact 

that “SMEs perceive the current promotion scheme as complex and confusing and 

the current promotion scheme implies the existence of in-house capabilities and 

management resources which SMEs typically do not possess”;257 and the lack of a 

one-stop agency for SMEs. 258 Another study concluded that although SMEs 

apparently benefit from German export promotion programs, “the current 

promotion system seems to put them systematically at a disadvantage” because 

large firms are able to incorporate “windfall gains” that are not accessible to 

SMEs.259

 Export controls: Some sources identified German export controls as a barrier to 

German SME exporting activities, especially for exports containing hightechnology dual-use (civilian and potential military use) components.260 The degree 

of export control varies considerably by sector, with sectors using dual-use 

technology being subject to scanning of all of their export containers instead of 

undergoing statistical sampling, as is done in many other industrialized 

countries.261 One source reported that the dual use of computer chips and encrypted 

cell phones were particularly problematic for SME exporters.262 Another source 

stated that export controls were a constraint with respect to exports to the Middle 

East, but not an issue for exports to other EU countries.263 Specific concerns cited 

were that export control regimes add to uncertainty, time, and costs for exporters—

factors that have a particularly adverse impact on SME exporters.264 

 Foreign nontariff barriers: Foreign technical standards in important export 

markets, especially the United States, were reported as a barrier to German SME 

exporting activities. German officials stated that U.S. nontariff barriers in the 

automotive sectors were particularly detrimental because most of the suppliers to 

Germany’s large motor vehicle manufacturers are SMEs.265

256 Führmann, “SME Promotion in Germany,” 2002, 3. 257 Hauser and Werner, “Fostering International Entrepreneurship: Are SMEs Targeted Adequately by 

Official Foreign Trade Promotion Schemes?” 2009, 15. 258 German academic official, interview with USITC staff, April 7, 2010. 259 Hauser, “The Impact of Foreign Trade Promotion on the Foreign Sales Intensity of SMEs,” January 

2009, 5 and 16. 260 German government official, interview with USITC staff, April 7, 2010; German industry official, 

interview with USITC staff, April 9, 2010. 261 German industry official, interview with USITC staff, April 9, 2010. 262 German government official, interview with USITC staff, April 7, 2010. 263 German academic official, interview with USITC staff, April 7, 2010. 264 German government official, interview with USITC staff, April 7, 2010; German industry official, 

interview with USITC staff, April 9, 2010. 265 German industry official, interview with USITC staff, April 9, 2010. 
2-47 

 

National Policies and Programs Supporting SME Exporting Activities 

German government institutions provide numerous programs at the national, state 

(Länder), and local levels to support the growth and development of SMEs. Some of 

these programs are part of German regional economic policy, which aims to reduce the 

disparities between different regions, such as less affluent regions in eastern Germany or 

other parts of the country.266 The German government’s small business policy includes 

measures to reduce the administrative burden, improve access to loan financing, and 

lower certain tax rates for SMEs.267 Germany also provides a range of policies at the 

federal, state, and local levels to support SME internationalization (including 

international cooperation, international contract production, international licensing, 

foreign direct investments), exporting activities, and the development of foreign markets 

and production sites.268

The Ministry of Economics and Technology (Ministry of Economics)269 is Germany’s 

lead agency in developing policies to promote foreign trade and investment. The Ministry 

of Economics works closely with the German private sector to develop instruments for 

foreign trade and investment promotion and to adapt these instruments to changing needs 

and demands. 270 Germany Trade and Invest (under the Ministry of Economics) is 

Germany’s foreign trade and investment promotion agency;271 its mission is to promote 

Germany as a location for industrial and technological investments and to identify 

investors for the German market to promote economic activity in Germany. 272 The 

Federal Office of Economics and Export Control (also under the Ministry of Economics) 

provides information on export controls and conducts trade promotion activities 

specifically directed at German SMEs.273

KfW Bankengruppe (KfW), a German government-owned development bank, makes a 

number of financing instruments available to German SMEs.274 KfW reported that it had 

taken on a greater role in providing financing for SME suppliers and buyers as a result of 

the 2008–09 global financial crises. Rather than create new financial instruments, KkfW 

has focused on expanding instruments that have been successfully used in the past.275

KfW also provides trade financing to other European SMEs. For example, KfW has 

provided financing to Finnvera, Finland’s government-owned export credit agency, since 

2000 to support Finnish SMEs.276

266 Führmann, “SME Promotion in Germany,” 2002, 12. 267 Government of Germany, Ministry of Economics, “Small Business Policy: Priorities of German SME 

Policy.” 268 Führmann, “SME Promotion in Germany,” 2002, 19. 269 Bundesministerium für Wirtschaft und Technologie (BMWi). 270 Government of Germany, Ministry of Economics, “Promotion of Foreign Trade and Investment.” 271 German government official, interview with USITC staff, April 7, 2010. 272 Government of Germany, Germany Trade and Invest Web site, 

http://www.gtai.de/EN/Navigation/Metanavigation/Home/home-node.html (accessed May 17, 2010). 273 EC, “Doing Business Outside the EU: Germany,” November 2009. 274 German government official, interview with USITC staff, April 7, 2010; Deutsche Bank Research, 

Germany’s Mittelstand—An Endangered Species? 2007, 16; KfW, “KfW Bankengruppe,” Web site, 

http://www.kfw.de/EN_Home/index.jsp (accessed May 17, 2010). 275 German government official, interview with USITC staff, April 7, 2010. 276KfW, “KfW’s Support for SMEs Continues to Go European,” June 13, 2002. 
2-48 

rting.

 

Government financial assistance programs in support of SME exporting activities

Direct government support to promote German SME exporting activities is primarily 

provided through financing arrangements provided by KfW. The main components of 

direct government support programs offered by the German government are: 

 Preferential loans. Loans effectively provide subsidized credit through lower 

interest rates to qualifying SMEs. SMEs can obtain this financing either directly 

from KfW or by applying through private banks.277

 Credit and investment guarantees. 278 German export credit guarantees, often 

referred to as Hermes cover, 279 are particularly useful for German trade with 

markets considered to pose more risk, such as Russia—Germany’s 11th most 

important export market.280

 KfW’s “SME Program-Abroad.” This program provides low-interest loans to 

German SMEs to pursue foreign investment activities.281

Export promotion programs

Examples of German export promotion programs and activities for SMEs include: 

 Information on foreign markets. Germany Trade and Invest provides information 

on foreign trade to German companies seeking access to foreign markets. It has an 

international network of industry analysts who work with the German Chambers of 

Industry and Commerce (German Chambers, described below) to conduct research 

on foreign markets. 282 It also supplies the German Chambers with the foreign 

market information that the German Chambers provide to SMEs. Germany Trade 

and Invest provides client-oriented economic and industry data, as well as 

information about calls for proposals in foreign countries, investment and 

development projects, and legal and customs regulations.283 The German Chambers 

also have a worldwide network (German Chambers Abroad, AHK) that provides 

German SMEs with information about foreign markets. 284 Contact with the 

German Chambers is typically the first step SMEs undertake before expo 285

 Assistance in foreign markets. AHK has about 120 offices in 80 countries. They are 

mostly independent institutions which earn a major share of their income through 

the services they provide. The AHK provides SMEs with professional consultation 

277 German academic official, interview with USITC staff, April 7, 2010. 278 German industry official, interview with USITC staff, April 9, 2010; Führmann, “SME Promotion in 

Germany,” July 2002, 20; Government of Germany, FSO, Statistisches Bundesamt: Foreign Trade, 2010, 1. 279 So named because management of the guarantees is provided by Euler Hermes KreditversicherungsAG (Euler Hermes) and PricewaterhouseCoopers AG WPG. For further information, see Euler Hermes 

Kreditversicherungs-AG, “Federal Export Credit Guarantees.” 280 Euler Hermes Kreditversicherungs-AG, “Federal Export Credit Guarantees.” 281 Führmann, “SME Promotion in Germany,” 2002, 20. 282 Government of Germany, Germany Trade and Invest; German government official, interview with 

USITC staff, April 7, 2010. 283 Government of Germany, Germany Trade and Invest, “About Us.” 284 Führmann, “SME Promotion in Germany,” July 2002, 19–20. 285 German government official, interview with USITC staff, April 7, 2010. 
2-49 

 

and information on external markets. Basic information is free of charge, but 

detailed analysis and specific individual consulting are fee-based. 286 The EC 

identified AHK as an example of a European best practice in providing high-value 

information—on such topics as foreign business opportunities, potential partners, 

foreign business practices, export procedures, import regulations, standards and 

product specifications, laws and regulations, and marketing requirements—to 

SMEs.287

 Support for participation in international trade fairs. The German government 

funds the participation of German companies in trade fairs (firms pay their own 

travel expenses288) for firms that produce products in Germany or that manufacture 

abroad under German license under the national Foreign Trade Fair Program, the 

Fair Program for Innovative Companies, and Trade Fair Program of the Federal 

States.289 According to one source, German SMEs tend to attend trade shows first 

before seeking assistance from German Chambers of Commerce to finalize trade 

deals.290

 The Weltweit aktiv (“Active Worldwide”) foreign trade promotion program. This 

program was launched in 2003 by the Ministry of Economics to help German 

companies enter foreign markets. The program’s main priorities include expanding 

the number of German Chambers Abroad, improving the range of services offered 

to German exporters, improving access to trade credit, improving the amount of 

information and services available through the Internet, and increasing participation 

in trade fairs.291

 FDI promotion. Germany uses FDI promotion as a vehicle for promoting German 

exports. Germany seeks foreign companies interested in investing in Germany as 

an export platform to the rest of the EU, thereby taking advantage of Germany’s 

highly developed infrastructure, central location in the EU, pro-business culture, 

and large high-tech sector. Germany also supports inbound FDI, especially as it 

relates to firms doing greenfield investment in Germany’s high-tech exportoriented industries.292

 Regional initiatives. German region-based export promotion policies vary widely 

by region. Each of Germany’s regions has its own development bank to help ensure 

that SMEs have access to business development loans.293 In addition, some regions 

are very active in promoting local exports and attracting investment to their 

region.294 For example, the German state of Bavaria has an office in New York that 

sponsors trade fairs and other events to promote the interests of German firms from 

that state. The Ministry of Economic Affairs and Energy of the state of North 

286 EC, Supporting the Internationalization of SMEs: Good Practice, 2008, 15. 287 EC, Supporting the Internationalization of SMEs: Good Practice, 2008, 13. 288 German government official, interview with USITC staff, April 7, 2010 289 German government official, interview with USITC staff, April 7, 2010; Government of Germany, 

Ministry of Economics, Federal Office of Economics and Export Control, “Funding for Trade Fairs and 

Foreign Trade Aid.” 290 German government official, interview with USITC staff, April 9, 2010. 291 Government of Germany, Ministry of Economics, “Foreign Trade Campaign.” 292 German government official, interview with USITC staff, April 7, 2010. 293 German academic official, interview with USITC staff, April 7, 2010. 294 German industry official, interview with USITC staff, April 9, 2010. 
2-50 

 

Rhine-Westphalia promotes innovation and exporting activities of SMEs from that 

state. 295 Germany also works with other EU countries on a regional basis to 

promote SME exports within the EU market, as described in box 2.4. 

Ireland 

Economic Overview

With a GDP of about $222 billion, Ireland was the 14th largest EU economy in 2009.296

It was ranked as the “freest economy in the Europe region” and fifth worldwide in 2010 

by a composite index of economic freedom that included factors such as business 

freedom, trade freedom, investment freedom, financial freedom, and the protection of 

property rights. Ireland tied with Luxembourg as offering the greatest investment 

freedom in the world.297 Limited access to financing, inefficient government bureaucracy, 

inadequate supply of infrastructure, and restrictive labor regulations were ranked as the 

most problematic factors for doing business in Ireland in 2009.298

With an economy that is open to international trade and investment, Ireland has become 

highly integrated into the global economy. Ireland is one of the world’s largest exporters 

on a per capita basis, reflecting Ireland’s strongly export-oriented manufacturing 

activity. 299 Ireland also has a significant Dublin-based international financial services 

industry.300 The leading sectors in Ireland’s economy are services (54.6 percent), mining 

and manufacturing (28.6 percent), construction (13 percent), and agriculture (1.7 

percent).301 In 2008, Ireland’s leading goods exports were chemicals (26 percent of total 

manufactured exports by value); medical and pharmaceutical products (19 percent); and 

office machinery and processing equipment (11 percent). Ireland’s leading services 

exports in 2008 were computer services (35 percent of total services exports); business 

services (29 percent) and financial services and insurance (23 percent).302

The euro is Ireland’s official currency. However, unlike most euro zone countries, 

Ireland’s main trading partners—the United Kingdom and the United States—are noneuro zone countries. Ireland’s high dependence on non-euro export markets makes euro 

exchange rate trends an important determinant of Ireland’s trade performance. 

295 Government of Germany, Bavarian Ministry for Economic Affairs, Infrastructure, Transport and 

Technology; Ministry of Economic Affairs and Energy, North Rhine-Westphalia. 296 EIU, Country Report: Ireland, 2010, 14. 297 Among all countries, Ireland ranked as the fifth freest. Heritage Foundation, “Ireland,” 2010 Index of 

Economic Freedom, 237. 298 World Economic Forum, The Global Competitiveness Report, 2009–2010: Ireland, 2009, 174. 299 EIU, Ireland: Country Profile, 2008, 29. 300 Ibid., 27. 301 Calculated by USITC staff using data from Government of Ireland, Central Statistical Office (CSO), 

“Output and Value Added” data tables (accessed February 24, 2010). 302 Government of Ireland, Forfás, National Competitiveness Council, Driving Export Growth, 2009, 21. 
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BOX 2.4 Promoting cross-border region-to-region SME exports: The Netherlands–North Rhine-Westphalia INTERNED program 

The Netherlands–North Rhine-Westphalia (Germany) INTER-NED program provides a one-stop shop of 

comprehensive information and advice for German and Dutch SMEs to support cross-border foreign trade and 

business relations. The project connects about 20 chambers of commerce, business development organizations, 

technology centers, and universities on both sides of the border to provide training, market information, and business 

support services to promote SME cross-border exports between two neighboring and historically linked regions. The 

EC identified this program as an example of a European best practice in providing cross-border information services 

to assist SME exporting activities. 

Sources: EC, Supporting the Internationalisation of SMEs, 2008, 44.

Since 2000, Ireland’s economic growth has been driven by FDI in export-oriented 

manufacturing and services.303 The food and beverages sector is the largest in Ireland 

predominantly made up of Irish-owned enterprises. 304 Ireland’s other leading 

manufacturing industries are predominantly foreign owned. 305 In 2006, exports by 

foreign-owned companies in Ireland were valued at almost €80 billion ($97 billion), by 

contrast with exports by Irish companies, valued at about €7 billion ($8.5 billion).306

Foreign companies exported mainly to euro zone countries (53 percent of total exports), 

the United States (19 percent), and the United Kingdom (15 percent). Irish-owned 

companies exported mainly to the United Kingdom (45 percent) and euro zone countries 

(38 percent), with a significantly smaller share of exports to the United States (8 

percent).307

SME Business Environment

SMEs account for approximately 99.5 percent of all enterprises in Ireland, about the same 

as the EU average (99.8 percent). SMEs in Ireland account for 66.6 percent of national 

employment, slightly below the EU average (67.1 percent), and 55.6 percent of value 

added, slightly below the EU average (57.9 percent).308 More than one-half of Ireland’s 

SME workforce is found in firms employing fewer than 50 people.309

According to a recent EC assessment of the policy environment for SMEs, Ireland ranked 

above the EU average in the categories of entrepreneurship, responsive administration, 

finance, internationalization, and skills and innovation. In particular, the EC observed: 

 Entrepreneurship: Irish citizens were found to have a more favorable attitude 

toward entrepreneurship and growing a new business. Ireland also was reported to 

have a significantly higher share of female entrepreneurs than the EU average. 

 

303 EIU, Ireland: Country Profile, 2008, 20–21. 304 Government of Ireland, Fotfás, National Competitiveness Council, Driving Export Growth, 2009, 9. 305 EIU, Ireland: Country Profile, 2008, 18. 306 Based on an exchange rate of $1.00 = €0.8227 as of June 1, 2010. IMF, “Representative Exchange 

Rates for Selected Currencies,” June 1, 2010. 307 Government of Ireland, Forfás, Enterprise Statistics at a Glance, 2009, 34, table 3.6. 308 Based on data for 2004 and 2005. EC, SBA Fact Sheet: Ireland, 2008, 1. 309 EC, SBA Fact Sheet: Ireland, 2008, 1; Government of Ireland, Department of Finance, “The SME 

Sector in Ireland: Information Paper,” 2006, 1. 
2-52 

 firms.

 

 Responsive administration: Starting a business in Ireland took an average of two 

weeks, compared to an overall average of 20 days for EU countries. 

 Finance: The interest rate spread for loans in Ireland was the smallest in the EU. 

Ireland also is characterized by strong legal rights in financial matters and a lower 

rate of contract payment delays compared to other EU countries.310

 Internationalization: Despite having a lower share of turnover from exports than 

many other EU countries, Irish SMEs were found to be internationally more active 

than the EU average in terms of gaining income from subsidiaries and/or joint 

ventures abroad and purchasing inputs abroad.311 According to public and private 

sector representatives, the small size of Ireland’s domestic market makes exporting 

an especially attractive way for Irish firms to grow.312

 Skills and innovation: Ireland reportedly significantly outperformed the EU 

average in policy areas and in innovation indicators.313 Irish SMEs were found to 

be more active in Internet-based trade than the EU average. 314 As discussed in 

more detail below, Ireland has a specific program that identifies and supports 

exporting activities by high-potential startup 315

The Government of Ireland reported that 82 percent of all industrial enterprises 

(excluding agricultural, construction, and services) in Ireland were small enterprises 

(SEs),316 of which more than half had fewer than 10 employees in 2004, the most recent 

year for which such data are reported. SEs employed about 53,000 workers of the 

235,000 total employed in Ireland’s industrial sector in 2004. Almost 95 percent of 

industrial SEs were Irish owned, while 41 percent of larger industrial enterprises in 

Ireland were foreign owned in 2004.317

The Government of Ireland reported that SEs accounted for 98 percent of all businesses 

in Ireland’s services sector in 2004. SEs employed more than half of all service sector 

workers318 and accounted for more than half of total services sector turnover in 2004.319

About 93 percent of services sector SEs were Irish owned, while almost 19 percent of 

larger services enterprises in Ireland were foreign owned in 2004.320

310 EC, SBA Fact Sheet: Ireland, 2008, 2. 311 EC, SBA Fact Sheet: Ireland, 2008, 2. 312 Irish public sector official, interview with USITC staff, April 15, 2010; Irish private sector 

representative, interview with USITC staff, April 15, 2010. 313 Ibid., 2–3. 314 Irish private sector representative, Interview with USITC staff, April 15, 2010. 315 EI, “Startup Funding.” 316 The Government of Ireland defines SEs as enterprises employing fewer than 50 individuals. 

Government of Ireland, Central Statistics Office, Small Businesses in Ireland, May 2007, 9. 317 Government of Ireland, CSO, Small Businesses in Ireland, 2007, 14. 318 Ibid., 19. 319 Ibid., 20, table 3.3. 320 Ibid., 37, table 5.4. 
2-53 

 

SME Exporting Activities 

With 11 percent of SMEs engaged in exporting, Ireland ranks above the EU average (8 

percent) in SME exporting activity, according to EC survey data. 321 However, Irish 

industrial SEs are generally less export-intensive than larger firms, with SMEs exporting 

50 percent of their average turnover versus 85 percent for larger firms.322 The value of 

exports by industrial SEs declined from €2.7 billion ($3.3 billion) in 2000 to €2.1 billion 

($2.6 billion) in 2004, compared to an increase in exports by medium and large industrial 

enterprises from €69.5 billion ($85 billion) to €78.7 billion ($96 billion) during the same 

period. 323

Compared to larger firms, Irish industrial SEs shipped a significantly larger share of their 

exports to the United Kingdom and smaller shares of their exports to euro zone countries 

and to the United States. SEs shipped 42 percent of their exports to euro zone countries, 

40 percent to the UK, and 8 percent to the United States; medium-sized and large 

enterprises shipped 54 percent of their exports to euro zone countries, 16 percent to the 

United Kingdom, 14 percent to the United States, and 16 percent to the rest of the 

world.324 Because of the strong presence of multinational manufacturing firms in Ireland, 

it is also highly likely that many Irish SMEs do not export directly but instead supply 

larger firms which are the ultimate exporters of record.325 According to the EC, using the 

standard SME definition, the EU is the main destination of Irish SME exports, with 95 

percent going to the EU, 5 percent going outside Europe, and no exports going to non-EU 

Europe.326

Exporting Constraints Facing SMEs

The Government of Ireland has conducted a number of studies to assess the international 

competitiveness of Irish exporting industries. Irish exporting industries generally were 

reported to have been transformed over the past decade “with a major restructuring 

towards higher value added activities and knowledge-intensive employment, particularly 

in services,” although it was noted that “[w]e need to improve our attractiveness to 

overseas investors and create a business environment that encourages greater 

entrepreneurship and the development of more innovative, globally-competitive and 

largely-export focused Irish owned companies.”327 

In an EC report, the most frequently reported constraints to exporting by Irish SMEs were 

lack of capital (reported by 19 percent of Irish SMEs), lack of knowledge of foreign 

markets (15 percent), and tariffs in the destination markets (9 percent).328

321 Based on 2005 data. Gallup, Observatory of European SMEs: Analytical Report, 2007, 44. 322 Government of Ireland, Department of Finance, “The SME Sector in Ireland: Information Paper,” 

2006, 4. 323 Based on an exchange rate of $1.00 = €0.8227 as of June 1, 2010. IMF, “Representative Exchange 

Rates for Selected Currencies,” June 1, 2010. 324 Government of Ireland, CSO, Small Businesses in Ireland, 2007, 16, table 2.9 and 17, figure 2.3. 325 Government of Ireland, Forfás, National Competitiveness Council, Driving Export Growth, 2009, 26. 326 Gallup, Observatory of European SMEs: Analytical Report, 2007, 48. 327 Government of Ireland, Forfás, National Competitiveness Council, Ireland’s Competitiveness 

Challenge, 13–14. 328 Gallup, Observatory of European SMEs: Analytical Report, 2007, 53. 
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Using the most important barriers to SME exporting activities identified by the OECD as 

a guideline,329 the Commission identified the following barriers reported by Irish firms: 

 Shortage of capital to finance exports: A recent EC assessment found that Irish 

SMEs face greater difficulty than the EU average in finding available venture 

capital, both at the early and at the expansion stage. In addition, Ireland’s share of 

EC 2007–2013 structural funds allocations for stimulating entrepreneurship and 

SMEs is smaller than the EU average. The EC also noted that Irish SMEs reported 

a lower share of turnover from exporting than many other EU countries, indicating 

a lower degree of internationalization of Irish SMEs.330 

The 2008 Irish Exporters Association (IEA) survey mainly of SEs reported that 

Irish exporters predominantly used open account credit terms for export payments 

and that the use of letters of credit was declining.331 (A 2006 IEA survey reported 

that the use of open account trading reflected the fact that such terms are simple to 

arrange and avoid fees associated with other payments.332) The 2008 IEA survey 

also found that Irish exporters tended to use their own funds rather than bank 

financing to finance exports, with banking overdraft facilities the second most used 

source of export financing. The survey report noted that this was “an important 

outcome of the survey, in the after-math of the ‘credit crisis’ and the potential 

tightening of availability of funds from the banks.”333

In its 2006 survey, the IEA reported that almost 18 percent of service exporters 

stated that they had experienced difficulties in obtaining bank financing, and the 

report noted that the survey results suggested “a strong need for banks to re-look at 

the way they access and deal with the intangible assets that service exporters deal 

in.”334 The 2008 IEA survey reported that 97 percent of Irish exporters reported no 

problems obtaining funds from banks for financing their business; however, the 

report noted that “this would appear to indicate that businesses do not go to their 

banks for funding for export trade.” 335

The IEA surveys appear to indicate a shift in Irish exporters’ views of export 

financing risks. The 2006 survey reported a “surprising and disturbing lack of risk 

management” by Irish exporters (82 percent of exporters surveyed did not use 

credit insurance) because they considered it too expensive and too complicated.336

However, the 2008 survey reported that the use of credit insurance was a “rising 

trend” and that a “substantial change in attitude” had occurred since the 2006 

329 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7; OECD, Removing Barriers to 

SME Access to International Markets, 2008, 54. 330 EC, SBA Fact Sheet: Ireland, 2008, 2. 331 Ibid., 18. 332 IEA, Export Ireland Survey 2006, n.d.. 27. 333 IEA, Export Ireland Survey 2008, 2008, 20. 334 IEA, Export Ireland Survey 2006, n.d., 17. 335 Ibid. 336 The survey noted that “the low level of Export Credit insurance by Irish exporters as shown by the 

survey is not untypical of that associated with small exporters in other European countries and the USA. 

However, many of these countries have introduced a special Export Credit insurance scheme for small to 

medium-sized companies to address the perceived lower utilization levels, the consequent high risk exposure 

and longer term detrimental effects of potentially fewer small enterprises remaining active in export 

markets.” IEA, Export Ireland Survey 2006, n.d., 27. 
2-55 

survey.337 Nevertheless, the 2008 survey reported that more than 75 percent of 

exporters still did not use credit insurance. In addition, the IEA observed that many 

respondents reported that credit insurance was “not needed” because the firm was 

managed by a parent group that managed insurance; because the firm was a MNC 

that only conducted intercompany trade and did not need credit insurance; or 

because the firm carefully screened its customer base.338

 Problems identifying foreign business opportunities: Sources contacted by the 

Commission generally did not indicate that this OECD-identified barrier had a 

significant adverse impact on SME exporting activities in Ireland. However, one 

private sector representative stated that Irish SME owners or managers lacked 

extensive exporting experience apart from the English-speaking U.S. and UK 

markets, and that Irish SME exporters faced significant challenges breaking into 

the Chinese market. That source also expressed concern about the costs involved in 

developing new export markets and about Ireland’s apparent overreliance on the 

UK export market.339

Other barriers to Irish SME exporting activities identified by the Commission include: 

 Currency fluctuation: A 2008 IEA survey of primarily Irish-owned SMEs 340

found that exchange rate fluctuations ranked among the most important cost factors 

facing Irish exporters.341 Respondents ranked euro fluctuations vis-à-vis the U.S. 

dollar and the pound sterling as the top barrier for Irish exports to the key U.S. and 

UK markets.342 Individuals contacted by the Commission during the course of this 

investigation also identified exchange rate fluctuations as problematic for Irish 

exporters. 343 As one way of addressing exchange rate fluctuations, exporters 

reported that they were managing to get U.S. and UK buyers to accept invoicing in 

euros—effectively transferring the exchange rate uncertainty to the importer.344

 Low use of public sector support programs: In its 2008 report, the IEA survey 

reported that “surprisingly the use of Enterprise Ireland offices and the Irish 

Embassies abroad is very low, with only 7 percent of businesses stating they use EI 

offices, and only 1 percent stating they use . . . the embassies when identifying 

export opportunities. The use of these key state support agencies located in foreign 

markets has almost halved since the last survey,” suggesting a greater need for 

government support agencies to promote their services to the Irish business 

community.345 The survey concluded that Irish exporters “are very mature and tend 

to mainly identify export sales opportunities using their own marketing efforts.”346

The use of overseas agents and distributors, Internet-based sales, and trade fairs 

 

337 The IEA noted that it launched “a major campaign to extend the use of credit insurance during 

2007.”IEA, Export Ireland Survey 2008, 2008, 7, 28. 338 IEA, Export Ireland Survey 2008, 2008, 7. 339 Irish private sector representative, interview with USITC staff, April 15, 2010. 340 Irish-owned SME exporters made up 78 percent of the survey sample; multinational corporations and 

large corporations made up 22 percent. IEA, Export Ireland Survey 2008, November 2008, 36. 341 Ibid., 10. 342 Ibid., 14. 343 Irish private sector representative, interview with USITC staff, April 15, 2010. 344 Ibid., 16. 345 IEA, Export Ireland Survey 2008, November 2008, 33. 346 Ibid. 
2-56 

 

were also important strategies used by Irish exporters.347 The IEA reported that 

Irish exporters’ overall satisfaction rating of government support services has 

declined since its last survey.348

 Domestic costs: In its 2008 survey, the IEA found that labor costs and energy costs 

were the top-ranking cost factors facing Irish exporters.349 The Irish government 

reported that the country’s exporting industries faced high costs of land, office and 

factory space, and housing; limited competition in locally traded sectors of the 

economy, particularly in professional services; high utility costs (especially energy 

costs and waste disposal charges); fees imposed by local authorities (e.g., for 

access to utilities); and inadequate credit for local businesses. 350 As in many 

countries, Irish officials viewed the small operating scale of many Irish firms as a 

significant barrier to exporting. 351

 Foreign barriers. Irish exporters perceived Poland as having the lowest overall 

barriers to market entry. The United Kingdom and the United States ranked lowest 

in terms of language and cultural differences as export barriers, while China, Japan, 

and India ranked highest. With respect to establishing local relationships as a 

barrier to exports, Irish exporters ranked the United States more favorably than 

Ireland’s leading EU trade partners. However, Irish exporters ranked the U.S. 

market as presenting more barriers than other leading markets with respect to the 

scale of business and capital investment required for market entry.352

National Policies and Programs Supporting SME Exporting Activities 

The Government of Ireland provides support for SME exporting activities primarily 

through the Department of Enterprise, Trade, and Employment (DETE) and agencies 

under the aegis of DETE, including Enterprise Ireland (EI), Ireland’s lead agency for 

promoting the development of Irish enterprises; Forfás, the national advisory body for 

enterprise and science; and the Investment and Development Agency (IDA), Ireland’s 

investment promotion agency.353 The Bord Bia (Irish Food Board), a government agency 

established to develop markets for Irish food products, also provides services to promote 

SME exporting activities in the food sector.354 At the local level, Irish county and city 

enterprise boards conduct pre-export workshops and work to identify SMEs with export 

potential to graduate to EI assistance. 355 Box 2.5 provides an example of one Irish 

county’s support for SME exporting activities. 

347 Ibid. 348 IEA, Export Ireland Survey 2008, November 2008, 35. 349 Ibid., 10. 350 Government of Ireland, Forfás, National Competitiveness Council, Ireland’s Competitiveness 

Challenge, 9; Government of Ireland, Department of Finance, “The SME Sector in Ireland: Information 

Paper,” 2006, 5–6. 351 Forfás, National Competitiveness Council, Driving Export Growth: Statement on Sectoral 

Competitiveness, December 2009, 26. 352 Ibid., 14. 353 Government of Ireland, DETE, “Enterprise, Science and Technology.” 354 Bord Bia, “About Us.” 355 Government of Ireland, Forfás, Review of the Role of County and City Enterprise Boards in the 

Development of Micro-Enterprises, 2003, 47 and 49. 
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BOX 2.5 Small exporters in western Ireland go global 

The Sligo County Enterprise Board was established to generate sustainable employment in the county. They are 

doing so by working to develop an enterprise culture, forge multisectoral partnerships, foster economic development, 

and provide direct financial supports. Support services include: 

 Grants towards the cost of purchasing a capital item: Grant assistance may include a portion of refundable 

aid. The rate is as follows: 50 percent of capital investment, with the maximum capital grant available being 

€75,000 ($91,162). 

 Employment grants: a one-time contribution towards the salary of an employee in the first year up to €7,500 

($9,116) towards the creation of a new job in a business. 

 Feasibility study and technical assistance grants: A financial contribution towards the cost of investigating 

the viability of a potential business idea—60 percent (up to €6,350 [$7,718]) of the cost of undertaking the 

study. 

 Market development fund for small enterprises: 50 percent (up to a maximum of €1500 [$1,823]) of costs 

under two programs: (i) trade fair assistance, to enable small producers and services providers to attend 

and/or exhibit at relevant trade fairs to market their goods and services; and (ii) market visits, to enable 

promoters to travel abroad specifically for the purpose of making contact with new customers and/or 

suppliers, in particular to source suppliers within the euro zone. 

 The Sligo County Enterprise Board counts among its success stories Gillian Jewellery Design, which sells 

jewelry in the domestic market and exports to the United States and Canada, and Technical-Ideas.com Ltd., 

which exports ceramic artwork to the United States and the UK. 

Source: Sligo County Enterprise Board (Ireland), http://www.sligoenterprise.ie/index.html (accessed May 9, 2010). 

Note: Based on an exchange rate of $1.00 = €0.8227 as of June 1, 2010. IMF, “Representative Exchange Rates for 

Selected Currencies,” June 1, 2010. 

As the lead agency for promoting the development of Irish enterprises, EI works 

extensively with Irish SMEs that have export potential (i.e., are working towards 

exporting or are currently exporting) and that have at least 10 employees. Firms with 

fewer than 10 employees work with county or city boards (see box 2.5 for examples of 

the export promotion activities of Irish county boards). EI activities include export 

financing, the provision of market information and advice, in-market services, trade 

missions, and improving managerial skills and capabilities.356

Government financial assistance programs in support of SME exporting activities 

EI export financing assistance programs help both new and established SMEs pursue a 

wide range of activities to improve their viability and international competitiveness. Key 

activities include: 

 The Enterprise Stabilization Fund was established to provide funding to help Irish 

SMEs survive the current global economic downturn by supporting firms’ efforts to 

reduce costs and gain sales in overseas markets. The fund was established for firms 

in the manufacturing and/or internationally traded services sectors determined by 

EI to have a sustainable and financially viable business plan in the medium term.357

 

356 Irish government official, interview with USITC staff, April 15, 2010. 357 Government of Ireland, EI, “Enterprise Stabilisation Fund.” 
2-58 

 

 EI provides funding for SMEs to explore new ideas and new markets, including 

feasibility studies, assistance towards hiring a business mentor, attendance at trade 

fairs, and consultancy.358

 EI provides “startup funding” to encourage and support innovation-led, exportfocused “high potential start-ups companies.” The goal is to assist firms in 

developing products, services, or processes that are technologically new or 

substantially improved when compared to the state of the art in its industry in the 

EU.359

 The Going Global Fund was established for firms that have successfully 

established businesses in Ireland and wish to explore opportunities to 

internationalize their business. Funding under this program aims to help firms 

evaluate and assess overseas market opportunities; develop plans to localize their 

current services or product offers for overseas markets; identify suitable channels 

to international markets; examine possibilities for Web-enabling their service offers 

for export markets; and undertake foreign market research.360

 The Growth Fund was established to help SMEs improve their export potential.361

It funds activities that will lead to a sustainable improvement in productivity within 

the company. Funding is available to EU-defined SMEs that have been generating 

sales for at least five years before the date of application.362

Export promotion programs

EI is a one-stop shop that provides one-on-one advice and assistance to help Irish firms 

evaluate and enter export markets and to expand international sales. It has a network of 

31 offices worldwide to provide in-country assistance to Irish firms.363

One Irish government official described Irish export promotion policies as one that “picks 

winners” by supporting firms with high export potential, such as the medical devices 

sector, with firm-level policies designed to assess if firms are financially, commercially, 

and technically export ready. EI activities are intended to address issues related to the 

products or services being offered, along with managerial skills, export strategy, 

customer pipeline, and funding and investment needs. 364 The two main EI export 

promotion programs for SMEs are: 

 A program to improve international competitiveness: EI development advisors 

work with firms to construct effective business strategies that can develop their 

competitive advantages, enabling them to grow sales and exports. 

358 Ibid. 359 Government of Ireland, EI, “Startup Funding.” 360 Government of Ireland, EI, “Going Global Fund.” 361 Government of Ireland, EI, “Growth Fund.” 362 Ibid. 363 Government of Ireland, EI, “International Offices.” 364 Irish government official, interview with USITC staff, April 15, 2010. 
2-59 

 

 First Flight program: Helps SMEs that are either new exporters or early stage 

exports (less than €30,000 [$36,465] in exports365) by assessing and developing 

their key export capabilities. Services provided include market research, 

management training, access to a mentoring network, participation in trade 

missions, and additional firm-specific assistance. Target markets have included the 

United Kingdom, China, and North America; programs also have targeted specific 

sectors, such as clean technologies for the EU and UK markets. The EC identified 

Ireland’s First Flight program as an example of a European best practice in using 

internationalization to enhance SME competitiveness.366

The Dublin Business Information Center (DBIC) is a private-sector source of export 

assistance that provides advisory services to SMEs working with EI. The DBIC manages 

Ireland’s Business Enterprise Center, a small business incubator center that works with 

60–70 Irish SMEs. The DBIC has a memorandum of understanding with the Emerging 

Technology Center in Baltimore, Maryland367 to promote job creation in both Dublin and 

Baltimore by collaborating in the attraction of technology-based companies from their 

respective countries to open offices in the other’s business incubation centers.368

Poland

Economic Overview

With a GDP of about $442 billion, Poland was the seventh-largest EU economy in 

2009.369 Market-oriented economic policies in place since the 1990s, including economic 

deregulation, lower trade barriers, privatization, and closer ties to the EU, have brought 

macroeconomic stability, attracted FDI, and made Poland a “frontrunner among 

European transition countries.” 370 Poland has made significant improvements to its 

business environment, according to a composite index of economic freedom that included 

factors such as business freedom, trade freedom, investment freedom, financial freedom, 

and the protection of property rights.371 Although Poland’s trade policy is the same as 

that of other EU countries, certain Polish nontariff measures, including the enforcement 

of intellectual property rights, were cited as problematic for conducting business in 

Poland. According to one source, Poland’s weak legal framework was a disincentive to 

new business ventures. 372 Corruption in Poland was reported to be perceived as 

“significant.” 373 Other top-rated factors detracting from Poland’s business climate 

included nontransparent tax regulations, limited availability of financing, inefficient 

365 Based on an exchange rate of $1.00 = €0.8227 as of June 1, 2010. IMF, “Representative Exchange 

Rates for Selected Currencies,” June 1, 2010. 366 EC, Directorate-General for Enterprise and Industry, Supporting the Internationalisation of SMEs: 

Good Practice, 2008, 36; Government of Ireland, EI, “First Flight North America.” 367 Irish private sector official, interview with USITC staff, April 15, 2010. 368 Emerging Technology Centers, “Partnerships.” 369 EIU, Poland Country Report, 2010, 17. 370 World Bank, “Poland: Country Brief 2010.” 371 Among all countries, Poland ranked as the 71st freest economy. Heritage Foundation, “2010 Index of 

Economic Freedom: Ranking the Countries.” 372 Polish government official, interview with USITC staff, April 7, 2010. 373 Heritage Foundation, “Poland,” 2010 Index of Economic Freedom, 345. 
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government bureaucracy, restrictive labor regulations, and inadequate physical and 

economic infrastructure.374

Poland became a member of the EU in 2004, but does not currently use the euro as its 

official currency.375 Poland’s economy was not dramatically influenced by the 2008–09 

global economic recession, in part because of Poland’s relative exclusion from global 

manufacturing supply chains (see box 2.2 for a discussion of the 2008–09 global 

recession). Moreover, Poland was reported to be the only EU economy to have escaped 

recession in 2009 because of the country’s large domestic market, limited reliance on 

exports, and well-capitalized banking system.376

Poland’s leading goods export sectors in 2008 were mechanical and electrical equipment 

(25 percent of exports, by value); vehicles and aircraft (17 percent), primarily motor 

vehicles, parts, and accessories; metals and minerals (13 percent); and chemicals (12 

percent).377 Other EU countries were the primary destination market for Polish exports in 

2008 (78 percent of Poland’s total exports, by value). Neighboring Germany, Poland’s 

leading export market, accounted for one-third of Poland’s EU exports in 2008 and for 

one-fourth of Poland’s total exports. Neighboring Russia, Poland’s largest non-EU export 

market, accounted for 6.5 percent of the total,378 although exports to Russia reportedly 

have been declining in recent years.379

SME Business Environment

SMEs account for approximately 99.8 percent of all enterprises in Poland, identical to the 

EU average; micro enterprises accounted for 95.9 percent of Polish enterprises. SMEs 

contribute 69.8 percent of national employment, above the EU average (67.1 percent), 

with nearly 40 percent of Polish employment in micro enterprises.380 SMEs in Poland 

account for only 48.4 percent of total value added, below the EU average (57.9 

percent).381 According to a recent EC assessment of SME activities, Poland ranked above 

the EU average in the category of entrepreneurship, but generally ranked below the EU 

average in the categories of responsive administration, finance, internationalization, and 

skills and innovation. In particular, the EC observed: 

 Entrepreneurship: Poland’s performance was well above the EU average. Poland 

ranked particularly high with respect to the participation rate in entrepreneurial 

education. 

374 World Economic Forum, The Global Competitiveness Report, 2009–2010: Poland, 2009, 258. 375 Poland’s official currency is the zloty. According to the EC, Poland does not have a target date for 

adopting the euro, but it aims to do so as soon as possible. EC, “Poland and the Euro.” Poland’s economy 

would have to meet certain macroeconomic criteria before it could join the euro zone. EIU, Poland: Country 

Report, 2010, 6. 376 IMF, “Poland—Concluding Statement of the 2010 Article IV Consultation,” March 15, 2010. 377 Government of Poland, Ministry of Economy, Poland 2009: Report on Foreign Trade, 2009, table 13. 378 Ibid., table 11. 379 Polish industry association official, interview with USITC staff, April 7, 2010. 380 According to the EC, micro enterprises have fewer than 10 employees and an annual turnover or 

balance sheet of less than €2 million ($2.4 million). Medium-sized enterprises have 50–249 employees with 

either annual turnover ≤ €50 million ($61 million) or a balance sheet ≤ €43 million ($52 million). EC, 

Directorate-General for Enterprise and Industry, The New SME Definition: User Guide and Model 

Declaration, n.d., 14 and 16. See also table 2.1. Based on an exchange rate of $1.00 = €0.8227 as of June 1, 

2010. IMF, “Representative Exchange Rates for Selected Currencies,” June 1, 2010. 381 Based on data for 2004 and 2005. EC, SBA Fact Sheet: Poland, 2008, 1. 
2-61 

 

 Responsive administration: While ranking generally below the EU average, 

Poland ranked above the EU average with respect to certain business costs (e.g., 

registering property and enforcing contracts). Poland ranked below the EU average 

with respect to the costs for closing a business, start-up times and costs, and the 

availability of e-government. 

 Finance: Poland ranked below the EU average in this category, particularly with 

respect to the availability of venture capital. 

 Internationalization: Poland ranked above the EU average with respect to the 

share of SMEs gaining income from subsidiaries and/or joint ventures abroad. 

 Skills and innovation: Poland ranked above the EU average regarding the share of 

SMEs having new products or income from new products and SMEs’ turnover 

from new or significantly improved products. However, Poland ranked below the 

EU average on most education—or skills—related indicators in such areas as the 

share of participants in continuing vocational training.382

According to Polish Government data, SMEs accounted for nearly 48 percent of Poland’s 

GDP in 2006.383 Almost 36 percent of Polish SMEs were in the wholesale/retail trade and 

repairs sector in 2006; 16 percent in the real estate and business services sector; 12 

percent in industry; 10 percent in construction; 8 percent in transport and 

communications; and the remainder in other services.384

New Polish SMEs created during 2001–06 were typically sole proprietorships (94 percent 

in 2006), 385 with a first-year survival rate of about 66 percent.386 More than 39 percent of 

new Polish SMEs established in 2006 were established by women, reportedly one of the 

highest rates in Europe.387 Less than 1 percent of Polish SMEs had some reported share 

of foreign capital investment.388 Polish SMEs typically finance their business operations 

with their own resources and rarely use bank credits; this pattern is in line with SMEs 

worldwide, as discussed elsewhere in this report.389

Sources reported that the main competitive advantages of Polish SMEs were Poland’s 

low labor costs vis-à-vis other EU countries; Poland’s close proximity to other EU 

markets, especially the shared border with Germany—an advantage for intra-EU 

382 Ibid., 2–3. 383 Refers to nonagricultural SMEs. All nonagricultural enterprises accounted for about 70 percent of 

Poland’s GDP in 2005 and 2006; the balance of GDP was accounted for by agricultural enterprises and other 

entities. PARP, Report on the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 16. 384 PARP, Report on the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 21, chart 2.4. 385 Ibid., 21. 386 Ibid., 22, table 2.6. 387 Ibid., 25. 388 Ibid., 18, table 2.2, and 47. 389 Government of Poland, Ministry of Economy, Poland 2009: Report on Foreign Trade, 2009, 20. 
2-62 

 

trade;390 and an industrious and multilingual labor force.391 Now that more providers 

have set up international express delivery services in Poland, shipping costs reportedly 

are declining sharply.392

SME Exporting Activities 

SMEs in Poland are somewhat less likely to participate in cross-border trade than SMEs 

in other EU countries; only 7 percent exported in 2007, compared to the EU average of 8 

percent, according to EC survey data.393 However, Polish government data show that 

SMEs are increasingly involved in exporting, with the share of newly established Polish 

SMEs engaging in exporting increasing from about 3 percent in 2002 to 5 percent in 2004 

and to almost 7 percent in 2006.394 One source reported that exporting tends to be done 

by the medium-sized firms, and that micro-sized SMEs in Poland tend to remain microsized and not grow. 395 Enterprises with some share of foreign capital increased their 

export value by more than purely domestic firms. 396

According to Polish government data, nearly 16,000 Polish firms exported during 2007–

08. Approximately 87 percent of those firms, totaling nearly 14,000, were SMEs. Slightly 

more than one-half of those exporters (53 percent) were small enterprises, while the 

remainder were medium-sized.397

By economic sector, the greatest number of Polish SME exporters operate in transport 

(approximately 20 percent), industry (13 percent), and real estate and business services 

(10 percent); Polish SMEs are only minimally involved in the export of education, 

healthcare, or financial intermediation services.398 Polish SMEs ship 74 percent of their 

exports to other EU countries, 18 percent to non-EU Europe, and 9 percent outside 

Europe. 399 A recent EC assessment found that less than 2 percent of Polish SMEs 

exported outside the EU, compared to the EU average of almost 4 percent.400

With more than 80 percent of Polish exporting activity done through multinationals, one 

source discussed the importance of programs to promote inbound FDI to ultimately 

promoting SME exports. Because FDI in Poland typically occurs through mergers and 

acquisitions or other forms of joint ventures, this source stated that the resulting increase 

in domestic production ultimately leads to an increase in Polish exports. FDI has 

particularly benefited Polish SME exports in the motor vehicle and parts sector. To 

further capture the synergies between FDI and SME exports, the Polish government 

390 Polish government official, interview with USITC staff, April 6, 2010. 391 Polish government official, interview with USITC staff, April 6, 2010; Polish NGO association 

official, interview with USITC staff, April 6, 2010. 392 Polish government official, interview with USITC staff, April 6, 2010. 393 Gallup, Observatory of European SMEs: Analytical Report, 2007, 44. See also EC, SBA Fact Sheet: 

Poland, 2008, 3. 394 PARP, Report in the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 21, chart 2.4. 395 Polish government official, interview with USITC staff, April 7, 2010. 396 PARP, Report in the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 49. 397 PARP, “Condition of the Small and Medium-Sized Enterprise Sector in Poland,” PowerPoint 

presentation, slide 15, December 3, 2009. 398 Detailed sector descriptions are not available. PARP, Report in the Condition of the Small and 

Medium-Sized Enterprise Sector, 2008, 21, chart 2.4. 399 Gallup, Observatory of European SMEs, Analytical Report, 2007, 48. 400 EC, SBA Fact Sheet: Poland, 2008, 3. 
2-63 

nt facing 

Polish SMEs.

 

helped set up a Polish Investment Group to promote inbound FDI (mostly in the 

biotechnology, IT, and accounting services sectors).401

Exporting Constraints Facing SMEs 

The EC reported that the most frequently reported constraints to exporting by Polish 

SMEs were lack of knowledge of foreign markets (reported by 18 percent of Polish 

SMEs), lack of capital (16 percent), and different regulations in other EU countries that 

hinder intra-EU trade (10 percent).402

Using the most important barriers to SME exporting activities identified by the OECD as 

a guideline,403 the Commission identified the following barriers reported by Polish firms: 

 Shortage of capital to finance exports: One source reported that the financial 

needs of Polish SMEs were generally out of alignment with the availability of bank 

financing. 404 Another source stated that the Polish government was not 

demonstrating the strategic vision needed to address SME financing needs. 405

Trade financing reportedly is not widely available in Poland.406 In addition, the 

lack of availability of venture capital is said to be particularly problematic for 

Polish SMEs during the early startup phase of new businesses.407 Polish SMEs 

reportedly do not seek bank financing for working capital due to concerns about the 

cost of loan servicing, about becoming overly reliant on external financing,408 and 

about the ability of the Polish legal system to protect the firm’s assets in the event 

of legal challenges. 409 Several sources described a “go it alone” mentality they 

viewed as characterizing many SME owners as one explanation for why Polish 

SMEs tend not to seek outside financing. 410 Another source stated that the 

administrative bureaucracy needed to obtain bank financing was too taxing for 

SMEs.411 However, perhaps reflecting both the tendency of Polish SMEs to finance 

through their own assets and reports that access to bank credit has improved in 

recent years,412 access to financing did not rank as the leading constrai

413

 Problems identifying foreign business opportunities: Polish SMEs have 

historically not been integrated into global supply chains, limiting their ability to 

401 Polish academic official, interview with USITC staff, April 6, 2010. 402 Gallup, Observatory of European SMEs: Analytical Report, 2007, 53. 403 OECD, Top Barriers and Drivers to SME Internationalisation, 2009, 7; OECD, Removing Barriers to 

SME Access to International Markets, 2008, 54. 404 Klonowski, Innovation in the Polish SME Sector, 2009, 30. 405 Polish industry association official, interview with USITC staff, April 7, 2010. 406 Polish government official, interview with USITC staff, April 6, 2010; Polish government official, 

interview with USITC staff, April 6, 2010. 407 Based on data for 2004 and 2005. EC, SBA Fact Sheet: Poland, 2008, 2–3. 408 Government of Poland, Ministry of Economy, Entrepreneurship in Poland, 2009, 46. 409 Polish industry association official, interview with USITC staff, April 7, 2010. 410 Polish government official, interview with USITC staff, April 7, 2010; Polish government official, 

interview with USITC staff, April 7, 2010. 411 Polish academic official, interview with USITC staff, April 6, 2010. 412 Recent reforms reportedly have significantly improved access to credit in Poland. World Bank, Doing 

Business 2010, 2009, 142. 413 PARP, Report in the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 24; and 

Ministry of Economy, Entrepreneurship in Poland, 2009, 46. 
2-64 

ms for customers in Europe, the 

Middle East, and Africa from Ireland to Poland.

es generally considered foreign market information a 

significant deficiency.

operations of Polish enterprises abroad and attract foreign investments to Poland.

l generally unfamiliar with foreign legal 

terminology and business practices.

Other barriers to Polish SME exporting activities identified by the Commission include: 

 

sell to multinational companies. This was reported to be changing. In the motor 

vehicle sector, for example, General Motors reportedly has 20 subcontractors in 

Poland producing spare parts. In the information technology sector, Dell has 

recently moved all production of its computer syste

414

 Limited information to locate and analyze markets: Polish SMEs generally find 

it hard to access data on foreign markets.415 According to one source, Polish SMEs 

know little about foreign markets and about customs duties in non-EU trading 

partners. 416 Polish sourc

417

 Inability to contact potential foreign customers: One source recommended the 

creation of “a comprehensive system to promote the Polish economy . . . to support 

418

 Lack of managerial time, skill, and knowledge: According to one source, one 

possible reason for the low use of outside financing in Poland is the lack of 

managerial experience with bank financing.419 Another key concern raised by the 

SMEs in Poland related to the quality of the technical assistance offered by 

government administrative and technical advisors and the bureaucratic nature of the 

government support programs, particularly with respect to advice about obtaining 

financing and developing a business plan. More than 70 percent of Polish SMEs 

surveyed for a recent study reported “inadequate awareness” of Polish government 

support programs for SMEs. 420 General export skills among entrepreneurs in 

Poland, while improving, remain relatively low.421 Despite its multilingual labor 

force, Polish entrepreneurs were stil

422

 Low global competitiveness: Various Polish government reports rank the lack of 

strong price competition as the most significant factor inhibiting the economic 

growth of Polish SMEs. Polish SMEs even reported facing difficulties maintaining 

profitability in the domestic market, reflecting the country’s limited market size. 

Polish SMEs reportedly focused on maintaining their current position in the 

domestic market and generally showed “limited knowledge concerning the 

competitive environment and their own competitive potential in comparison with 

other enterprises.” 423 Another source stated that SMEs owned by younger 

generations were more globally focused, while firms owned by older generations, 

414 Polish nongovernmental organization (NGO) official, interview with USITC staff, April 6, 2010. 415 Klonowski, Innovation in the Polish SME Sector, 2009, 43; Polish academic official, interview with 

USITC staff, April 6, 2010. 416 Polish NGO association official, interview with USITC staff, April 6, 2010. 417 Polish industry association official, interview with USITC staff, April 6, 2010. 418 Government of Poland, Ministry of Economy, Entrepreneurship in Poland, 2009, 11. 419 Polish government official, interview with USITC staff, April 7, 2010. 420 Klonowski, Innovation in the Polish SME Sector, 2009, 40, 43. 421 Polish government official, interview with USITC staff, April 6, 2010. 422 Polish industry association official, interview with USITC staff, April 7, 2010. 423 PARP, Report in the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 171, 173. 
2-65 

government support ultimately would make them less globally 

competitive. 

ation within its borders 

because leading innovation centers are foreign-owned.

 

to the extent that they export, export to culturally similar markets such as the Czech 

Republic, Hungary, Romania, and Bulgaria, rather than to larger EU markets.424

One source stated that the “Made in Poland” brand is not well known globally, and 

the Polish SMEs need help with trade shows and trade promotion in general to 

elevate their visibility.425 One source questioned whether Polish SMEs’ growing 

dependence on 

426

 Limited innovation: The disinclination of Polish SMEs to engage in R&D 

contributes to the relatively low global competitiveness of Polish firms vis-à-vis 

other EU countries. While improving in recent years, Poland ranked below the EU 

average in terms of an overall innovation index.427 Several indicators show Poland 

to lag significantly behind other EU countries in R&D expenditures or other 

measures of innovation.428 According to Polish government data, more than threefourths of Polish SMEs were reported to conduct no activities to develop new or 

significantly enhanced products or services. One-half of Polish SMEs reported 

undertaking no capital investment expenditures, reflecting both limited capital 

available for development as well as the perceived lack of need to invest in new 

technologies that could enhance their competitiveness.429 However, some sources 

stated that Poland often does not get credit for innov

430

 Difficulties meeting international technical standards: According to Polish 

government data, only 10 percent of SMEs have products that qualify as meeting 

standards such as those set by the International Organization of Standards (ISO).431

To address this barrier to exporting, the Polish government established a grant plan 

to help SMEs obtain the product certification required to export to certain markets. 

The grant covers 50 percent of the certification process costs up to €13,000 

($15,801) per firm,432 and covers such costs as consultancy fees, preparation and 

translation of technical documents required by the foreign certifying body, 

transportation and insurance of samples and technical documents to the certifying 

body, the certification procedure, and obtaining and issuing the certificate. Grants 

are only available for exports to non-EU markets, but this help is important for 

Poland, which counts non-EU countries such as Russia, Belarus, and Ukraine as 

traditional export markets. The EC identified Poland’s grants program for product 

certification as an example of a European best practice of using internationalization 

to enhance SME competitiveness. 433 Poland also has an export certification 

. 

 the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 214. 

 staff, April 6, 2010; Polish industry 

ass

0.8227 as of June 1, 2010. IMF, “Representative Exchange 

Rat

n, 2008, 34. 

424 Polish academic official, interview with USITC staff, April 6, 2010. 425 Polish NGO association official, interview with USITC staff, April 6, 2010 426 Polish academic official, interview with USITC staff, April 6, 2010. 427 Government of Poland, Ministry of Economy, Entrepreneurship in Poland, 2009, 46. 428 PARP, Report in 429 Ibid., 171, 175. 430 Polish industry association official, interview with USITC

ociation official, interview with USITC staff, April 7, 2010. 431 PARP, Report in the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 181. 432 Based on an exchange rate of $1.00 = €

es for Selected Currencies,” June 1, 2010. 433 EC, Supporting the Internationalisation of SMEs: Good Practice Selectio
2-66 

rding to one 

source, political uncertainty about relations with Russia, Poland’s second-largest 

owever, Polish sources reported that 

SMEs often find EC programs more helpful because they typically are better funded and 

Direct government support to promote Polish SME exporting activities includes an 

stem to provide export credits. 

Export credit insurance and guarantees are provided by the Export Credits 

 administers a program that provides interest 

subsidies on export credits for exporters and importers to help lower the interest 

 

assistance program to help SMEs with the administrative and legal requirements 

for export to EU markets.434

 Other constraints: Two sources reported that exchange rate volatility of the Polish 

currency (the zloty) was problematic for Polish exporters. 435 Acco

trade partner, was a constraint to that bilateral trading relationship.436

National Policies and Programs Supporting SME Exporting Activities

Poland provides a broad range of programs to support SMEs and SME export activities, 

but faces a significant roadblock: a lack of public awareness of these programs. Five 

ministries and about 350 government-sponsored public and private institutions and 

agencies are active in developing and offering programs aimed at supporting SMEs in 

Poland. The vast majority of these programs are offered by the Ministry of Economy and 

managed by the Poland Agency for Enterprise Development (PARP). 437 Additional 

support for Polish SMEs is provided at the regional level and funded by the Ministry of 

Economy and the EC,438 although several sources reported that regional programs were 

not well funded and of limited effectiveness.439 H

more focused than Polish government programs.440

Government financial assistance programs in support of SME exporting activities 

emphasis on export credit assistance: 

 Poland’s Ministry of Finance administers a sy

Insurance Corporation (KUKE).441

 The National Economy Bank 442

rates on loans made to SMEs.443

 PARP’s role is to stimulate the development of entrepreneurship and innovation in 

Poland’s SMEs abroad as well, chiefly through grant programs.444 The focus of 

434 Polish government official, interview with USITC staff, April 6, 2010. 435 Polish government official, interview with USITC staff, April 6, 2010; Polish NGO association 

official, interview with USITC staff, April 6, 2010. 436 Polish government official, interview with USITC staff, April 6, 2010; Polish industry association 

official, interview with USITC staff, April 7, 2010. 437 Polska Agencja Rozwoju Przedsiębiorczości (PARP). 438 Polish government official, interview with USITC staff, April 6, 2010. 439 Government of Poland, Ministry of Economy, Entrepreneurship in Poland, 2009, 103. 440 Polish government official, interview with USITC staff, April 6, 2010. 441 Korporacja Ubezpieczeń Kredytów Eksportowych (KUKE) S.A. 442 Bank Gospodarstwa Krajowego (BGK). 443 Ministry of Finance, “Forms of Official Financial Export Support in Poland,” 2008; Ministry of 

Economy, Entrepreneurship in Poland, 2009, 11; Polish government official, interview with USITC staff, 

April 7, 2010. 444 PARP, Report on the Condition of the Small and Medium-Sized Enterprise Sector, 2008, 193. 
2-67 

etitiveness of Polish industries. PARP 

also has programs specifically designed to increase SME exports.445 Key exportany Polish SMEs, one Polish official stated that grant 

programs were most effective such as the Passport to Export program 

447

ples of programs to promote exporting activities by Polish SMEs include efforts by 

the Ministry of Economy, Polish embassies, the Polish Chamber of Commerce, and the 

me, including sector-specific promotional efforts and 

certification, promotional publications, and export support ventures; ministry 

ent of SME exporting activity. The EC identified KSU as an example 

of a European best practice in making public administration responsive to SME 

 for 

trade partners, and participate in trade fairs and foreign trade missions. The 

program is funded by Poland’s Ministry of Economy with EC co-financing.452 

 

PARP is primarily on domestic economic development, although many of its 

programs are designed to enhance the comp

related programs offered by PARP include: 

o Direct financial support for enterprises to help improve the competitiveness 

of Polish SMEs vis-à-vis the EU single market.446 Because of the precarious 

financial state of m

described below.

Export promotion programs

Exam

EC: 

 The Ministry of Economics provides export promotion and export certification 

assistance (largely directed at exports to the EU market). The Foreign Trade section 

of the Ministry of the Economy provides information about foreign markets on its 

website.448 The Ministry of Economics offers funding to promote exports under the 

EU’s de minimis aid sche 449

awards; and sponsorship. 

 The National SME Service Network (KSU) is a national network of centers under 

the Ministry of Economics that provides services to support SMEs to support the 

developm 450

needs.451

 “Passport to Export” program is a grant program to help Polish SMEs develop an 

export plan. The program covers the costs of export-related advisory services to 

help Polish SMEs develop marketing plans and to obtain trade financing, search

445 Ministry of Economy, Entrepreneurship in Poland, 2009, 103. 446 Ministry of Economy, Entrepreneurship in Poland, 2009, 46–47, 194–197. 447 Polish government official, interview with USITC staff, April 7, 2010. 448 Polish government official, interview with USITC staff, April 6, 2010. 449 Article 88(3) of the treaty establishing the European Community requires state aid to be notified to the 

European Commission so that it can assess whether the aid is compatible with the common market. The de 

minimis rule was introduced in order to exempt small aid amounts. It sets a ceiling below which aid is 

deemed not to fall within the scope of Article 87(1) and is therefore exempt from the notification requirement 

laid down in Article 88(3). EC, “Summaries of EU Legislation: De minimus Aid,” March 16, 2007. 450 PARP, “National Small and Medium-sized Services Network.” n.d. 451 EC, Communication: A “Small Business Act” for Europe, 2008, 20. 452 Polish Information and Foreign Investment Agency, “Passport to Export”; Polish government official, 

interview with USITC staff, April 6, 2010. 
2-68 

 PARP supports the establishment of exporter assistance centers (IEACs) 

throughout Poland to provide free export-related assistance, and fee-based 

consultancy services.453

 Trade specialists at Polish embassies provide foreign market information and 

counseling services to Polish exporters. Embassies also provide business 

matchmaking services, organize trade promotional events, and facilitate a firm’s 

entry into a particular foreign market.454

 The Polish Chamber of Commerce’s foreign cooperation office also helps firms 

doing business outside Poland. In addition, the chamber has a separate specialist 

business unit providing comprehensive support for promoting foreign trade, 

particularly export drives relating to eastern markets.455

 PARP also cooperates with other EU member countries to improve the domestic 

business climate and promote export opportunities for Polish SMEs. Two such 

cooperation programs, Sweden and Switzerland, are described in box 2.6. 

 An EC-financed Internet portal offered by the Polish Institute for Market, 

Consumption and Business Cycles Research provides foreign market information 

for Polish exporters.456

BOX 2.6 Sweden and Switzerland support Polish SME exporters 

The Swedish government, through the Swedish Trade Council and the Association of Swedish Chambers of 

Commerce, has established a Marketplace Baltic Region to promote and facilitate trade within the region for SMEs in 

Estonia, Kaliningrad (a Russian enclave between Poland and Lithuania), Latvia, Lithuania, Poland, Russia, Ukraine, 

and Sweden itself. Its goal is to promote exports to Sweden, set up a cost-free help desk to provide advice, market 

information, importer contact information, and answers to questions related to Swedish import rules and procedures. 

The EC identified the Marketplace Baltic Region program as an example of a European best practice in cross-border 

cooperation. 

The Swiss-Polish Cooperation Program is part of a Swiss grant aid program provided to Poland and nine other 

countries that joined the EU in 2004. The goal of the program is to help reduce economic and social disparities 

between Poland and the more advanced EU countries and, within Poland, to help reduce the economic and social 

disparities between the main cities and the structurally weaker peripheral regions. Among other things, funding was 

provided to support the improvement of the business environment and access to finance for Polish SMEs in general 

and export-oriented SMEs in particular through expansion of IEACs. 

Sources: EC, Supporting the Internationalisation of SMEs: Good Practice, 2008, 41; Government of Poland, Ministry 

of Economy, Instruments for Internationalization of Business Activity , 2009; Government of Poland, Ministry of 

Regional Development, Swiss-Polish Cooperation Program.”

 

453 Ibid. 454 EC, Communication: A “Small Business Act” for Europe, 2008, 20; Polish government official, 

interview with USITC staff, April 6, 2010. 455 EC, “Doing Business Outside the EU: Poland,” September 2009. 456 Ibid. 
3-1

CHAPTER 3 

Views of U.S. SMEs on Barriers to Exporting 

and Strategies to Overcome those Barriers

Introduction 

This chapter describes the most significant barriers to exporting noted by U.S. small and 

medium-sized enterprises (SMEs), as well as the strategies that these enterprises reported 

as effective in overcoming such barriers. It also summarizes suggestions to increase SME 

exports that SME representatives offered in the course of the investigation. To gather this 

information, the Commission conducted extensive fieldwork, holding discussions with 

more than 260 small businesses, large firms, and trade organizations representing a wide 

variety of industries.1 The Commission also solicited information from all interested 

parties at three public hearings,2

 through written testimony, and in telephone interviews 

with firms and associations around the United States. The information presented in this 

chapter reflects the views of SME representatives and corroborating this information was 

beyond the scope of this study. 

These organizations represented industries across the agriculture, manufacturing, and 

service sectors. The Commission found that many barriers to SME exports are similar 

across sectors, but the strategies that SMEs use to overcome those barriers often vary 

from one sector to the next. SMEs reported to the Commission on a number of export 

barriers that seem to confront them across industries, as summarized in table 3.1. 

The key findings presented in this chapter are followed in chapter 4 by a close 

examination of (1) the specific barriers to exports in seven industries where SMEs are 

important competitors, and (2) the strategies used by SMEs in those industries to 

overcome export barriers. 

Domestic Barriers to SME Exporting

Domestic barriers to exports include constraints of U.S. origin related either to limited 

access to finance, problematic U.S. government laws and regulations, high transport 

costs, the small scale of SME production, or the small size of the exporting firms. 

Access to Finance

Many SMEs reported limited access to finance as a significant barrier to exports. This 

concern has two facets: limited availability of trade finance, and limited access to 

sufficient working capital for business operations. Trade finance, which is an essential 

component of export transactions, ensures that exporters receive payment for their goods 

shipped overseas. By contrast, access to sufficient working capital is essential for 

conducting daily operations and expanding into new business areas such as exporting. 

 1 These discussions included both individual meetings and roundtable discussions involving multiple 

firms. 2

 The Commission held public hearings in St. Louis, MO, on March 10, 2010; in Portland, OR, on March 

12, 2010; and in Washington, DC, on March 18, 2010. 
3-2

TABLE 3.1 Barriers to SME exports and suggested strategies and recommendations to overcome those barriers 

Domestic barriers  Limited access to finance, including both trade finance and working capital 

 Certain problematic U.S. government regulations, particularly export controls 

 and visas for foreigners to visit the United States 

 High transport costs 

 Small scale of SME production 

Foreign barriers  Costly and nontransparent foreign government regulations 

 Language and cultural barriers 

 Inadequate knowledge of foreign markets, including the ability of SMEs to hire 

 staff to acquire such foreign market knowledge 

 Limited information to locate or analyze foreign marketsa

 Inability to contact potential overseas customersa

Suggested strategies  Pool resources with other small firms through trade associations or less formal 

 coalitions 

 Collaborate with large firms 

 Take advantage of government programs designated to help exporters 

 Take advantage of favorable regulatory structures in certain countries 

 Focus on opportunities arising from social networking 

 Construct specialized pricing models 

SMEs’ recommendations for 

government policies 

 Negotiate additional trade agreements 

 Devote additional resources to enforcing existing agreements 

 Help SMEs with market access problems (particularly in India and China) 

 Provide SMEs with more information and education on export opportunities in 

 foreign markets 

 Streamline and reform U.S. regulations (particularly those related to export 

 control and visa applications) 

Sources: Hearing testimony, written submissions, e-mails, and interviews (in person and by phone) with Commission 

staff. 

a

Results are similar to the findings of a recent OECD study titled “Top Barriers and Drivers to SME 

Internationalization,” 2009, summarized in chapter 2.

Trade Finance 

The ability to finance sales to foreign buyers can have a significant impact on exporting, 

with foreign buyers often choosing suppliers that can provide financing over those that 

cannot. SME exporters often find themselves competing against larger enterprises that are 

able to finance sales to foreign customers, as well as foreign suppliers that have access to 

government-provided financing.3

 As several SME representatives noted, it is often 

difficult for SMEs to get bank financing that is appropriate for international activities. 

 3

 USITC, hearing transcript, March 10, 2010, 158 (testimony of Thomas Dustman, Sunnen Products); 

industry representatives, telephone interviews by USITC staff, December 2009–March 2010. 
3-3

Many banks set minimum size limits for international transactions.4 And while large 

banks may not be interested in handling SMEs’ relatively low-volume business, SMEs 

reported that it is almost impossible to find medium-sized and smaller banks that are 

willing to accept international receivables as collateral for a loan, a practice that is 

common for large banks.5

 One SME representative described her company’s financing 

situation as follows: 

There seems to be sort of a Catch-22 situation that goes on. We have 

wonderful local banking relationships that have been really supportive of 

our growth. They are, however, smaller local banks that are not dialed in 

for international trade. They don’t handle letters of credit. They don’t 

handle any of the apparatus we need to do business with. . . . They don’t 

necessarily have the relationships with, for instance, Ex-Im [the ExportImport Bank]. So they send us to a larger bank that does have the 

relationship with Ex-Im. The larger bank then says, gee, that's really great. 

And you know what? You’re way too small. We want you to go talk to a 

broker. So we went and we talked to the broker. And the broker says, hey, 

this is a totally great program, and you know what, you might even be too 

small for me. And . . . that’s why I say conceptually, the tools are exactly 

right. . . . But maybe the service provider network . . . is not incented to 

reach far enough down to these kinds of transactions, either on the loan or 

on the insurance side.6

In making their purchasing decisions, foreign buyers will frequently choose suppliers that 

are able to extend credit, rather than those that require cash on delivery.7

 However, owing 

to their small size and limited financial capabilities, many SMEs are unable or unwilling 

to extend credit to unfamiliar foreign buyers. SME executives also stated that banks are 

often unwilling to extend credit to finance their exports, or do so only at a high rate of 

interest, because lending institutions view SMEs as higher risk in comparison to larger, 

more diversified firms.

SMEs also cited their difficulty in collecting foreign receivables as a major constraint to 

exporting. For example, some SMEs have lost business because banks and export credit 

agencies refuse to extend credit based on foreign receivables.8

 Representatives of SMEs 

in several industries also noted that payment terms tend to be longer when dealing with 

exports. For example, SMEs in the textiles industry generally receive payments for 

domestic sales within 30 days, but payments for foreign sales typically take 90–100 days, 

and the longer payment terms are reportedly difficult for a small company with limited 

working capital to handle. This longer payment cycle reportedly is another factor that 

makes it more difficult for SMEs to obtain financing from domestic banks or the Ex-Im 

Bank.9

 Another SME representative explained the situation as follows: 

 4

 Air Tractor, Inc., written testimony to the USITC, March 25, 2010. 

5

 USITC, hearing transcript, March 12, 2010, 48–49, 101–105 (testimony of Ann Bunnenberg, Electrical 

Geodesics, Inc., and Frank Monfared, Business Solutions Group Corp.). 6

 USITC, hearing transcript, March 12, 2010, 104–105 (testimony of Ann Bunnenberg, Electrical 

Geodesics, Inc.). 7

 Industry representative, interview by USITC staff, March 9, 2010.

8

 Industry representatives, interviews by USITC staff, January–March, 2010; Bieri, written testimony to 

the USITC, February 9, 2010. One source stated that credit insurance, one tool designed to offset concerns 

about foreign receivables, is not frequently used in the United States. 9

 Industry officials, telephone interviews by USITC staff, February 17 and 23, 2010; Bieri, written 

testimony to the USITC, January 29, 2010; and industry representative, telephone interview by Commission 

staff, February 23, 2010. 
3-4

During the credit crisis of 2008–09, U.S. banks have strongly reduced 

lending to Central American banks. Those banks, in turn, have cut their 

lending or reduced it to their customers, who are our customers. What has 

made this situation worse is the fact that our customer’s customer, the U.S. 

retailers, demanded extended payment terms, in some cases going from 

payment in 30 days to payment in 100 days. As one can imagine, this can put 

a company in very serious trouble—cutting the lending on one end and 

getting paid much later on the other end. If we did want to continue business, 

we had to take the role of the lender to our customer, giving them extended 

terms, this at a time [when] our own lenders have become more stringent in 

their lending to us. The U.S. Ex-Im Bank has in many cases withdrawn their 

credit guarantees to us for certain of our customers. So not only did we have 

to extend terms in which we get paid, but also at the same time losing the 

credit protection. We have not been able to work with the SBA [Small 

Business Administration] and Ex-Im Bank to resolve the issue, as we have 

been told we are exceeding the $5 million export limit under which the SBA 

can lend to us. [This] has increased our risk substantially, as we had to 

increase our terms, which in turn has led to higher interest rates from our 

domestic bank, as well as more stringent covenants in our loan agreements 

with our bank.10

Trade financing has historically been an issue for SMEs, but several firms reported that 

loans, including SBA-guaranteed loans, have been even more difficult to obtain since the 

beginning of the recent economic downturn.11 Companies have also cited limitations on 

available Ex-Im Bank financing. These include problems obtaining financing for projects 

related to steel or military sales;12 a lack of communication between parties to a financing 

transaction, including the SME, Ex-Im Bank brokers, the Ex-Im Bank, the U.S. 

Commercial Service (USCS), and the SBA; the perception among SMEs that Ex-Im 

Bank favors larger companies over smaller ones; and slow Ex-Im Bank approval times.13

A number of small companies reported that their transactions are often too small to be 

approved by Ex-Im Bank. Even if they receive approval, it is difficult to find a lender 

willing to go through the Ex-Im Bank process and paperwork for a small transaction, 

leading SMEs to prefer exporting to customers that can provide advance payment or 

letters of credit.14

Working Capital 

Even though the need for working capital is not directly tied to exports, it remains one of 

the most important concerns for SMEs. Firms that are unable to finance daily operations 

or domestic growth are also unlikely to expand their exports. There have been press 

reports of manufacturing SMEs forced to close because of shortfalls in working capital 

due to late receipt of payment for receivables.15 In the case of the service sector, many 

SMEs are young companies that are not able to qualify for bank financing because they 

 10 Bieri, written testimony to the USITC, February 9, 2010, 2–3. 11 Moreover, with little access to commercial lending, existing lines of credit are very important to 

companies. Industry representatives, interviews with USITC staff, Boston, MA, March 1–3, 2010. 12 Industry representatives, interviews by USITC staff, North Carolina, January 25–28, 2010. 13 Vander Meer, written testimony to the USITC, January 26, 2010. 14 National Association of Manufacturers, written testimony to the USITC, March 25, 2010. 15 E.g., Maher, “Tool Firms Seek Aid from U.S. Loan Plan” March 20–21, 2010, A1. Maher reports that 

machining SMEs, in an effort to offset such shortfalls, are not only seeking a $30 billion loan program 

financed by the Troubled Asset Relief Program, but are also expected to approach a major customer—

General Motors—to seek progressive payment terms subject to specific milestones. 
3-5

cannot provide three years of financial records. In addition, the nature of service sector 

firms is such that they do not have factory-like assets to serve as collateral. These issues 

have been even more prominent in the current economic downturn.16 One international 

development consultancy firm, which exports services that are reimbursed through World 

Bank and U.S. Agency for International Development contracts in Africa, notes that its 

difficulties in attracting working capital loans from banks or private investors have 

specifically prevented it from bidding on new contracts and thus increasing its total 

exports. The company, Kwaplah International, Inc., attributes the banks’ reluctance to the 

firm’s business focus on Africa and its work on United Nations peacekeeping missions, 

which banks perceive as risky operations even though the company has a solid record and 

has risk mitigation processes in place. Kwaplah’s CEO estimates that he could increase 

the firm’s revenue by a factor of four or five each year, given sufficient working capital.17

Firms in the computer services and medical devices industries face particular constraints 

on access to working capital, as outlined in the case studies in chapter 4. 

U.S. Domestic Laws and Regulations

SMEs in many sectors have reported that U.S. federal and state laws and regulations may 

also serve as barriers to exporting. Examples cited by SMEs include U.S. export control 

laws and visa regulations. For example, government approaches to addressing new 

products, such as nanomaterials, under the export control regime have a significant 

impact on SMEs involved in chemicals, medical devices, and nanotechnology.18

Domestic textiles and apparel SMEs also noted that they must comply with U.S. 

regulations that are often more costly to implement than those of their counterparts 

abroad.19 Computer services companies also cited examples of barriers to exports from 

export control regulations. Further information specific to those industries is highlighted 

in the industry case studies in chapter 4. 

Export Controls 

The U.S. Government maintains a series of export control regulations that limit exports 

of specific goods and services to specific countries. Products subject to export control 

regulations are considered to be either “dual-use” products—e.g., products with both a 

commercial and a military application subject to Export Administration Regulations 

(EAR)—or products intended for military use regulated under the International Traffic in 

Arms Regulations (ITAR). These regulations are administered by several agencies, 

including the Department of Commerce and the Department of State. Box 4.1 in chapter 

4 provides more detailed information on the regulations and their impact on certain hightechnology companies. 

Although U.S. companies generally agree that such controls are necessary, the paperwork 

and logistics are considered 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 

 16 Industry representative, interview by USITC staff, New York, NY, February 18, 2010. 17 Mahn, written testimony to the USITC, received April 1, 2010. 18 Industry representatives, interviews by Commission staff, January–March, 2010. 19 Kay, written testimony to the USITC; industry official, telephone interview by USITC staff, February 

23, 2010. 
3-6

controls for similar products. Finally, they reported 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.20 As noted by one SME representative, the answers to 

the following list of questions are not easy to find: 

 “How do we complete a Shippers Export Declaration?” 

 “Do I need to register with the U.S. government as an exporter? Does my product 

need a validated export license? How can I find out? What is the difference 

between an export license from the Department of Commerce and from the 

Department of State? What is the difference between Export Administration 

Regulations and International Traffic and Arms Regulations? If I ship items to one 

country and someone else there ships them to an embargoed country, is that my 

problem? What is an end-user certificate?” 

 “What is a Schedule B number? What is it used for? What is an Export Commodity 

“Control Number? 

 “Am I the exporter or is Federal Express, DHL or the freight forwarder the 

exporter? What documents are needed by U.S. Customs for exporting? What 

documents are needed by the importing country to easily clear customs upon 

arrival?” 

 “Finally, who can I contact to obtain answers to all of these questions?”21

In the representative’s words, “In my opinion, if the U.S. government wants to increase 

exports, then we need to find a way to simplify export transactions.”22

SME representatives cited a wide range of “challenges” related to export control 

regulations, including: 

 the need to hire experts to stay current on export control regulations. 

 the possibility of shipments delayed at Customs because a license is needed. 

 the length of time needed to obtain licenses and pay license fees for each product 

and for each customer, including annual renewals. 

 an inability to obtain clear and concise compliance information from a single 

source within the U.S. government. 

 the need for SMEs to maintain information regarding the ultimate end user of their 

products to avoid liability issues, even when they have obtained the required 

licenses. 

 the need to consult lists of domestic and foreign parties with whom an exporter 

cannot conduct business. These lists are maintained by several U.S. government 

agencies and include the Denied Parties List, the Debarred Parties List, and the list 

of Specially Designated Foreign Nationals, along with listings promulgated under 

the Foreign Narcotics Kingpin Designation Act. Shipping to or having a business 

 20 USITC, hearing transcript, March 18, 2010, 92 (testimony of Peter Dent, Electron Energy 

Corporation); bullets in original. 21 USITC, hearing transcript, March 10, 2010, 188–189 (testimony of Stephen Mitchell, Magna 

Technologies, Inc.). 22 USITC, hearing transcript, March 10, 2010, 188–189 (testimony of Stephen Mitchell, Magna 

Technologies, Inc.). 
3-7

relationship with any of these parties will result in a violation. In addition, the 

Department of Treasury Office of Foreign Assets Control enforces embargoes 

against certain countries or parties in those countries.23

For example, Zoltek Corporation, a manufacturer of advanced carbon fibers based in 

Bridgeton, MO, also has a manufacturing facility in Hungary. The export of carbon fibers 

requires a license in both the United States and Hungary, but Zoltek pointed out that in 

most cases, the process of obtaining such licenses is substantially faster and easier in 

Hungary than in the United States. For this reason, to fill orders for most countries for 

which an U.S. export license would be required, Zoltek ships the product from its 

Hungarian manufacturing facility. The company reported that the processing time for an 

export license averages one week in Hungary, compared to 35–45 days in the United 

States. In addition, one Hungarian export license covers global exports, whereas U.S. 

exports of the same goods require separate licenses for each destination country, and also 

require significantly more paperwork. In addition, Zoltek noted that U.S. export licenses 

are required to ship to China, India, Taiwan, and Turkey—all countries that produce 

carbon fibers domestically. They have had several cases where customers in those 

countries have chosen to purchase local products rather than Zoltek exports, largely to 

avoid export control paperwork.24

Hydra-Power Systems, Inc., which recently began exporting transmissions, reported that 

exporting helped the company to reduce the number of layoffs and maintain sales during 

the recent economic downturn. However, learning about the ITAR process for exports of 

dual-use products and applying for its first export licenses cost the company $20,000 

during a time of tight budgets, and involved a six-month time lag to export products 

which the company produces in six weeks.25 Another company, Magna Technologies, 

Inc., of St. Charles, MO, also gave an example of losing sales because of export license 

delays. Magna was working on a project that involved sales of laser sites to the Egyptian 

government. Given that the delivery was required within 30 days, and that it takes 

between 45 and 60 days just to get the export license, Magna lost the contract to a 

Chinese company that was able to promise faster delivery.26

Reflecting ongoing concern about the effects of U.S. export control regulations on U.S. 

exporters, on April 20, 2010, Secretary of Defense Robert Gates announced a reform 

proposal with four core components:

 a single export control list 

 a single primary enforcement coordination agency 

 a single information technology system, and 

 a single licensing agency. 

 23 Industry representatives, telephone interview by USITC staff, February 5, 2010; and interviews by 

USTIC staff, Houston, TX, March 1, 2010; Miami, FL, March 3, 2010; North Carolina, January 25, 2010; 

and Boston, MA, March 1–2, 2010; USITC, hearing transcript, March 10, 2010, 213–17 (testimony of Karen 

Bomba, Zoltek Corp.); USITC, hearing transcript, March 12, 124–125 (testimony of Walter Evans, Schwabe, 

Williamson & Wyatt, and Pete Herder, Hydra Power Systems, Inc.); National Association of Manufacturers, 

written testimony to the USITC, March 25, 2010; Foreign Trade Association, written testimony to the 

USITC, March 24, 2010. 24 USITC, hearing transcript, March 10, 2010, 162–166 (testimony of Karen Bomba, Zoltek Corp.). 25 USITC, hearing transcript, March 12, 150–153 (testimony of Pete Herder, Hydra Power Systems, Inc.). 26 USITC, hearing transcript, March 10, 2010, 238–239 (testimony Stephen Mitchell, Magna 

Technologies, Inc.). 
3-8

According to a White House press release, the Administration will work with 

Congress to implement the reform over the coming year.27

Difficulties Obtaining U.S. Entrance Visas

A number of SMEs noted that the increased difficulty that foreigners faced in obtaining 

visas to the United States acts as a barrier to SME exports. According to the Oregon 

Business Development Department, a recent survey of international travel professionals 

showed that 77 percent believe that the United States was more difficult to visit than 

other destinations. Entrance procedures to the United States have consistently registered 

as a top barrier for travel, including misinformation for foreign travelers on U.S. entry 

and exit requirements; lengthy actual entrance procedures for visiting the United States; 

long wait times in Customs that create the perception that travelers are not welcome and 

potentially reduce international visits; and long visa processing times, specifically 

mentioned by potential visitors from China, India, and Brazil. This has repercussions for 

both small and large companies in a number of industries.28 In the tourist industry, 

foreign tourists are less likely to visit the United States due to onerous visa requirements. 

In health care, patients in the past often traveled to the United States for treatment with a 

large number of family members, but are now more likely to go to Europe, and U.S. 

hospitals have begun to set up affiliates overseas rather than rely on the ability to bring 

patients to this country. In education, there are indications that foreign students are 

choosing to study at universities outside the United States due in part to onerous visa 

requirements.29

Manufacturers have found it difficult to invite potential foreign customers to the United 

States to demonstrate their products.30 For example, according to a representative of the 

USCS, a medical device firm that was interested in exporting to China repeatedly tried to 

obtain a visa to bring a Chinese hospital administrator to the United States for a product 

demonstration for a deal valued at more than $1 million. The individual was denied a 

U.S. visa, as were other hospital employees. The USCS was unable to help with the visa, 

as they have no control over visas. In the end, the USCS was able to assist the medical 

device company by flying its Chinese customer to Mexico City, to see the equipment at a 

hospital there, and the firm was able to close the sale, but the visa problems certainly 

made the transaction extraordinarily difficult.31 Another company involved in exporting 

to China reported that “the length of time that it takes Chinese nationals to get a visa has 

become extremely onerous,” that the problem has become worse in the last few years, 

and that it would be much easier to make sales to Chinese customers if it were easier to 

bring potential customers to the United States to demonstrate their products. Chinese 

 27 The White House, Office of the Press Secretary, “Fact Sheet on the President’s Export Control Reform 

Initiative,” April 20, 2010; Garamone, “Gates Proposes Revamp of Export System,” April 20, 2010; Gates, 

remarks, April 20, 2010. 28 USITC, hearing transcript, March 12, 2010, 14–15 (testimony of Tim McCabe, Business Development 

Department of Oregon). 29 USITC, hearing transcript, March 12, 2010, 14–15 (testimony of Tim McCabe, Business Development 

Department of Oregon); USITC, hearing transcript, March 18, 2010, 137–138 (testimony of Spencer Ross, 

National Institute for World Trade). 30 USITC, hearing transcript, March 18, 2010, 137–138 and March 12, 2010, 85 (testimony of Spencer 

Ross, National Institute for World Trade and Katy Coba, Oregon Department of Agriculture). 31 USITC, hearing transcript, March 10, 2010, 54–55 (testimony of Cory Simek, Foreign Commercial 

Service). 
3-9

nationals have to go through an interview process, which seems to take a long time even 

to schedule, and then wait through even longer delays for the visa to be completed.32

Visa problems may continue even after sales are finalized. Sunnen Products, a 

manufacturer of honing machines, stated that it sold a machine system to an Indian 

company. Approximately 20 weeks later, according to Sunnen, the Indian customer 

wanted to send a company representative to Sunnen’s St. Louis, MO, factory to see the 

machine being assembled and learn how to operate it. However, the customer’s employee 

was repeatedly turned down for a visa, and Sunnen reported that it had to send its own 

employee to India to provide the machine demonstration.33

For U.S. companies with affiliates outside the United States, visa problems also 

complicate internal company management. For example, Sunnen reported that it also has 

a wholly owned subsidiary in Shanghai, and that when it tried to bring its Chinese 

employees from Shanghai for extensive training in St. Louis, they were denied visas. 

Sunnen stated that as a result, it had to send U.S. employees to China for an extensive 

training period, along with a machine to use for the training, generating significant 

additional expenses.34 Another firm with a manufacturing facility in Hungary reported 

that it takes between nine and 18 months to bring its Hungarian engineers to the United 

States to train them in the U.S. parent company’s procedures.35

U.S. Tariffs

SMEs have noted that U.S. tariffs on goods that they import as intermediate inputs can 

serve as barriers. For example, Zoltek Corporation reports that to produce its carbon 

fibers it must import acrylic fibers, which are no longer produced in the United States. As 

of January 1, 2010, acrylic fibers faced a U.S. import duty of 7.5 percent;36 according to 

Zoltek, the tariff on inputs makes it cheaper for the company to manufacture carbon 

fibers outside of the United States.37

Similarly, another Missouri-based SME, Spartan Light Metal Products, reported that it 

faces difficult competitive conditions in the global magnesium casting industry, based in 

part on U.S. countervailing duties imposed since 2005 on imported magnesium alloy 

from China. Spartan said that its foreign competitors can import this input from China 

without paying a penalty, and then export finished magnesium castings to the United 

States free from trade penalties. The company further said that the Chinese policies that 

 32 USITC, hearing transcript, March 10, 2010, 202 (testimony of Rudi Roeslein, Roeslein and 

Associates). The U.S. Embassy, Beijing, provides information on visa processing times on its Web site, 

http://beijing.usembassy-china.org.cn/waittime.html (accessed May 13, 2010). 33 USITC, hearing transcript, March 10, 2010, 200–202 (testimony of Thomas Dustman, Sunnen 

Products). 34 USITC, hearing transcript, March 10, 2010, 200–202 (testimony of Thomas Dustman, Sunnen 

Products). 35 USITC, hearing transcript, March 10, 2010, 200–203 (testimony of Karen Bomba, Zoltek Corporation; 

Thomas Dustman, Sunnen Products; Rudi Roeslein, Roeslein & Associates). 36 All carbon fibers are made from polyacrylonitrile and acrylic fibers. U.S. imports of acrylic tow fibers 

had been subject to a temporary duty reduction and suspensions, all of which expired December 31, 2009, 

and have not been renewed. As of April 2010, it is unknown whether Congress will renew the duty reduction 

or suspensions for 2010. 37 USITC, hearing transcript, March 10, 2010, 166–167 (testimony of Karen Bomba, Zoltek 

Corporation). 
3-10

spurred the initial countervailing duty order have changed since 2005, and that the U.S. 

policy should therefore be changed as well.38

Other Domestic Laws and Regulations

Other U.S. government regulations may also impact the ability of SMEs to export. 

Electronic Export Information (EEI) regulations,39 under which the Census Bureau 

requires notification of all export shipments valued at more than $2,500, have been 

reported by SME representatives as impeding SME exports. Under the regulations, 

businesses must report all such shipments using their tax ID number. If individuals do not 

have a tax ID number, they must obtain one in order to report the shipment. This is seen 

as a significant barrier by some very small, owner-operated businesses that do not already 

have tax ID numbers. An industry representative explained that some such businesses 

may export only occasionally—for example, after being contacted directly by a foreign 

customer, often through the company’s Web site.40

Medical devices firms are particularly sensitive to U.S. Food and Drug Administration 

(FDA) export regulations. U.S. SMEs in the medical devices industry must first be 

approved by the FDA in order to export, which can prove difficult for more complicated 

devices, as discussed in the industry case study in chapter 4. Although larger firms face 

the same approval process, the impact may be greater on SMEs because many small 

firms depend on a single product to generate revenue for the firm.41 Also, industries that 

deal with newly developed materials such as nanomaterials also face uncertain state and 

federal environmental and health regulations. 

In the agriculture sector, one SME representative reported that fees charged by the USDA 

Animal and Plant Health Inspection Service (APHIS) for the approval of export health 

papers and overtime user fees have increased sharply in recent years, and have become a 

burden to exporting. According to the representative, fees have increased from $33.50 per 

hour in 1992 to $144.00 per hour in 2011 and 2012, and are expected to exceed $155 per 

hour in 2013. APHIS requires payment for a minimum of two hours for such overtime 

user fees, even though inspection of an export shipment may take significantly less 

time.42 Additional details on APHIS export requirements are available on the agency’s 

Web site.43

Transport Costs

SME executives from a number of agricultural and manufacturing industries also 

reported that transportation costs can serve as significant constraints to exports, with 

 38 USITC, hearing transcript, March 10, 2010, 172, 232, 258 (testimony of Mike Sparks, Spartan Light 

Metal Products); written testimony to the USITC, March 10, 2010, Spartan Light Metal Products. 39 As of July 2, 2008, export information must be filed electronically. This is the electronic equivalent of 

the export information formerly filed on the Shipper’s Export Declaration. The information is used by the 

Census Bureau for statistical purposes and by the Bureau of Industry and Security and other export 

enforcement agencies for export control and enforcement purposes. Census Bureau, 

http://www.census.gov/foreign-trade/regulations/regs/flipper/index.html#electronicexportinformation

(accessed April 9, 2010). 40 Industry representative, telephone interview by USITC staff, Washington, DC, February 25, 2010. 41 Industry representative, telephone interview by USITC staff, Washington, DC, February 24, 2010; 

industry representative, interview by USITC staff, Boston, MA, March 2, 2010. 42 USITC, hearing transcript, March 10, 2010, 30–31(testimony of Tony Clayton, Clayton AgriMarketing). 43 See USDA APHIS Web site, “Import and Export,” http://www.aphis.usda.gov/import_export/

(accessed May 14, 2010). 
3-11

certain fixed costs placing SMEs at a disadvantage in exporting compared with their 

larger competitors.44 According to one SME advocate, “All SMEs have a stake in 

investment in transportation when it cuts the delays in getting their products into export 

markets.”45 Rapid and unexpected increases in ocean freight rates were also identified by 

SME executives as a constraint to exporting, particularly on lower-valued cargo such as 

hardwood logs, where shipping costs represent a higher proportion of overall production 

costs.46 Another SME representative stated that shipping documentation requirements 

related to import tariffs and other regulatory requirements are burdensome and 

increasing.47

Shipping modes depend on the type of product being shipped, with larger cargoes 

generally shipped by rail, truck, or sea, while higher-value, low-volume products (e.g., 

pharmaceuticals, architectural blueprints) are more likely to be shipped by air. Given 

economies of scale, shipping full containers is considerably less expensive than shipping 

smaller orders. However, many SME exporters cannot fill a shipping container. SME 

representatives described a number of creative strategies they say they have adopted to 

address the issue. In some cases, a broker might aggregate multiple companies’ exports 

into a single container, and a distributor would apportion the shipment to individual 

customers upon arrival. In a variation on this strategy, a broker might sell the aggregated 

export shipment to a U.S. company, which would then ship it overseas and sell the 

product.48

One key issue cited by SME exporters of agricultural goods and second hand textiles is 

the problem of container shortages. Two public officials testified that since mid-2008, the 

economic downturn has led global marine shipping companies to take roughly 13 percent 

of the global fleet out of service, together with the empty containers that remain on board 

the furloughed vessels, effectively taking those containers out of service. In addition, 

according to the testimony, most U.S. imports arrive at East Coast ports, so there are 

significantly more shipping containers available on the East Coast compared to the West 

Coast; data for the Port of Portland, OR, alone show an annual deficit of nearly 70,000 

containers in 2009. The officials noted that at the same time, railroad costs for 

repositioning containers have tripled; for ocean carriers, it is generally more profitable to 

reposition empty containers directly to Asia, rather than to the U.S. West Coast.49 If 

exporters have to absorb the costs of repositioning the containers, according to the 

testimony, it often raises the prices of their exports too high to compete with other global 

sources of many commodities. The witnesses stated that these trends pose particular 

problems for agricultural producers and other types of firms that operate on very small 

 44USITC, hearing transcript, March 10, 2010, 24–28; and industry representatives, interviews by USITC 

staff, Washington, DC, and North Carolina, February 9, 2010, and January 25–28, 2010; industry 

representatives, telephone interviews by Commission staff, December 2009–March 2010; and USITC, 

hearing transcript, March 10, 2010, 54. 45 USITC, hearing transcript, March 12, 2010, 33 (testimony of Walter Evans, Schwabe, Williamson & 

Wyatt). 46 USITC, hearing transcript, March 18, 2010, 131–132 (testimony of Jameson French, The Hardwood 

Federation). 47 Sauereisen, written testimony to the USITC, January 2010. 48 Industry representatives, interviews by USITC staff, January–March, 2010. 49 Ships deliver a greater share of U.S. imports to East Coast ports, but more goods are exported from the 

United States to Asia out of West Coast ports, requiring empty shipping containers to be repositioned. It is 

generally more cost-effective for shippers to move empty containers across the country via railroad than to 

reload the empty containers onto ships for transport to the West Coast. USITC, hearing transcript, March 12, 

2010, 19–20, 24 (testimony of Katy Coby, Oregon Department of Agriculture, and Greg Borossay, Port of 

Portland). 
3-12

margins, generating some concerns about West Coast farmers being unable to afford to 

export agricultural products overseas.50

Small-Scale Production

Another factor limiting exports for some U.S. SMEs is the small scale of production. 

Many of those who testified noted that this factor can limit export potential for certain 

SMEs, as foreign buyers may seek out only those suppliers able to fulfill high-volume 

orders.51 This is a particular issue for SME exporters in the agriculture sector, as 

discussed in the case studies of the wine and apple industries in chapter 4. In the wine 

industry, for example, representatives noted that SMEs often focus on producing smaller 

volumes of higher-value products, so they are not able to supply high-volume retail 

outlets. Likewise, it was reported that in the apple industry, smaller volumes and an 

inability to consistently provide the varieties and sizes demanded by foreign importers 

prevent apple exporters from expanding export sales. SMEs’ small-scale production also 

means that they face higher shipping, logistics, compliance, and insurance costs per 

shipment, which raises their prices and threatens their competitiveness in foreign 

markets.52 The representatives pointed out that producing on a smaller scale also means 

that a single export shipment carries a higher level of risk for the firm, as it represents a 

greater share of overall production; if exports are seen as more risky than domestic 

shipments, this may be enough to deter small producers from vigorously pursuing an 

export strategy. 53

Foreign Barriers to SME Exporting

The foreign barriers cited most often by SMEs were foreign government regulations, 

particularly labeling rules and sanitary and phytosanitary (SPS) regulations; language and 

cultural barriers; and U.S. SMEs’ limited knowledge of foreign markets. According to 

one global company that works closely with SMEs, another problem for SMEs are trade 

barriers that prevent large U.S. service providers from operating in foreign markets, 

particularly providers of financial, insurance, and logistics services. The company 

representative explained that many SMEs likely prefer to use the same service providers 

in foreign markets that they use at home, facilitating small companies’ abilities to 

maintain their supplier relationships as they expand into exporting. Since these services 

are essential to exporting, according to this representative, barriers faced by these large 

services firms effectively act as export barriers for SMEs.54

Foreign Government Laws and Regulations

Representatives of SMEs in many industries reported to the Commission that the costs of 

understanding and complying with foreign government laws and regulations can pose 

significant barriers to exporting. These representatives stated that such regulations pose 

two types of problems for SMEs: (1) the administrative burdens of compliance, and (2) 

 50 USITC, hearing transcript, March 12, 2010, 19–20, 24 (testimony of Katy Coby, Oregon Department 

of Agriculture, and Greg Borossay, Port of Portland); Secondary Materials and Recycled Textiles, written 

testimony to the USITC, March 26, 2010. 51 Industry representatives, telephone interviews by USITC staff, December 2009–March 2010. 52 Compliance costs include meeting foreign market sanitary and phytosanitary (SPS) regulations and 

certifications. Examples include laboratory tests and producing and applying special labels to meet export 

market regulations. Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 53 Industry representative, telephone interview by USITC staff, February 11, 2010. 54 Industry representative, interview by USITC staff, Washington, DC, February 25, 2010. 
3-13

the lack of standardized regulations across countries. Related to the difficulties posed by 

regulatory compliance, according to the testimony, is the inability of small firms to hire 

personnel dedicated to navigating the market and regulatory environments of potential 

export markets, which makes the problem more difficult for SMEs than for large firms 

that are better able to absorb the cost of hiring additional staff. 

In the agricultural sector, examples of regulatory compliance costs cited by SMEs that 

either limited or prevented exports to certain countries include the administrative burden 

of import and export paperwork; the cost of additional record-keeping,55 testing, or 

certification requirements; and the need to tailor production practices to meet a foreign 

regulation, such as those regarding food standards, SPS requirements, or packaging 

regulations.56 One U.S. exporter of livestock reported to the Commission that health 

protocols differ widely in various export markets, and that trying to meet all of the 

requirements is very difficult. For instance, according to the exporter, China and Russia 

each require a veterinarian from their country to supervise livestock operations, costs that 

are borne by the U.S. exporters; China also requires a certification by a particular USDA 

lab in Iowa.57 In addition, representatives noted that foreign regulations and import 

requirements, including restrictions resulting from specific events like outbreaks of 

disease, can result in delays at foreign ports, potentially damaging perishable food or 

pharmaceutical products.58 The industry case studies in chapter 4 examine specific 

examples of how such barriers affect U.S. exports of wine and apples. 

Industry representatives stated that certification for organic products in multiple countries 

using different standards may serve as an export barrier for SMEs. For example, they 

reported that an organic product produced in the United States and shipped to both France 

and Japan requires separate certifications in all three countries. Canada recognizes the 

U.S. National Organic Program standard, so organic product exports to Canada do not 

face this problem. One SME reported that its hemp products are certified as organic 

under USDA rules that had previously been recognized in Korea, but that the Korean 

government has recently issued its own organic certification rules that are significantly 

stricter than U.S. standards, such that most U.S. companies would fall out of compliance. 

U.S. government agencies are reportedly trying to negotiate a compromise with Korea, 

but if those efforts are unsuccessful, the company will stop exporting to Korea as of 

January 1, 2011, when the new Korean organic standards take effect.59

SPS regulations in particular were cited as potential barriers to exports. For example, 

witnesses stated that China has placed a ban on oak and maple tree imports because of 

concerns over Sudden Oak Death, which is a disease in plant products. The witnesses 

explained that the State of Oregon, in partnership with the federal government, conducts 

a very rigorous inspection program for Sudden Oak Death that is recognized nationwide. 

The Oregon Department of Agriculture, they added, invites trading partners to examine 

the inspection process and protocols, but Oregon wood products producers continue to 

 55 For example, a foreign government might require traceability of the agricultural product back to the 

field of production, requiring a detailed recordkeeping system that an SME producer would not already have 

in place. USITC, hearing transcript, March 10, 2010. 56 Industry representatives, telephone interviews by USITC staff, December 2009–March 2010; USITC, 

hearing transcript, March 10, 2010, 29–30, 60; and USITC, hearing transcript, March 12, 2010, 20–21. 57 The cost associated with the Chinese veterinarian is $12,000. The cost of the Russian veterinarian was 

not reported. USITC, hearing transcript, March 10, 2010, 67–69 (testimony of Tony Clayton, Clayton AgriMarketing). 58 USITC, hearing transcript, March 12, 2010, 108–109; industry representatives, interviews by USITC 

staff, Washington, DC, February 18 and 25, 2010; telephone interview by USITC staff, March 23, 2010. 59 The Merry Hempsters, Inc., written testimony to the USITC, March 23, 2010. 
3-14

face such export challenges.60 The hardwood industry reported that China and India, 

among other countries, now require expensive product tests that can only be performed in 

those countries, adding significant costs to exporting.61

Foreign laws and regulations also strongly affect exports by firms in the service sector. 

For example, according to industry officials, regulations may raise costs for aviation 

maintenance services SMEs through requirements to submit to multiple regulators’ 

oversight of maintenance facilities.62 The officials said that large services firms often 

have multiple regulatory experts on staff, but services SMEs generally do not employ 

export managers (though they may contract with external law firms or consultants for 

specific needs).63 The officials also stated that SME services firms are also less likely 

than large firms to actively participate in the development of international regulatory 

standards through industry associations and contact with government agencies. While 

industry associations also represent SMEs in promoting market access initiatives or 

seeking regulatory harmonization, SMEs themselves are reportedly more likely to accept 

the state of regulation in foreign countries as given.64 Specific examples illustrating the 

impact of foreign government regulations on SMEs in the computer and professional 

services industries are reported in chapter 4. 

Government regulations in a number of countries create market access barriers specific to 

the film and television industry, including local dubbing requirements and screen quota 

requirements, according to industry witnesses. For example, the witnesses stated that 

Spain and France require film dubbing to be done locally, so distributors must use local 

laboratories and talent to dub their films, increasing exporting expenses and cutting down 

on economies of scale. The witnesses also reported that Korea, Spain and China impose 

screen quotas, which require that theaters exhibit locally produced films for specific 

amounts of time or proportions of screen time. The witnesses explained that screen 

quotas reduce export opportunities by lowering the number of slots available for 

theatrical exhibition of foreign films. 

The Chinese and Indian markets were identified as having specific audiovisual services 

barriers, including piracy, distribution, and ownership restrictions. Witnesses stated that 

in China, foreign motion pictures are imported and distributed theatrically only by two 

state-licensed Chinese entities, leaving few distribution opportunities for theatrical 

release of foreign films. For those films that are imported and released, they added, the 

licensing arrangement is on much less favorable commercial terms than could be 

negotiated in an open market. Other barriers for exports to China that were cited include 

rigorous and nontransparent censorship requirements and piracy. In India, market access 

barriers cited include foreign ownership restrictions, considerable piracy, and customs 

valuation practices that inflate the costs to SMEs and discourage Indian imports. In 

addition, witnesses said that customs authorities continue to demand five years of 

proprietary and financial documents to determine allegedly delinquent taxes, sometimes 

refusing to release products into the market in the absence of inflated duty payments.65

 60 USITC, hearing transcript, March 12, 2010, 20–21 (testimony of Katy Coba, Oregon Department of 

Agriculture). 61 USITC, hearing transcript, March 18, 2010, 73 (testimony of Jameson French, Hardwood Federation). 62 Bilateral aviation safety agreements that provide mutual recognition of aviation authority oversight of 

such maintenance facilities can alleviate this burden. USITC, hearing transcript, March 18, 2010, 184 

(testimony of Christian Klein, Aeronautical Repair Station Association). 63 Industry representative, telephone interview by USITC staff, January 27, 2010. 64 Industry representative, interview by USITC staff, New York, NY, February 18, 2010. 65 Independent Film & Television Alliance, written testimony to the USITC, March 25, 2010.
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Problems with regulation were also mentioned by a number of SME representatives. 

They stated that different regulatory standards, and the lack of mutual recognition 

between foreign and U.S. regulators, can significantly raise the compliance costs of 

operating in more than one market, and tend to pose a much larger burden for SMEs, 

particularly if they are small suppliers, than for large companies.66 For example, one 

company that produces medical devices reported that they pay $20,000 annually for ISO 

certification: $5,000 for the initial certification, plus $3,000 for each additional country to 

cover inspection fees.67 The firm currently exports to the European Union (EU) and 

Canada, but said that they had decided not to expand to Japan, due to the high costs of 

certification. To be certified in all APEC member countries, the firm estimated a total 

annual cost of $62,000 a year, which could not be justified by potential additional sales in 

those markets.68

One specific type of regulation mentioned by many SMEs is labeling requirements, 

which can add significant costs to the production of goods for export when countries 

require different labels for the same product. According to industry officials, the costs 

can be so high that companies stop exporting certain product lines rather than meet 

multiple and sometimes divergent labeling requirements in different countries.69 Issues 

with labeling regulations were cited as problems for SMEs in industries as diverse as 

chemicals, nanotechnology, textiles and apparel, and across the agriculture sector. 

Among the examples discussed were food labeling laws, such as those that require 

packaging to identify ingredients, nutritional facts, and organic content; these raise costs 

for exporters by requiring that they affix unique labels to products destined for different 

export markets. Some labeling regulations can reportedly prevent an SME from entering 

new export markets altogether, due to concerns that proprietary formulas or ingredients 

may be divulged.70 Other testimony pointed out that for wineries that ship to multiple 

export destinations, labeling requirements that differ by country can be an important 

barrier, as designing multiple product labels is expensive.71

Protection of Intellectual Property 

Several SMEs cited their inability to protect their intellectual property (IP) in certain 

foreign countries as an important barrier to increasing SME exports. In particular, they 

noted that in many cases they lack the ability to identify sources of infringement and 

lacked the financial resources to enforce copyrights in local courts. Larger companies 

may protect their IP, in part, through local representatives or visits to foreign markets to 

monitor counterfeiting activities, but the witnesses stated that SMEs are unlikely to have 

the resources for such activities. Exporters of films and television programming similarly 

noted that remedies that may be available to larger producers, including worldwide sameday release and legal action through local court systems, are often too expensive to be 

practical for SME producers, making U.S. government enforcement efforts 

indispensable.72

 66 USITC, hearing transcript, March 12, 2010, 20–21 (testimony of Katy Coba, Oregon Department of 

Agriculture); and Kay, written testimony to the USITC, February 19, 2010. 67 ISO refers to standards developed by the International Organization for Standardization. See the 

organization’s Web site at http://www.iso.org/iso/home.htm. 68 USITC, hearing transcript, March 12, 2010, 142 (testimony of Grant Ramaley, Aseptico, Inc.). 69 Industry representatives, interviews by USITC staff, January–March 2010. 70 For example, a firm may choose not to enter certain markets due to the concern that ingredient labels 

may require that it reveal too much information about proprietary recipes. USITC, hearing transcript, March 

12, 2010, 20–21 (testimony of Katy Coba, Oregon Department of Agriculture). 71 USITC, hearing transcript, March 18, 2010, 119 (testimony of James Gore, Clawson International). 72 Independent Film & Television Alliance, written testimony to the USITC, March 26, 2010. 
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A number of SMEs singled out China as an export market in which their IP was 

vulnerable, and as a country that offered few legal protections against theft of trade 

secrets, product designs, and other IP violations.73 Some SMEs have taken steps to 

protect their IP. Roeslein & Associates, an SME that provides engineering consulting 

services, stated that IP problems are so prevalent in China that the company has 

intentionally added faults to some engineering drawings and computer programming 

systems, to ensure that competitors will not profit from copying them, rather than trying 

to enforce their rights through the court system.74

Other SMEs report substantial economic impacts from Chinese IPR infringement. 

Sunnen Products, a machine tools company, indicated that when they introduce new 

machines in China, whether or not they are patented, copies tend to appear on the 

Chinese market within six months. Sunnen estimates that it lost 40–50 machine sales over 

the last three to four years to illegal copies of its products in China.75 According to the 

Independent Film & Television Alliance, film and television piracy has significant 

economic impacts on SMEs in the industry. 

Piracy lowers the license fees that distributors can or will pay for independent 

films because legitimate distributors, including online distributors, cannot 

compete against pirated product that is free or nearly free. Local distributors will 

often cite piracy, even for films not yet released in that market, as a reason to pay 

reduced license fees, change the terms of an executed license agreement, or 

decline to distribute a film at all. Moreover, piracy decreases the value of the 

film’s license in neighboring regions where pirated copies may be distributed. 

The risk of the film being pirated throughout the region, thus lowering the value 

of the license and exposing the producer (or seller) to possible contract 

renegotiation demands by local distributors in neighboring countries, can 

outweigh the financial benefit of distributing in certain territories.76

According to another SME, Chinese medical device companies have been copying U.S. 

and European technologies and selling them on world markets at significantly lower 

prices. Chinese firms reportedly have attempted to market inferior products in the United 

States without appropriate regulatory clearances.77

To address the lost business opportunities to SMEs from foreign IPR infringement, one 

industry representative called for a new U.S. system to monitor U.S. investment overseas, 

run by the Department of Commerce, whereby offers by U.S. firms for joint ventures or 

licensing contracts overseas would first be made to U.S. SMEs, as a means of retaining 

valuable intellectual property within the United States.78

 73 USITC, hearing transcript, March 12, 2010, 11, 39 (testimony of Tim McCabe, Oregon Business 

Development Department, and Matt Nees, Software Association of Oregon); USITC, hearing transcript, 

March 18, 2010 (testimony of Spencer Ross, National Institute for World Trade); Air Tractor, Inc., written 

testimony to the USITC, March 25, 2010; Foreign Trade Association, written testimony to the USITC, March 

24, 2010. 74 USITC, hearing transcript, 207 (testimony of Rudi Roeslein, Roeslein and Associates). 

75 USITC, hearing transcript, March 10, 2010, 206–209 (testimony of Rudi Roeslein, Roeslein and 

Associates; Thomas Dustman, Sunnen Products). 76 Independent Film & Television Alliance, written testimony to the USITC, March 26, 2010, 4. 77 Tiba Medical, written testimony to the USITC, March 26, 2010. 78 USITC, hearing transcript, March 18, 2010 (testimony of Spencer Ross, National Institute for World 

Trade). 
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Customs Clearance

One problem frequently cited by SMEs is customs clearance delays, which affect all 

SME exporters but are a particularly significant impediment to companies shipping 

perishable products, such as food or medical supplies. For example, one company that 

ships radioactive isotopes for medical treatments stated that it can export around the 

world using overnight express shipping, but the half-life on the product (the time by 

which the product decays) is approximately 60 hours. The representative said that they 

simply do not export to Latin America, because frequent customs delays in many 

countries in the region make it impossible to guarantee final delivery within the useful 

life of the product. For any time-sensitive product, an export market is closed if customs 

delays cannot be overcome, industry officials pointed out. Similarly, they said, 

companies cannot be part of the cross-border global supply chain if they cannot 

participate in the just-in-time inventory environment.79

Foreign Tariffs

SMEs in both the agriculture and manufacturing sectors said that high tariffs overseas 

increase the costs of U.S. exports, often making it difficult to compete with foreign 

producers in local markets.80 U.S. firms also noted that they can be harmed by 

preferential trade agreements in place between their export market countries and third 

countries, because such trade agreements give foreign exporters increased access to those 

markets, compared with access for U.S. producers.81 One industry representative stated 

that because SMEs may operate in niche markets where they produce smaller quantities 

of high-value goods, high foreign tariffs may also have a more significant impact on such 

SME exports, compared with larger firms that may export larger quantities of lowervalue goods.82 U.S. exporters of secondhand textiles stated that they face restrictions 

imposed by up to 31 countries, some of which ban such imports outright while others 

have adopted high tariffs to discourage such trade. Given that the primary markets for 

secondhand textiles are outside the United States, the industry is particularly concerned 

about such barriers.83

Foreign Government Support Programs

Representatives of the wine and the textiles and apparel industries cited foreign 

government support programs for their domestic industries as important impediments, 

making U.S. exports less price-competitive vis-à-vis locally produced goods in a number 

of countries.84 In addition to direct foreign support of particular industries, representatives 

of U.S. SMEs also report that foreign governments support exports by their firms to a 

greater extent than the U.S. government, through low-cost loans; marketing support, 

including support to appear at international trade fairs; free trade missions; and tax 

incentives. According to industry and government sources, foreign governments heavily 

 79 Industry officials, interviews by USITC staff, Washington, DC, February 25, 2010. 80 Bieri. Written testimony to the USITC, January 29, 2010; and Kay, written testimony to the USITC, 

February 19, 2010. 81 For example, the free trade agreement between China and the ASEAN countries of Southeast Asia may 

mean that Chinese producers of certain products receive preferential access in the ASEAN market, compared 

with U.S. producers of those products. Kay, written testimony to the USITC, February 19, 2010. 82 Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 83 Secondary Materials and Recycled Textiles, written testimony to the USITC, March 26, 2010. 84Additional detail is provided in the industry case studies. USITC, hearing transcript, March 18, 2010, 

78 (testimony of James Gore, JB Clawson International); industry representative, telephone interview by 

USITC staff, February 16, 2010. 
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subsidize their companies’ participation in trade missions and trade fairs related to a wide 

variety of industries. Examples were cited by firms in the aircraft, textiles and apparel, 

and movies and television industries, among others. In contrast, U.S. SMEs state that, 

whether they are attending a trade fair or exhibiting, typically they must pay their own 

attendance fees and related travel expenses. They report that foreign governments may 

also provide support for potential customers to travel to those markets to evaluate local 

products.85 One company noted that the EU publishes a free, comprehensive market 

access database that permits EU-based firms to understand tariffs, taxes, and import 

requirements for exporting to overseas markets, and notes that an equivalent database 

would be a useful tool for U.S. SMEs interested in exporting.86 Chapter 2 of this report 

includes an extensive discussion of EU government support for exporters. 

An association representing independent film and television producers cited another 

example, noting that the United States does not participate in bilateral “co-production 

agreements,” as do Australia, Canada, China, Great Britain, and France, among many 

other countries. Under these agreements, local talent, crew and expenditures, and 

shooting locations are able to qualify for cross-national benefits, including subsidies and 

screen quota qualifications. Equally important, according to the association, such coproduction agreements create relationships between producers and distributors in 

multiple countries that become the basis for future business; the lack of such agreements 

in the United States further limits opportunities for U.S. independent producers and 

distributors to develop their global business.87

Exchange Rate Fluctuations

Exchange rate fluctuations can have a significant impact on the payment that a company 

ultimately receives for export sales. An industry representative stated that larger 

companies tend to have the resources and experience to hedge against global currency 

fluctuations, whereas SMEs may not have such abilities. The representative noted that the 

impact of exchange rate fluctuations can also vary depending on the industry and the 

particular export market. For example, shipments of chemicals exported to the EU are 

denominated in euros, so their value can fluctuate significantly with exchange rates; in 

comparison, sales to Asian countries are often valued in dollars, providing more stable 

terms for exporters.88

Language and Cultural Barriers

SMEs in a number of industries reported cultural and language barriers to exporting. 

Such barriers may make it more difficult for firms, particularly small firms, to identify 

foreign customers and markets for their products. The NW Trade Adjustment Assistance 

Center, charged with assisting SMEs that have been affected by imports, has noted that 

most of the SMEs it works with do not have staff members that speak a foreign language, 

making it more difficult for them to begin exporting.89 As noted by another industry 

representative, it is vital for SMEs and other U.S. exporters to become proficient in “the 

new languages of trade,” specifically Portuguese, Hindi, Russian, Mandarin, Arabic and 

 85 Kay, written testimony submitted to the USITC, February 19, 2010; USITC, hearing transcript, March 

10, 2010, 128, 137 (testimony of Tony Clayton, Clayton Agri-Marketing); industry and U.S. government 

officials, interviews and telephone interviews by USITC staff, January 27–March 2, 2010. 86 TradeMoves LLC, written testimony to the USITC, March 24, 2010. Chapter 2 discusses exports by 

U.S. vs. EU SME exporters in greater detail. 87 Independent Film & Television Alliance, written testimony to the USITC, March 26, 2010. 88 Industry representative, interview with USITC staff, February 9, 2010. 89 NW Trade Adjustment Assistance Center, written testimony to the USITC, submitted March 24, 2010. 
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Korean, the languages spoken in emerging markets that are poised to increase their share 

of U.S. exports. The speaker called for increased funding and attention to foreign 

language programs in U.S. schools at all levels in an effort to address the problem.90

Language and cultural barriers may be particularly acute for SMEs in the services sector, 

where exports typically entail developing an ongoing relationship with a foreign 

customer. For instance, in the computer services industry, there is a need to provide onsite customer service and installation assistance.91

Global Products International (GPI) produces and sells Harley-Davidson branded 

products in 69 countries from manufacturing facilities in the United States, Canada, and 

Germany, and has faced a wide variety of cultural and language challenges. For example, 

they reported that customers in Russia have higher expectations of fabrics and stitching, 

but demand products at a lower price, and that in many markets intense price competition 

is due to the prevalence of counterfeit goods. The company stated that it also faces 

language barriers that can affect its ability to meet importer quality standards. In the 

Ukraine, for instance, GPI notes that it recently received a contract for payment based on 

its performance and the customer’s final acceptance of the product, but later faced an 

unexpected interpretation of the contract when it discovered that many provisions 

reportedly related to money laundering in the Ukraine. According to GPI, the company’s 

access to staff with language skills influences its choice of marketing strategy and its 

ability to execute that strategy. GPI noted that it has employees with language skills in 

Spanish, Russian, German, and Chinese and is currently looking to hire someone who 

speaks Japanese, but added that acquiring employees with those skills took years of 

hiring and training.92

Knowledge of Foreign Markets

Many SMEs noted that their limited knowledge of foreign markets acts as a significant 

barrier to increasing their exports. In most cases, their small size and resources preclude 

hiring the staff needed to identify export opportunities, establish relationships with 

foreign buyers, understand importing regulations and compliance rules of importing 

countries (e.g., labeling, consumer safety, or SPS regulations), and seek out export 

assistance available through various U.S. state and federal government programs. Several 

SME executives noted that the cost of employing a dedicated export sales staff to perform 

these vital duties is often prohibitive, and thus exporting is not a viable business option 

for many of them.93 One SME representative stated that the cost of networking and of 

acquiring information on projected economic and political conditions in foreign markets, 

including currency fluctuations, market desirability, or regulatory changes, was 

prohibitively high for SMEs, whereas larger businesses were more likely to be part of 

organizations that pooled resources and shared such information.94

One SME representative offered a list of critical questions for SME exporters, noting that 

most would find it very hard to find the answers: 

 90 USITC, hearing transcript, March 18, 2010, 61–63 (testimony of Spencer Ross, National Institute for 

World Trade). 91 Industry representative, telephone interview by USITC staff, March 2, 2010. 92 USITC, hearing transcript, March 10, 2010, 179–180 (testimony of Rebecca Herwick, Global Products 

International, Inc.). 93 USITC, hearing transcript, March 18, 2010, 198, 222 (testimony of Maria Hardy, Medical, Laboratory 

& Technology Consultants, Inc. and Joseph Reddix, The Reddix Group LLC); industry representatives, 

telephone interviews by USITC staff, December 2009–March 2010. 94 USITC, hearing transcript, March 10, 2010, 267 (testimony of Rebecca Herwick, Global Products 

International, Inc.). 
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 “What countries would best fit my product?” 

 “Are there countries I cannot export products to?” 

 “How do we identify potential customers within a country?” 

 “How can we obtain export financing; what is a letter of credit; what about 

customers who insist upon receiving net 30 day payment terms or open account, 

how do we know we will receive payment?”95

While those questions might easily be answered by assistance organizations such as the 

SBA or world trade organizations, international trade commissions, local banks, or 

attorneys, SMEs said that they often find it difficult to sort through the available 

information to answer such questions.96

Related to the problem of gaining sufficient knowledge about foreign markets is the 

problem of finding reliable local representation overseas. SMEs in a number of 

industries, including medical devices and textiles and apparel, have noted that it can be 

difficult for them to find business partners or distribution agents in foreign markets.97

According to one industry source, compliance with the Foreign Corrupt Practices Act 

(FCPA)98 can further increase a U.S. firm’s risk in selecting important local business 

partners and arrangements.99

Strategies to Overcome Barriers to Exporting

U.S. SMEs have developed a number of strategies to overcome some barriers to 

exporting. These strategies fall into three principal categories: (1) combining forces with 

other firms in the same industry, either through trade associations or through less formal 

consortia; (2) collaborating with a single larger firm, either a firm in the same industry or 

a broker or distribution agent; and (3) taking advantage of government programs that 

assist SME exporters. As illustrated below, these strategies may work together. For 

example, industry associations have assisted SMEs in understanding and accessing 

government programs to a greater extent than would have been possible for SMEs 

operating on their own. As an example, box 3.1 identifies several of the barriers to 

exporting encountered by one company, along with the strategies that the company used 

to overcome those barriers and become a successful exporter. 

Trade Associations and Coalitions with Other Firms

Many firms find it advantageous to combine forces to achieve mutual goals, such as 

increasing public awareness of their products or working to achieve changes in 

regulations. For example, the U.S. Chamber of Commerce Trade Roots group works with 

businesses, trade associations, and local government agencies around the United States to 

 95 USITC, hearing transcript, March 10, 2010, 188–189 (testimony of Stephen Mitchell, Magna 

Technologies, Inc.); bulletsin original. 96 USITC, hearing transcript, March 10, 2010, 188–189 (testimony of Stephen Mitchell, Magna 

Technologies, Inc.) 97 USITC, hearing transcript, March 10, 2010, 182–183 (testimony of Rebecca Herwick, Global Products 

International, Inc.); industry representatives, telephone interviews by USITC staff, February 17, 19, and 23, 

2010. 98 Under the Foreign Corrupt Practices Act, it is illegal under U.S. law for U.S. persons to make 

payments to foreign government officials to assist in obtaining or retaining business. Additional details are 

available at http://www.justice.gov/criminal/fraud/fcpa/. 99 Industry representative, interview by USITC staff, Houston, TX, March 2, 2010. 
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BOX 3.1 Barriers to exports of services and strategies to overcome the barriers: The case of Systems Integrated 

The experiences of Systems Integrated (SI) in entering the export market illustrate several barriers to exports 

commonly faced by SMEs in the service sector, including accessing financing, navigating the international bidding 

process, and protecting intellectual property (IP). SI supplies computer services along with engineering, construction, 

and consulting services. Many of its customers are utilities, and the company typically takes responsibility for entire 

water or power control systems, such as unmanned hydropower plants. The company employs engineers, 

programmers, and technicians, who write software, design custom circuitry boards, and purchase and assemble 

manufacturing inputs. SI has 25 employees, none of whom are dedicated full-time to managing exports. 

SI identified opportunities in exporting to developing countries engaged in high levels of infrastructure investment. 

The firm’s first exporting experience was to China, where one employee had existing contacts. The firm won a bid on 

a World Bank project and was able to obtain a bank letter of credit through contacts with the California Export 

Finance Office, which is no longer in operation. The project was completed successfully and led to further business in 

China. 

SI initially worked with a local representative in China and eventually established an office in Beijing. At one point the 

company established a joint venture with a Chinese firm, but began to see its copyrighted software appearing 

elsewhere in China. The firm considered defending its copyright and suing for reparations in the Chinese court 

system, but determined that legal action could cost millions of dollars and there was much the firm did not understand 

about the Chinese legal system. They decided to leave the country and operate in countries with stronger 

enforcement of IP rights. 

Another challenge encountered by SI is access to finance. Some banks found it difficult to understand the firm’s 

variety of products and services, lack of inventory, and use of new technology, as well as the size of its bids and the 

high level of responsibility such a small firm takes on in building complex infrastructure systems. The company 

eventually found a bank willing to work with it, but it has taken time to do so. 

The international bidding process poses challenges for SMEs like SI. The firm often bids for contracts that are paid in 

local currencies, and therefore must buy forward to protect against currency fluctuations. Additionally, governments 

often issue bids in local languages and do not provide translations (although the World Bank and other multilateral 

organizations usually issue bids in English), so SI must hire its own translators who understand engineering nuances, 

a process that can be expensive and time consuming. Many bids also have local content requirements, which can be 

a constraint, though SI often uses local firms as subcontractors where possible, even in the absence of such 

requirements. The actual process of bidding has become easier and less expensive due to technological 

improvements. SI used to ship large quantities of bid documents and engineering blueprints overseas and hire a 

counterpart to assemble the documents upon arrival, but now it is possible to send everything via e-mail and use a 

Voice over Internet Protocol service to communicate. 

SI noted the advantage of having an existing relationship in countries where it may bid on projects. For example, the 

firm’s entry into Malaysia was facilitated by a manufacturer who owned a factory in Malaysia and acted as a local 

representative. The company has sought and developed relationships with representatives abroad who understand 

both technology and local governments. 

Sources: Systems Integrated representatives, interview by USITC staff, Irvine, CA, March 5, 2010.

increase awareness of exporting for small businesses.100 Agricultural SMEs in particular 

are often able to overcome constraints to exporting because of the way agricultural 

producers have organized themselves into cooperatives and commodity and trade 

organizations over time. Agricultural cooperatives are farmer-owned production and 

marketing organizations that serve multiple purposes, including providing the necessary 

scale to meet buyers’ demands for large, consistent quantities while reducing marketing 

and transportation costs for smaller operations. Commodity and trade organizations often 

provide members with support ranging from agricultural research to promotional 

 100 U.S. Chamber of Commerce, written testimony to the Commission, February 9, 2010. 
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activities, both domestically and abroad, including promotion of U.S. agricultural 

products through USDA export promotion programs.101

In the agriculture sector, packers and marketers may source products from independent 

growers and other packers as well as from their own growers. This allows exporters to 

increase their ability to meet customer demands in terms of varieties and sizes, while also 

allowing them to supply more consistent volumes throughout a greater portion of the 

year.102 Similarly, many U.S. SME wineries use brokers or agents to facilitate exports.103

Some SME manufacturers also participate in industry consortia to share costs and risks 

related to regulatory programs and transportation, as well as to maximize their market 

presence overseas and optimize transportation logistics. For example, nanotechnology 

companies have formed a consortium to work with the U.S. Environmental Protection 

Agency to develop nanotechnology definitions and regulations.104 SME exporters of 

professional services frequently join networks of service providers as well. Professional 

services are often complementary, and networks that comprise providers of accounting, 

legal, management consulting, and other services can facilitate both international referrals 

and ad hoc alliances that offer complete packages of services to clients.

Cooperation With Larger Companies

Many SMEs across all industries work closely with global shipping and logistics firms 

that can help them access foreign markets, identify potentially problematic foreign import 

restrictions before goods are shipped, deal with customs clearance procedures and 

security concerns, access multimodal shipping and logistics services, and even offer 

warehousing and inventory management services overseas. Using the global logistics 

networks of large firms helps SMEs to match some of the capabilities of larger suppliers 

and better track delivery of inputs and shipment times. New products offered by shipping 

companies permit SMEs to handle much of their shipping needs from their own offices, 

simplifying the process and saving substantial staff time.105 One logistics company noted 

that it actively works to identify SME customers that currently export to a single market, 

usually Canada or Mexico, and works with those SMEs to help them expand exports into 

additional markets.106

In an effort to help its SME customers with access to trade finance, FedEx collaborates 

with the USCS and that agency’s partnerships with six regional commercial banks.107

UPS has pursued a different strategy, setting up a subsidiary to provide direct trade 

finance to SME exporters or their foreign customers (box 3.2). Besides forming alliances 

with larger companies in the same industry, SMEs may also hire large or small private 

sector consultant firms for insight into exporting strategies and market knowledge or for 

more concrete assistance, such as identifying distributors in foreign markets. 

Professional services SMEs operate on the strength of their reputations, and hence often 

enter foreign markets through relationships and referrals, often with large multinational 

 101 Although many U.S. agricultural cooperatives are SMEs, there are some very large cooperatives that 

employ more than 500 employees. USDA, however, considers all agricultural cooperatives to be eligible for 

its SME exporting assistance programs. 102 Industry representatives, telephone interviews by USITC staff, December 2009–February 2010. 103 Industry representatives, telephone interviews by USITC staff, February 11 and 16, 2010. 104 Industry representatives, interviews by USITC staff, January–March 2010. 105 Industry representatives, telephone interview by USITC staff, February 25, 2010; interview by USITC 

staff, Washington, DC, February 18, 2010; UPS and FedEx promotional materials. 106 Industry representatives, interview by USITC staff, Washington, DC, February 18, 2010. 107 FedEx, “The Missouri Trade Initiative,” 2009; U.S. Commercial Service Web site, “Our Partners.”
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firms. For example, management consulting and accounting SMEs may work with large 

domestic clients that then ask them to supply services to their foreign subsidiaries, or an 

SME may work with a domestic subsidiary of a foreign firm which, over time, may lead 

to work for the firm’s foreign headquarters.108 Similarly, legal services SMEs sometimes 

become involved internationally at the request of a client—for example, someone who 

owns property in multiple countries may seek a law firm that can deal with property law 

issues across borders.109

Government Programs

U.S. government programs can be important sources of information on foreign markets 

and customers for SME exporters. Federal government agencies that provide such 

assistance include the Ex-Im Bank, the USCS, the SBA, and the FAS. All of these 

agencies maintain a network of offices and staff around the United States that are 

available to assist SMEs. According to one SME representative of an export management 

company, 

[W]e made full and ongoing use of the U.S. Department of Commerce and Ex-Im 

Bank staff and resources through their domestic and international offices, 

including trade counseling, market research reports, trade shows, the Gold Key 

Service, export credit insurance and taking the time and effort to meet with U.S. 

Commercial [Service] officers in the foreign countries in which we are doing 

business. These sound like such obvious steps but many SMEs are still not taking 

advantage of the resources already existing to assist them at very low or no cost. 

If the U.S. government is committed to increasing SME exports, it is absolutely 

critical that the U.S. Department of Commerce and Ex-Im Bank sustain these 

programs.... These human, “on the ground” resources are invaluable and cannot 

be replaced by information that SMEs can glean from the internet. The 

Department of Commerce services are a very necessary and cost effective 

component to the contacts and knowledge that SMEs need in order to export 

successfully.110

The USCS Gold Key Matching Service provides an individualized service to match U.S. 

exporters to foreign customers. For a fee, USCS offices overseas can arrange business 

meetings with pre-screened contacts, including representatives, distributors, professional 

associations, government contacts, and licensing or joint venture partners.111 In testimony 

to the Commission, several SME representatives reported using the Gold Key service, 

although some noted that the program did not seem to fit as well for service sector 

firms.112

The U.S. Ex-Im Bank provides access to trade finance for U.S. companies, as does the 

Small Business Administration. The Overseas Private Investment Corporation (OPIC) 

offers export insurance programs. Some of these government agencies partner with larger 

 108 Industry representative, interview by USITC staff, New York, NY, February 17, 2010. 109 Industry representative, interview by USITC staff, New York, NY, February 18, 2010. 110 Benson, written testimony to the USITC, January 23, 2010, 2. 111 Additional details regarding the Gold Key service are available on the U.S. Commercial Service Web 

site, http://www.export.gov/salesandmarketing/eg_main_018195.asp (accessed April 15, 2010). 112 USITC, hearing transcript, March 10, 2010, 222–223 (testimony of Thomas Dustman, Sunnen 

Products); USITC, hearing transcript, March 12, 2010, 162–163 (testimony of Leonard Felix, CID BioScience); USITC, hearing transcript, March 12, 2010, 55–56 (testimony of Frank Monfared, Business 

Solutions Group). 
3-24

BOX 3.2 UPS Capital 

United Parcel Service (UPS), a global logistics firm, established a trade finance subsidiary, UPS Capital, in 1998. The 

unit only provides trade finance loans, with approximately 80 percent of loans serving SME customers. In most cases, 

UPS provides loans to foreign firms to finance imports of U.S.-made goods. According to UPS, such financing 

provides a way for U.S. SME exporters to compete with foreign SMEs that have access to government-provided 

export financing. 

UPS Capital fills an important market niche, since, as noted elsewhere in this study, many commercial banks prefer 

not to handle financing for the relatively small shipments that most SMEs export. The UPS Capital business model 

depends heavily on loan guarantees from the U.S. Ex-Im Bank, which apply to approximately 90 percent of UPS 

Capital loans. Most of the remaining loans are guaranteed by foreign country export credit agencies. 

UPS Capital also offers an opportunity for UPS to cross-sell its logistics services. One key factor that lowers the trade 

finance risk profile for UPS, compared to commercial banks, is that the company’s shipping and financial services 

work together. When UPS provides both types of services, the company has total control over the shipments 

involved, can ensure that the package is picked up and delivered as specified in contract documents, and can require 

payment upon delivery in the export destination. In addition, UPS financial and logistics services work together to 

boost the company’s overall global sales. 

UPS leverages its existing international sales force, which focuses on the company’s logistics services, to market its 

financial products to both U.S. exporters and foreign buyers. UPS primarily targets U.S. companies that are already 

exporting to at least one market, offering them a way to expand sales by providing financing to additional customers. 

UPS Capital also markets through international trade shows, where it can be on-site to provide financing as soon as a 

connection is made between buyer and seller. 

Sources: Representatives of UPS Capital, telephone interviews by USITC staff, March–April, 2010; UPS Capital Web 

site, http://www.upscapital.com (accessed April 20, 2010).

private-sector firms to provide exporting opportunities for SMEs. For example, both 

FedEx and UPS have partnered with the USCS to provide information on shipping and 

logistics services to SMEs that are considering exporting, or expanding their exports to 

additional countries.113

Several SMEs testified before the Commission that Ex-Im Bank financing was a 

significant asset in their ability to export goods or to secure contracts overseas. For 

example, Roeslein & Associates, an engineering and consulting services firm, noted that 

Ex-Im Bank programs helped it to establish letters of credit, and established very clear 

payment criteria, which was helpful to a small business. Ex-Im Bank financing also may 

have helped the firm to secure contracts in some cases where its competitors were unable 

to provide financing, because the Ex-Im Bank terms required purchases of U.S. goods 

and services.114

In addition to federal government programs, most states also offer export assistance 

programs to SMEs. For example, the Oregon Business Development Department 

(Business Oregon) assists local companies in marketing their goods and services at 

international trade shows, connects businesses with Ex-Im Bank programs, and works 

closely with federal government agencies to promote Oregon exports.115 Business Oregon 

also uses a credit enhancement fund through which it guarantees the principal on bank 

loans to SME exporters.116 The Massachusetts Export Center has created a program, the 

 113 Industry representatives, telephone interview by USITC staff, February 25, 2010; interview by USITC 

staff, Washington, DC, February 18, 2010; UPS and FedEx promotional materials. 114 USITC, hearing transcript, March 10, 2010, 226–228 (testimony of Rudi Roeslein, Roeslein & 

Assoc.). 115 USITC, hearing transcript, March 12, 2010 (testimony of Tim McCabe, Oregon Business 

Development Department, 11–13). 116 USITC, hearing transcript, March 12, 2010, 102–103 (testimony of Timothy McCabe, Oregon 

Business Development Department). 
3-25

“Compliance Alliance,” that helps companies learn to export through seminars and 

networking events and ensures they comply with relevant regulations. The Massachusetts 

Export Center estimates that the return on investment is 88:1, as the companies that were 

assisted generated over $1.5 billion in export sales in 2008, sustaining an estimated 3,000 

jobs in the state.117

Agricultural SMEs cite U.S. government programs as an important method for 

overcoming domestic constraints and barriers to exporting.118 The FAS oversees several 

export assistance programs, including the Market Access Program (MAP),119 which is the 

principal USDA FAS program for promotion of small business agricultural exports.120

Agricultural cooperatives and SMEs can apply for matching funds from the MAP 

Branded Program, which provides up to 50 percent of the funding for branded product 

promotions, with a funding limit of five years in a single country.121 Agricultural 

commodity and trade organizations can also apply for funds from the MAP Generic 

Program, which provides up to 90 percent of the funding for generic promotion of 

agricultural products, such as U.S. wines or U.S. cotton. Funds from both MAP programs 

can be used to reduce the costs of overseas marketing and promotional activities, such as 

trade shows, market research, consumer promotions for retail products, technical capacity 

building, and seminars to educate overseas customers.122 A number of SMEs and state 

government officials noted their support for the MAP program. According to the Oregon 

Department of Agriculture, MAP 

is an absolutely critical program for us in Oregon. We ... use it extensively to 

support our work in international markets, and our small and medium-sized 

farms and processors also access this program. It is very, very important for us. 

It is the kind of support that we really need, and if we lost the Market Access 

Program, that would be a huge blow to us.123

Other Strategies

Local and state governments may have other ideas for promoting exports from their 

regions. As one way to increase exports from the U.S. Midwest, for example, civic 

leaders in the St. Louis area, in cooperation with Chinese officials, created the MidwestChina Hub Commission in December 2008. The initiative, nicknamed “The Big Idea,” is 

 117 U.S. Chamber of Commerce, written testimony to the Commission, February 9, 2010. 118 Industry representatives, phone interviews by Commission staff, December 2009–March 2010; 

USITC, hearing transcript, March 12, 2010, 22 (testimony of Katy Coba, Oregon Department of Agriculture); 

USITC, hearing transcript, March 18, 2010, 82 (testimony of James Gore, JB Clawson International). 119 The MAP uses USDA Commodity Credit Corporation (CCC) funds to share the costs of overseas 

market research, consumer promotions for retail products, technical capacity building, and seminars to 

educate overseas customers. 120 Other programs that benefit both small and large business and are administered by FAS include the 

Foreign Market Development Cooperator (FMD) Program and the Export Credit Guarantee (ECG) Program. 

The FMD program provides funds to reduce market impediments, improve the processing capabilities of 

importers, modify restrictive regulatory codes and standards in foreign markets, and identify new markets or 

uses for U.S. products. ECG also may provide commercial financing of U.S. agricultural exports. 121 This five-year funding limit was mentioned by multiple SMEs as a constraint to being able to 

effectively market product in certain markets. As a result, one SME only takes funding for certain markets 

every two to three years to try to prolong the benefits of MAP funds. Industry representative, telephone 

interview by USITC staff, February 17, 2010. 122 USITC, hearing transcript, Washington, DC, March 18, 2010, 72–79 (testimony of Jameson French, 

The Hardwood Federation). Industry representatives, telephone interviews by USITC staff, various dates; 

USDA FAS, “Market Access Program,” December 2009. 123 USITC, hearing transcript, Washington, DC, March 12, 2010, 22 (testimony of Katy Coda, Oregon 

Department of Agriculture). 
3-26

focused on creating a direct air cargo link between St. Louis and China, using St. Louis 

International Airport. As envisioned by supporters, the plan would expand trade between 

the Midwest and China; simplify transport links for local companies that now primarily 

depend on air cargo through Chicago and other locations; increase recognition by local 

companies of the potential for exports from the Midwest to China; and lead to increased 

employment in the Midwest and St. Louis regions.124 These changes would particularly 

benefit SMEs that are likely more sensitive to transport costs, and less likely to be 

recognized outside their home region, than larger companies. 

Investments in local infrastructure to support the plan have included a $1 million grant 

from the U.S. Department of Transportation for runway development and repair at 

Lambert Airport, $40 million in private investment in new air cargo distribution facilities, 

a $1.7 million grant from the U.S. Department of Commerce’s Economic Development 

Agency to conduct a feasibility analysis, and a $1 million grant from the State of 

Missouri to undertake air freight-related studies. Missouri officials have also traveled to 

China to speak with Chinese officials and airline executives on the benefits of air cargo 

flights into St. Louis airports. The key to a successful St. Louis air cargo hub to China 

would be sufficient two-way trade. This would mean increasing U.S. exports of food 

(particularly beef and pork), farm equipment, and other goods manufactured in the 

Midwest enough to ensure that air cargo planes loaded with exports from China would 

head back to China with equally full loads. Other industries that are expected to benefit 

from the air cargo hub include biotechnology and related biological sciences, 

pharmaceuticals, and renewable energy, especially wind, solar, and plant-related 

technologies. In March 2010, the Midwest-China Hub Commission signed agreements 

with four Chinese air carriers to study the potential for the air cargo hub.125

Increased use of technological tools offers a suite of potential export strategies for SMEs 

by assisting small firms in developing market information, making connections with 

customers, and reducing operational costs. One method of e-commerce that is particularly 

targeted at SMEs is the network market. A network market is an e-commerce platform 

that enables a business network, such as a chamber of commerce or a government export 

promotion agency, to gather the online sales catalogues of its members at a central Web 

site. A recognized network serves as both a familiar destination for Internet shoppers and 

as a guarantor of the credibility of the market participants. Such networks facilitate 

business-to-consumer (B2C) and business-to-business (B2B) sales, and serve as a source 

of promotional samples for potential customers.126 As noted by one provider of such 

networks, “Network markets overcome the critical e-commerce challenge of generating 

the visibility and credibility that their members cannot achieve on their own,” helping 

SMEs to assure potential foreign customers that they are trustworthy providers of goods 

or services, while avoiding the need for significant marketing investments to generate 

interest in their Web sites.127

 124 Midwest-China Hub Commission, written testimony to the USITC, March 26, 2010. 125 Midwest-China Hub Commission, written testimony to the USITC, March 26, 2010; industry 

representative, e-mail message to the USITC, April 12, 2010; Logan, “St. Louis Delegation Inks Deal with 

Four Chinese Airlines to Study Lambert Cargo Flights,” March 28, 2010. 126 Examples of such network markets include the World Fair Trade Organization, which provides 

customers access to fair trade goods around the world from a central internet location 

(http://www.wftomarket.com), and Alibaba.com (http://www.alibaba.com), which serves as a centralized 

internet marketplace for Chinese manufacturing exporters. OpenEntry.com (http://www.openentry.com) 

provides startup services for such network markets. Salcedo, written testimony to the USITC, March 19, 

2010. 127 Salcedo, written testimony to the USITC, March 19, 2010.
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SME Recommendations for Increasing Exports 

Of the more than 260 organizations that participated in the Commission’s investigation, 

35 offered suggestions for policy changes that they thought would enhance the ability of 

SMEs to export.128 The suggestions are summarized in table 3.2. The three suggestions 

that were most frequently given to the Commission were as follows: (1) increase focus on 

free trade agreements (FTAs) and other trading 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 recommendations were, however, 

quite diverse, including actions at both the federal and the state government levels to help 

SMEs increase exports. Suggestions included simplifying U.S. export control regulations, 

reducing paperwork for exports of product samples, and providing more education about 

regulations.129

One SME representative noted that SMEs that export to emerging markets would benefit 

if the Ex-Im Bank were to develop new criteria for evaluating SMEs as U.S. exporters. 

According to this witness, many small foreign buyers appear risky under traditional 

evaluation methods such as those used by Coface and Dun & Bradstreet, but where 

information systems are less sophisticated than in the United States, lenders such as the 

Ex-Im Bank should rely more on consideration of the management, character, and 

potential of foreign buyers, and on their plans for the financing. The witness added that 

USCS offices overseas could help such foreign buyers to meet these new standards, 

creating additional export opportunities for U.S. SMEs.130

A number of SMEs suggested ways to make U.S. government export promotion 

programs significantly more helpful to SMEs. For instance, a number of SMEs noted that 

information on government programs can be either hard to find or overabundant, making 

it difficult for small business owners to sort through the various government programs 

and target the best ones to address their particular concerns.131 According to the National 

Minority Business Council (NMBC), government programs charged with reaching out to 

SMEs, particularly the Ex-Im Bank, could be more helpful in targeting their services to 

minority-owned SMEs. For example, the Ex-Im Bank could revise its risk criteria for 

SMEs that export to developing countries in Asia, Africa, and Latin America so that its 

loans can better compete with financing offered by countries such as China and India to 

their own SME exporters. As another example, the NMBC suggested that government 

agencies could make better use of ethnic-targeted media outlets or churches to reach out 

to minority-owned SMEs.132

 128 This listing of policy recommendations offered by the SMEs does not necessarily reflect the number 

of organizations that raised the issue as a barrier. For example, many cited difficulty obtaining U.S. visas for 

staff or customers but only a few added suggestions regarding potential modifications. 129 Sources include hearing testimony, written testimony, and interviews (in person, by telephone, and via 

email) with Commission staff. 130 McLymont, written testimony to the USITC, February 9, 2010. 131 USITC, hearing transcript, Washington, DC, March 18, 2010, 202 (testimony of Maria I. Hardy, 

Medical, Laboratory & Technology Consultants); Foreign Trade Association, written testimony to the 

Commission, March 24, 2010. 132 USITC, hearing transcript, March 18, 2010, 66, 166 (testimony of Fritz-Earle McLymont, National 

Minority Business Council). 
3-28

TABLE 3.2 Policy change recommendations provided by SME representatives 

Increased focus on FTAs and other 

trading arrangements, including 

enforcement 

 Support expansion of free trade 

 Enforce existing trade agreements and treaty rights when violations occur 

 Minimize/remove/standardize import duties 

 Improve intellectual property rights programs and their enforcement 

 Develop mutual recognition agreements that incorporate credible systems for 

 certification 

 Create more effective trade policies 

 The United States exported agricultural products under a program called Food for 

 Peace / PL 480. This type of program could be extended to other commodities, 

 services, products and projects using stimulus funds, potentially helping developing 

 markets while reviving U.S. businesses in all sectors. 

More assistance with market 

access, particularly in India and 

China 

 Promote export trading companies 

 Organize a business association to advocate for U.S. SMEs in India 

 Encourage India to harmonize customs duties at the national and state level 

 Increase government programs that assist with representation in China 

 Increase flexibility of government marketing grants to match company needs and allow 

 for local export promotion strategies 

 Increase niche-specific U.S. government (USG) trade missions 

 Strengthen programs to link U.S. SME exporters as subcontractors for larger foreign 

 projects 

 At the state level, identify potential markets for SMEs and help SMEs introduce 

 themselves to international clients through trade shows and other vehicles 

 Encourage the replication and expansion of successful state-level promotion initiatives 

 Improve the U.S. Commercial Service Gold Key program 

 Provide more money and assistance for export promotion 

 Develop a “teaming” process to match small businesses with larger firms or other 

 small businesses 

 More USG funding to SMEs to help them be better positioned at foreign trade fairs 

 Increase USG funding for export promotion 

More information, outreach, and 

educational opportunities about 

exporting 

 Make information on the export process more readily available and visible 

 Increase focus on international business training at the high school and college level 

 Increase foreign language and trade training at the K-12 level 

 Create a robust worker retraining program for those who have lost jobs to imports 

 Provide USG investment in innovation, training, and workforce development 

 Focus on nontraditional export industries 

 Encourage diversity and ethnic outreach 

 Provide a comprehensive trade and tariff database for SMEs to support export 

 opportunities (similar to what is provided to SMEs in the EU) 

 Provide potential SME exporters with greater export encouragement; start-up support; 

 practical how-to counseling and training; customized help with market research, 

 promotion and matchmaking to select the best markets and partners; negotiate and 

 close deals, mitigate risks, and comply with requirements. 

Streamline, update, and reform 

export processes and export control 

regulations 

 Find ways to simplify the export process (streamline paperwork, licenses) 

 Expand the electronic export documentation systems to include supporting 

 documentation (currently stored in paper format) to enable better tracking of the 

 documents and to make it easier for Customs to administer export regulations; and 

 to provide funding for Customs to expand the existing electronic system 

 Set up a global export license to streamline the export license process 

 Allow transfers of product samples without an export license 

 Fundamentally reform the export control system (make it speedier, update the lists 

 more often, and add new technology as it is developed) 

 Give compliance education, advice, information, training, and assistance; these are 

 critically needed to overcome fears, raise compliance levels, and minimize 

 inadvertent violations 
3-29

TABLE 3.2—Continued

Policy change recommendations provided by SME representatives 

Financing 

 Expand loan program for exports 

 Make grants more available 

 Improve the capacity and speed of Ex-Im Bank (better credit checks, faster 

 applications, easier access) 

 Increase funding to the Ex-Im Bank 

Regulations and standards 

 Require businesses to submit to an evaluation process (to see if any U.S. company 

 can produce the product at a competitive price) before licensing to a foreign-based 

 competitor 

 Adopt protective nontariff barriers (e.g., technical standards, mandatory U.S. 

 component integration, etc.). 

 Remove or oppose legislation that increases regulatory or oversight costs 

 Strengthen the U.S. government’s relationship with the International Accreditation 

 Forum (IAF) and involvement in International Organization of Standards (ISO) 

 programs 

Modify U.S. visa system 

 Improve the visa system so that the cost and inconvenience of travel to the United 

 States is reduced and staff and customers of foreign companies can be brought in to 

 see U.S. companies’ operations and products 

Transportation issues 

 Increase freight transportation efficiencies 

 Nurture growth of import warehouse distribution systems to naturally increase flow of 

 empty equipment into region 

Sources: USITC, hearing transcripts, March 10, 12, and 18, 2010; written submissions to the USITC; industry representatives, 

interviews with USITC staff, December 2009–April 2010. 

4-1 

CHAPTER 4 

Views of SMEs on Barriers to Exports: 

Industry Case Studies 

Introduction 

As illustrated in the previous chapter, SMEs face a wide variety of domestic and foreign 

barriers which industry representatives have identified as constraints on exporting. The 

Commission identified seven industries from the agriculture, manufacturing, and service 

sectors likely to offer deeper insights into significant export barriers, as reported by 

industry representatives (table 4.1). These industries include apples, wine, certain hightechnology industries, textiles and apparel, medical devices, computer services, and 

professional services. SMEs are well represented and are competitive actors in all of 

these industries.1

Apple Industry

Industry Background

The U.S. apple sector consists of approximately 7,500 apple growers, as well as fruit 

packers and marketers. While most of the firms in the industry are SMEs, the industry 

has consolidated significantly over the past decade. As a result, in the Pacific Northwest, 

the 14 largest fruit marketers handle about 90 percent of all tree-fruit exports.2

 Despite 

the consolidation, almost all apple producers and exporters have fewer than the 

equivalent of 500 full-time employees, including most of the fully integrated marketers of 

apples that own and operate their own growing, packing, and marketing ventures. As a 

result, SMEs account for almost all of the industry’s exports. Washington State is the 

largest apple producer in the country, generally accounting for almost 60 percent of 

national production.3

 Other significant producing states include New York and Michigan, 

but Washington exports a much larger share of its production (about 30 percent) and 

accounts for the majority of apples exported nationally.4

Exporting plays an important role for the U.S. apple industry, especially for the exportoriented state of Washington. How apples are exported depends on how vertically 

integrated the firm is, a factor which can vary significantly in the apple industry. After 

harvest, apples are transported from the orchard to the packinghouse for washing, sorting, 

and packing. Once prepared by the packinghouse, the fruit is sold internationally through 

independent brokers, the packing facilities’ in-house sales staff, a parent company’s 

marketing arm, or separate, independently owned fruit marketing firms. Some packers 

are vertically integrated and source a large percentage of their apples from 

 1

 As in chapter 3, the information presented in this chapter reflects the views of SME representatives 

who were able to meet or speak with Commission staff. The Commission has not corroborated this 

information. 2

 The largest marketers of U.S. apples typically handle and market other tree fruits as well, such as pears 

and cherries. Industry representative, email message to USITC staff, January 14, 2010. 3

 USDA, NASS, Noncitrus Fruit and Nuts 2010 Summary, January 2010, 11. 4

 Steward, “Chile Is the Most Competitive,” January 1, 2008, 12.
TABLE 4.1 Key findings on export barriers and suggested strategies to overcome those barriers, selected industries 

Industry Barriers Strategies 

Apples  The major factors restricting exports of apples by U.S. SMEs are access to 

capital and financing restrictions, small volumes, inadequate product varieties, and limited sales staffs and resources dedicated to exporting. Sanitary and phytosanitary (SPS) measures are the primary barriers to certain foreign markets for all producers. However, SPS protocols have a greater impact on smaller producers, who cannot spread the costs of implementing those protocols over a larger volume of produce. 

 The strategies used by the U.S. apple industry to overcome these barriers 

include consolidating the product through larger packers and marketers, to 

increase exporters’ product offerings and minimize risk; creating industry associations that provide market research, promotion, and services to resolve international trade issues; and using promotion programs and services provided by various U.S. government programs and agencies. 

Wine  Major domestic factors that constrain U.S. exports of SME wine are a lack 

of resources dedicated to exporting; relatively small-scale production; and a primary focus by SMEs on the U.S. market. 

 Foreign barriers include high tariffs and trade agreements between 

competitor nations; compliance issues, including SPS measures and labeling regulations; limited knowledge of U.S. wine in foreign markets; longer contract terms; and a higher level of support provided by competitor nations to their wine sectors. 

 Strategies used by U.S. wine SMEs to overcome many impediments to 

exporting include organizing themselves into regional industry groups to pool resources dedicated to market research, product promotion, and identification of potential export customers; and using U.S. government export promotion programs, including the USDA Market Access Program (MAP). SMEs also are increasingly employing agents and brokers that specialize in foreign markets to gain export market share. 

High-tech industries  Chemical and nanotechnology SMEs are particularly affected by U.S. 

export controls, U.S. state and federal environmental and health regulations (particularly for new products such as nanomaterials), and transportation costs. REACH (the new EU chemical regulatory system), EU directives and labeling requirements, and EU member state requests for additional product information are considered major trade barriers for chemical and nanotechnology SMEs. 

 To overcome export barriers, chemical and nanotechnology SMEs often 

approach issues together with other SMEs to share costs and risk and to maximize market presence. SMEs also make use of U.S Department of Commerce export promotion programs. 

Textiles and apparel  The most significant challenges for textile and apparel SME exporters are 

identifying potential foreign customers, understanding customs and foreign regulations, and receiving payment from foreign customers. 

 U.S. textile and apparel firms compete best internationally when they are 

highly automated and when they either address niche markets or can compete on quality.

 Making contacts through trade shows and fairs, associations, trade 

groups, partnering, and government programs is also useful. 

Medical devices  The principal domestic and foreign barriers for SMEs seeking to export 

medical devices include complex regulatory procedures, lack of access to capital, and inadequate reimbursement from foreign health insurers. 

 U.S. medical device SMEs’ chief export strategies include seeking 

financing from venture capital firms, working with the U.S. Commercial Service and private consulting firms to explore market opportunities abroad, and exporting into the EU before pursuing other markets. 

Computer services  Barriers to exports faced by computer services SMEs include export 

controls on encryption software, access to export finance, regulations on data security, and language barriers. 

 Export strategies used by computer services SMEs include partnering with 

other firms and adopting innovative pricing models that mitigate the risk of nonpayment. 

Professional services  Barriers to exports confronting professional services SMEs include limited 

availability of skilled workers, cultural and language barriers, and nontransparent regulation in many foreign countries. 

 Export strategies used by professional services SMEs include leveraging 

relationships with larger firms, joining networks of SMEs, seeking employees with international experience, and promoting U.S. codes and standards abroad. 

Sources: Hearing testimony, written submissions, e-mails, and interviews (in person and by telephone) with Commission staff. 

4-2 
4-3 

growing operations they own, while other packers source primarily from independent 

growers. Many of the marketing firms that export are fully integrated and own both 

packing and growing operations, but they also market significant quantities from other 

independent packers. Almost all of these fully integrated marketers are SMEs. 

Domestic Barriers to Exporting

The major domestic barriers that restrict exports of apples by U.S. SMEs are limited 

availability of capital and trade finance, small volumes and inadequate product varieties, 

and limited sales staffs and resources dedicated to exporting. Both limited finance options 

and capital restrictions inhibit U.S. apple exports. Trade finance is an issue of particular 

concern to SME exporters. While some U.S. exporters require a full cash payment before 

shipping their product, others require only a certain percentage of the payment in 

advance. This percentage often fluctuates depending on the perceived risks associated 

with the export market and whether or not the exporter has a previously established 

relationship with the importer. For example, an apple exporter may require an importer in 

Russia to pay 80 percent of the sale price in advance, while only requiring 60 percent up 

front for an importer in the United Kingdom.5

Because of the relatively low profit margins in the industry, many exporters have limited 

working capital available to finance sales and, as a result, their ability to extend credit to 

customers is restricted. Industry officials have suggested that if they were able to extend 

more credit and require a smaller percentage of the total sale price to be paid in advance, 

they would be able to expand export sales.6

 Larger firms with higher revenues and more 

capital are generally more willing to risk selling product to new buyers that they are 

unfamiliar with, while smaller packers often are not. Certain apple exporters stated that 

programs such as the U.S. Department of Agriculture (USDA) Export Credit Guarantee 

Program (GSM-102) and the Supplier Credit Guarantee Program have been used in the 

past to overcome some of these financing limitations, but the programs lacked both 

efficiency and funding and are now rarely used.7

Smaller volumes and an inability to consistently provide the varieties and sizes demanded 

by importers prevent apple exporters from expanding export sales. Demand for apples is 

constantly evolving and varies significantly by region and country. Certain markets 

demand particular varieties, such as Granny Smith or Red Delicious, while others prefer 

specific sizes. Some exporters occasionally have to turn down orders when they are 

unable to meet certain specifications.8

 In addition, packers may not produce the quantity 

of apples needed to supply large-scale importers with consistent shipments throughout 

the year. This results in lost business for U.S. apple exporters. While marketers often 

combine the product of multiple packers in order to increase their product offerings, 

industry officials have stated that expanding their growing operations would allow them 

to overcome some of the supply barriers.9

 However, because of the low margins in the 

industry, they do not have the needed capital and cannot get the low financing rates that 

would make expansion affordable.10

 5

 Industry representative, telephone interview by USITC staff, January 21, 2010. 6

 Industry representatives, telephone interviews by USITC staff, December 2009–February 2010. 7

 Industry representatives, telephone interviews by USITC staff, January 19–21, 2010. 8

 Industry representatives, telephone interviews by USITC staff, December 2009–February 2010. 9

 Ibid. 

10 Industry representative, telephone interview by USITC staff, January 21, 2010. 
4-4 

Small sales staffs and limited resources prevent many apple SMEs from expanding their 

exports.11 Many of the packers and marketers have sales staffs that focus on specific 

export markets with established importers. Developing a new market requires allocating a 

tremendous amount of resources in terms of money and staff time. In order to expand into 

a new foreign market, an exporting firm must conduct extensive market analysis so that it 

can be familiar with the demand preferences, the distribution system, and the 

infrastructure of the country. In addition, resources have to be allocated towards 

marketing the product to new potential importers and retailers. This requires significant 

resources that many SMEs do not have, thereby reducing many exporters’ ability to 

expand into new markets.12

Foreign Barriers to Exporting

According to many U.S. apple exporters, the principal nontariff barriers preventing the 

expansion of U.S. apple exports are sanitary and phytosanitary (SPS) measures, which 

are meant to prevent the importation of pests and diseases. Apple exporters are required 

to follow ever-changing SPS protocols13 in order to gain access to international markets. 

These protocols might require, for example, field inspection, fumigation, and cold 

treatment, as well as maximum pesticide residue levels.14 Some countries’ protocols are 

stricter than those commonly applied internationally and can keep U.S. apples out of a 

market altogether. Because SPS rules vary significantly based on the country, 

establishing preventative protocols to meet the requirements is a complicated process that 

can add significant costs for growers. Due to SMEs’ limited resources and smaller scales 

of production, these requirements affect smaller growers and packers more than larger 

operations, since the latter can spread the costs of implementing those protocols over a 

larger volume of produce.15

SME Strategies for Exporting

The U.S. apple industry has developed a number of methods to overcome many export 

barriers. Strategies include the consolidation of the product through larger packers and 

marketers, which increases exporters’ product offerings and minimizes risk for smaller 

firms; creating industry associations that provide market research, promotion, and 

services to resolve international trade issues; and using promotional programs and 

services provided by various U.S. government programs and agencies.16

Packers and marketers source apples from their own growers, from independent growers, 

and from other packers. This allows exporters to increase their ability to meet customer 

demands in terms of varieties and sizes, while also allowing them to supply more 

consistent volumes throughout more of the year. Smaller apple packers who may not 

have the resources to export to certain markets also sell their product to larger marketers 

in order to minimize their exposure to the risks that arise when exporting apples.17

 11 Industry representatives, telephone interviews by USITC staff, December 2009–February 2010. 12 Ibid. 

13 For example, SPS protocols might change in response to newly developed chemicals used for apple 

fumigation. 14 USDA, APHIS and BAPHIQ, “Systems Approach Work Plan for the Exportation of Apples from the 

United States into Taiwan,” June 25, 2008; Northwest Horticulture Council Web site, Export Manual, 

http://www.nwhort.org/countries-toc.html. 15 Industry representatives, telephone interviews by USITC staff, December 2009–February 2010. 16 Ibid. 

17 Ibid. 
4-5 

Despite the fact that even the larger packers and marketers are still small in size, the 

packing and marketing sector of the industry has consolidated over the last decade and, as 

a result, the industry is becoming increasingly vertically integrated.18 As this process has 

unfolded, it has become more common for smaller packers to sell their product through 

the larger exporting firms. 

Apple growers and marketers have created a number of industry associations, such as the 

Northwest Horticulture Council (NHC) and the Washington State Apple Commission 

(WSAC), that provide valuable resources and assist in selling their product abroad. The 

NHC focuses on international policy issues, such as SPS barriers, while the WSAC deals 

primarily with promotion and market development for the Washington apple growers. 

The WSAC is funded entirely by growers through assessments on their fresh apple 

shipments. The NHC is also funded entirely through assessments to its members, which 

include, among others, the WSAC and the Washington State Fruit Commission. Given 

that many firms have limited resources to expand into new markets, the WSAC has 

representatives on the ground in countries throughout the world that not only promote 

U.S. product to increase exports, but also provide valuable information to U.S. producers 

with respect to the foreign market, supply chains, and importers.19

Many U.S. apple producers also take advantage of various government programs to 

overcome barriers in certain markets. For example, funding from the USDA Market 

Access and Promotion (MAP) program is used to share the costs of overseas marketing 

and promotional activities. These activities expand foreign export markets by targeting 

market constraints and new sales opportunities. In addition, officers from USDA’s 

Foreign Agricultural Service (FAS) who are posted in foreign markets are often called on 

by individual exporting SMEs to gather first-hand, up-to-date information on the 

market.20

Wine Industry 

Industry Background 

The U.S. wine industry is dominated by SMEs. U.S. wineries numbered nearly 7,000 in 

2010,21 and the overwhelming majority of the wineries (over 90 percent) are small 

operations, most employing 50 or fewer employees, although approximately 12 wineries 

employed over 500 employees.22 The rest are medium-sized wineries with 200–350 

employees. Industry sources estimate that SMEs accounted for approximately 40 percent 

of the value of domestic production and 20–30 percent of total wine exports in 2009.23

California is the center of the U.S. wine sector, accounting for over 90 percent of U.S. 

wine production (by volume and value) and 95 percent of total U.S. wine exports.24

 18 For example, in Washington State alone, the total number of packers reportedly declined from 44 in 

the late 1990s to 24 in 2008. Industry representative, telephone interview with USITC staff, August 20, 2008. 19 Industry representatives, telephone interviews by USITC staff, December 2009–February 2010. 20 Industry representatives, telephone interviews by USITC staff, January 21–22, 2010. 21 As of January 2010, the total number of U.S. wineries (producers and blenders) was 6,746. California 

was home to 2,939 wineries (56 percent of total). Alcohol and Tobacco Tax and Trade Bureau, FOIA. 22 Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 23 USITC, hearing transcript, March 18, 2010, 77 (testimony of James Gore, JBC International); industry 

representatives, telephone interview by USITC staff, February 4, 2010. 24 Wine Institute, Industry Profile. 
4-6 

Approximately 200 U.S. SME wineries regularly export, and exporting is an integral part 

of their business plans. Another 200 wineries export intermittently by filling occasional 

export orders.25 U.S. SME wineries supply a wide variety of foreign market segments 

including the hotel, restaurant, and bar sectors, as well as specialty stores and private 

clients. Some of the larger medium-sized wineries supply supermarket chains in certain 

markets. The United Kingdom, Canada, Mexico, and Japan are the largest export markets 

for U.S. wine, while the leading developing markets are located in Asia, such as China 

and South Korea. 

Domestic Barriers to Exporting 

The major domestic factors that constrain U.S. exports of SME wine are a lack of 

resources dedicated to exporting; relatively small scale production, largely consisting of 

high value products; and a primary focus by SMEs on the U.S. market. Industry 

representatives reported that domestic factors are just as important as foreign barriers in 

limiting exports.26

The leading factor limiting U.S. SME wine exports, according to industry sources, is a 

lack of resources, primarily time and personnel, dedicated to exporting. According to 

industry representatives, significant resources are required to conduct market research, 

identify potential customers, vet creditworthiness of potential partners, negotiate export 

contracts, research foreign compliance and other regulatory requirements, and coordinate 

shipping logistics.27 According to one industry source, “many [SME wineries] have an 

office staff of only 5 or 6 people;” they lack the time and staff necessary to handle the 

relatively more time consuming requirements of exporting.28

Another key domestic factor limiting U.S. SME exports is the relatively small volumes 

and high value of most SME wine. Manufacturing in relatively small batches, SMEs 

generally have higher per unit production costs relative to large wineries that benefit from 

economies of scale. Moreover, SMEs cannot supply substantial volumes at “very 

aggressive prices” and cannot compete in certain export market segments that are 

dominated by very large international producers. According to industry representatives, 

SMEs are not competitive in supplying the largest segment of the international wine 

trade―large off-premise establishments, mainly supermarkets that purchase wine in 

substantial volumes, including bulk wine, at very low prices. SMEs also face higher per 

capita shipping, logistics, compliance, and insurance costs, which also raise their prices 

and affect their competitiveness in foreign markets.29

The relatively small scale of SMEs also contributes to the risk exposure they face in 

export transactions. According to an industry representative, if a transaction “turns sour,” 

which is a concern in certain export markets, SMEs proportionately have a greater share 

of their production at risk.30 Moreover, because “the exporting chain is not seamless,” 

problems such as customs delays or last-minute compliance issues can arise. SMEs 

 25 Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 26 Industry representatives, telephone interviews by USITC staff, February 4–19, 2010. 27 Ibid. 

28 Industry representative, telephone interview by USITC staff, February 11, 2010. 29 Compliance costs include meeting foreign market sanitary and phytosanitary regulations and 

certifications. Examples include laboratory tests and producing and applying special labels to meet export 

market regulations. Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 30 Industry representative, telephone interview by USITC staff, February 11, 2010. 
4-7 

typically do not have the personnel or expertise compared to large wineries to efficiently 

deal with the problems that can occur in the export process.31

Another factor that inhibits SME exports is the sector’s focus on the U.S. domestic 

market, the world’s largest and most lucrative wine market.32 Because of the additional 

time, resources, and expense required for exporting, most U.S. SMEs focus on the U.S. 

market. The relatively small volumes produced by most SMEs easily can be marketed to 

domestic purchasers at lower transaction costs (higher profits) than to international 

markets.33 Only a small number of non-California SME wineries reportedly export. For 

many SME wineries, it is much easier and more profitable to sell at a winery tasting room 

or into the local, regional, or national supply chain than it is to export.34 Moreover, many 

U.S. SMEs have volume constraints and do not have the ability to expand capacity to 

supply foreign markets.35

Foreign Barriers to Exporting

Foreign factors and trade measures that affect U.S. SME wineries include high tariffs and 

trade agreements entered into by competitor nations; compliance issues including SPS 

measures and labeling regulations; a lack of knowledge of U.S. wine in foreign markets; 

longer contract terms; and a greater level of support provided by competitor nations to 

their wine sectors. Although these factors affect all exporters, they can have a 

disproportionately negative effect on SME exporters.36

A major factor limiting SME exports is high foreign tariffs, particularly duties imposed 

on an ad valorem (value) basis. Because most SMEs ship relatively high value wine, 

tariff costs per unit can be greater for SMEs. High tariffs reportedly price many SME 

wines out of large segments of export markets or out of markets entirely. Large wineries 

that export substantial volumes reportedly cut prices in order to sell more units; most 

SMEs do not have the volume or economic power to cut prices or profit margins in order 

to gain market share.37

U.S. free trade agreements (FTAs) can have a beneficial effect on SME wine exports by 

lowering tariff barriers to SME exports; however, industry representatives noted that 

many U.S. FTAs (with the exception of NAFTA) have been established with countries 

that are relatively small wine markets.38 At the same time, FTAs negotiated by other 

foreign suppliers can have a negative impact on U.S. wine exports. Many major 

competitor nations, including Chile, Australia, and the European Union (EU), have 

aggressively negotiated FTAs in key export markets such as Japan, China, and Korea; 

 31 Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 32 In 2009, U.S. imports of wine were $3.9 billion. GTIS (accessed March 2, 2010). 33 Industry representative, telephone interview by USITC staff, February 11, 2010. 34 Industry representatives estimate that less than 5 percent of SME wineries export annually. For those 

wineries that export, an estimated 90–95 percent of their output is marketed in the domestic market. Of the 

1,100–1,200 Northwest (Washington and Oregon) wineries, approximately 65–75 export in any given year, 

while about 20 to 30 wineries regularly export. New York wineries are primarily focused on the domestic 

market with approximately 85–90 percent of their output sold at the winery. Industry representatives, 

telephone interviews by USITC staff, February 10, 11, and 16, 2010. 35 Industry representative, telephone interview by USITC staff, February 11, 2010. 36 See the forthcoming USITC study, “U.S. Exports from Small and Medium-Sized Enterprises: 

Characteristics and Performance,” for further discussion of ways certain barriers to exports disproportionately 

affect SMEs, compared with larger companies. 37 Industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 38 USITC, hearing transcript, March 18, 2010, 96 (testimony of James Gore, JBC International); industry 

representative, telephone interview by USITC staff, February 16, 2010. 
4-8 

according to an industry source, this situation “creates an uneven playing field” for U.S. 

wine exporters.39

In many foreign markets, SPS measures take the form of laboratory analyses to determine 

if the wine is consistent with its label, including the grape variety, or does not contain 

prohibited additives or chemicals. These fixed costs can be more expensive for small 

volume SME exporters.40 For example, in an export market, 10 certification certificates 

may be required for 20 cases of wine, while the same country may require 20 certificates 

for 20,000 cases.41

Moreover, in many instances foreign compliance regulations require “a lot of additional 

paperwork,” which discourages SMEs from exporting.42 For example, in order to supply 

certain retail establishments in the United Kingdom, exporters must join Sedex, a 

business organization that requires its members to submit a number of time-consuming 

forms.43 This requirement reportedly dissuades SMEs from entering this market 

segment.44 Certain compliance regulations can also raise costs for SMEs because the 

standards differ from U.S. standards. For example, some markets in the EU will only 

accept six-bottle cases, while the typical case size in the U.S. market is a dozen bottles. 

This requires exporters to purchase special boxes, which increases costs.45

SMEs are also less likely to be familiar with differing SPS requirements and other 

compliance standards that can vary from market to market. For example, there are widely 

varying standards for maximum residue levels of certain chemicals. There have been 

instances where SME shipments had to be recalled because lab analysis indicated the 

presence of a prohibited chemical. Moreover, SMEs are primarily focused on producing 

to U.S. standards. Large wineries that regularly export substantial shipments to particular 

markets have the knowledge and experience of foreign market regulations and can more 

easily manufacture to foreign standards, while this would be prohibitively costly for most 

SMEs.46

U.S. SME exporters also reported that many importers and retailers in foreign markets 

have limited knowledge of U.S. wine, which can dampen foreign demand for SME wine. 

According to industry sources, there is a general lack of knowledge abroad about U.S. 

winegrowing regions, except for California. Retailers in foreign markets often are 

unfamiliar with wine produced in other states, including Washington, Oregon, or New 

York.47 Moreover, the perception of California wine in many export markets is limited to 

two extremes: either large-volume, aggressively priced wine or very limited volume, 

 39 Although the United States has signed an FTA with Korea, the agreement has not been ratified. Other 

major wine exporters, such as Chile and the EU, signed FTAs with Korea after the United States did, but 

have already ratified the treaties and currently have preferential access to the Korean wine market. USITC, 

hearing transcript, March 18, 2010, 97 (testimony of James Gore, JBC International); industry representative, 

telephone interview by USITC staff, February 19, 2010. 40 Certain markets allow self-certification, which is what U.S. standards call for, but others require thirdparty certification, which can be costly. Industry representative, telephone interview by USITC staff, 

February 11, 2010; industry representative, interview by USITC staff, Washington, DC, February 4, 2010. 41 Industry representative, interview by USITC staff, February 4, 2010.

42 Industry representative, telephone interview by USITC staff, February 19, 2010. 43 Sedex (Supplier Ethical Data Exchange) is “a membership organization for businesses committed to 

continuous improvement of the ethical performance of their supply chains.” Sedex Web site. 

http://www.sedex.org.uk/sedex/go.asp?u=/WebSite/Home&pm=6&location=About 44 Industry representative, telephone interview by USITC staff, February 19, 2010. 45 Ibid. 

46 Industry representative, telephone interview by USITC staff, February 10, 2010. 47 Industry representatives, telephone interviews by USITC staff, February 10 and 11, 2010.
4-9 

exceptionally high-value wine, which cuts sales of medium-value wines produced by 

certain SMEs. It was also reported that many importers carry just one brand of California 

wine and “think they have the market segment covered,” which further limits the 

opportunities for SME exporters.48

Other factors noted by U.S. industry representatives that inhibit U.S. SME wine exports 

include problematic financing terms and foreign government support of SMEs. Long 

financing terms for exports are generally not a problem for medium-sized SMEs, but can 

discourage small SMEs with tighter budgets. For example, payment terms for most 

foreign sales are 90–120 days, while domestic terms are usually 30 days.49 Industry 

representatives also commented that SME wineries abroad, including those in the EU, 

Australia, and South Africa, receive substantially greater levels of government marketing 

and other support compared with U.S. wine sector SMEs, which improves foreign 

wineries’ competitiveness in third-country markets.50

SME Strategies for Exporting

Strategies used by U.S. wine SMEs to overcome many of these impediments to exporting 

include organizing into regional industry groups to pool resources dedicated to market 

research, product promotion, and identification of potential export customers. These 

nonprofit private sector organizations use export programs and other assistance offered 

by certain U.S. government agencies, including promotional funding provided by the 

USDA MAP program.51 SMEs also increasingly employ agents and brokers that 

specialize in foreign markets. 

Regional wine organizations are a critical source of information and assistance for SMEs 

that export. They include the Wine Institute, which represents California wineries; the 

Northwest Wine Coalition, made up of Washington and Oregon wineries; and the New 

York Wine and Grape Foundation.52 These organizations provide export-related services 

and promotion, primarily funded by the USDA MAP program. According to an industry 

representative, MAP-funded programs do all the “legwork and research [for exporting] 

that SMEs cannot afford.”53

The Wine Institute, the largest such group, employs representatives in most major export 

markets that work with California wineries to find buyers and importers and help with 

issues that arise in the exporting process. The Wine Institute and other regional 

organizations participate in international wine trade shows, organize promotions and 

tastings in foreign retail and on-premise establishments,54 sponsor delegations to visit 

export markets, and host buying delegations that visit the United States.55

 48 Industry representative, telephone interview by USITC staff, February 19, 2010. 49 Ibid. 

50 USITC, hearing transcript, March 18, 2010, 78 (testimony of James Gore, JBC International); industry 

representative, telephone interview by USITC staff, February 16, 2010. 51 In fiscal year 2010, the MAP program provided over $8 million for U.S. wine export promotion 

activities. See the discussion of the agriculture sector at the beginning of this chapter. 52 There are some sub-state regional organizations that promote regional wine, such as the Napa Valley 

Vintners Sonoma County Vintners Associations. Industry representative, interview by USITC staff, February 

16, 2010. 53 Industry representative, telephone interview by USITC staff, February 11, 2010. 54 These are establishments where wine is consumed on the premises, such as bars and restaurants. 

55 Industry representatives, telephone interview by USITC staff, February 4, 2010. 
4-10 

The MAP program funds two wine-specific programs: generic regional promotion (for 

example, the Wine Institute’s international efforts to promote California wine); and a 

brand program that funds promotion of a specific winery’s products. The brand program 

is available only to SMEs (wineries that have 500 or fewer employees). Other U.S. 

government assistance available to SMEs is provided by the USDA’s Foreign 

Agricultural Service, which publishes wine market reports and maintains staff around the 

world that assist exporters, and the International Trade Division of the U.S. Treasury 

Department’s Alcohol and Tobacco Tax and Trade Bureau, which handles and negotiates 

many alcohol-related international compliance issues.56

Many U.S. SME wineries also use brokers or agents to facilitate exports. Brokers match 

wineries and importers (foreign buyers), monitor the marketing and sale of their clients’ 

products, and advise wineries on foreign compliance requirements, such as laboratory 

certification and labeling.57 They typically maintain a range of styles and vintages from a 

variety of wineries in their portfolios, and may focus on particular producing regions 

(such as California or Washington) and markets (such as the United Kingdom or Latin 

America). They also serve as a liaison between wineries and foreign buyers, including 

advising foreign buyers on current and future availability of their client’s wine and 

prices.58 Brokers representing U.S. wineries are mostly located in the United States and 

can range in size from an individual to a small firm. The use of brokers has increased 

substantially in the past decade as SME exports have expanded. Some wineries use 

brokers to facilitate all their exports, while others use brokers for particular markets or 

regions where they do not have contacts or exporting relationships.59

High-Technology and Related Manufacturing Industries: 

Chemicals and Nanotechnology 

Industry Background

Exports are an essential component of growth for many high-technology SMEs, 

particularly those in the chemical industry and those involved in nanotechnology. The 

chemical manufacturing industry (NAICS 325)60 produces a wide variety of products, 

ranging from commodity chemicals to specialty end products such as pharmaceuticals, 

pesticides, adhesives, and resins. Chemicals were the third largest SME export product 

class in 2007.61 Nanotechnology is the application of science and engineering at the 

nanoscale in a wide variety of sectors to create novel products, tools, and technologies 

using unique properties of matter that emerge at that scale.62 A number of 

nanotechnology SMEs are beginning to commercialize and export product along the 

entire value chain, ranging from upstream nanomaterials (e.g., carbon nanotubes) to 

 56 USITC, hearing transcript, March 18, 2010, 163 (testimony of James Gore, JBC International). 57 Industry representatives, telephone interviews by USITC staff, February 11 and 16, 2010. 58 Industry representative, telephone interviews by USITC staff, February 16, 2010. 59 Ibid. 

60 The North American Industry Classification System (NAICS) codes define industries for statistical 

purposes. 61 Official Census statistics; USITC, Small and Medium-Sized Enterprises: Overview of Participation in 

U.S. Exports, January 2010, 3-10-3-11. 62 The nanoscale ranges from about 1 nanometer to about 100 nanometers (a nanometer is one-billionth 

of a meter). Products incorporating nanomaterials and processes include advanced composites, highperformance batteries, automotive electronics in hybrid vehicles, and cancer treatments, among others. 
4-11 

downstream products such as solar cells, pharmaceuticals, and cosmetics.63 Some SMEs 

that have developed specialized products very early in the companies’ existence and 

export them to a few customers worldwide have been characterized as “born global” 

SMEs.64

Domestic Barriers to Exporting

Although subject to many of the same domestic constraints as other manufacturers, 

chemical and nanotechnology SMEs are particularly affected by export controls (see box 

4.1), environmental and health regulations, and transportation costs, given their limited 

personnel and monetary resources. Several nanotechnology SMEs cited both the lack of a 

U.S. or international definition for carbon nanotubes, making compliance difficult, and 

EPA’s precautionary approach towards new uses for nanomaterials (e.g., antimicrobial 

nanosilver). This approach has reportedly led EPA to stop accepting new applications for 

certification despite ongoing shipments by incumbent suppliers, resulting in lost U.S. jobs 

at one SME and decreased innovation in nanomaterials.65

Several nanotechnology SMEs and other sources also cited concerns about limited 

availability—and their subsequent import dependence—of certain minerals and metals, 

particularly indium and rare earths, which are critical inputs used to manufacture hightechnology products for export.66 Given China’s dominant position in world production 

of both, some U.S. SMEs say that China’s export restrictions create a competitive 

disadvantage and promote uncertainty as to product development; one nanotechnology

SME also said that a lack of access to rare earths could result in the closure of his 

company.67

Transportation costs and limited container availability were also reported as domestic 

constraints on exports, particularly for chemicals. Whereas high-volume products are 

generally shipped via ocean freight, higher-value, low-volume products such as 

 63 Shapira, “Nanotechnology Innovation,” March 9–10, 2010. Based on publications and patents, 

Shapira estimates that about 4,300 nanotechnology U.S. SMEs were active between 2000 and 2008; however, 

he notes that many of the earlier firms may no longer be in business and, as companies can have multiple 

patents and/or papers, the activity levels may be overstated. Shapira, e-mail to USITC staff, March 16, 2010. 

For more information about the methodology and other caveats, see Shapira, “US Firms Entering the 

Nanotechnology Domain, 2000–2008,” March 24–26, 2010. Other sources estimate that 750–1,000 

nanotechnology SMEs were operating in the United States in 2009. Industry representative, e-mail to USITC 

staff, March 25, 2010. 64 Shapira, “Nanotechnology Innovation,” March 9–10, 2010. 

65 USITC, hearing transcript, March 10, 2010, 213–17 (testimony of Karen Bomba, Zoltek Corp.); 

USITC, hearing transcript, March 12, 2010, 156–59 (testimony of Robert D. “Skip” Rung, Oregon 

Nanoscience and Microtechnologies Institute); USITC, hearing transcript, March 18, 2010, 15–16 (testimony 

of the Honorable Donald A. Manzullo, U.S. Representative, 16th District, Illinois); and 53–55 (testimony of 

Peter C. Dent, Electron Energy Corp); industry representatives, interviews with USITC staff, January–March 

2010; telephone interviews with and e-mail to USITC staff, February 5, 18, and 19, 2010. 66 Indium-tin oxides are components of transparent electrodes used in liquid crystal displays and solar 

cells; researchers are studying ways to substitute carbon nanotubes for these oxides. Rare earths are used in 

defense and in green technologies (e.g., each electric motor on a Toyota Prius uses 2 to 4 pounds of 

neodymium, a rare earth). World Trade Organization (WTO), “Trade in Mineral Resources,” January 2010, 

25; USITC, hearing transcript, March 18, 2010, 50 (testimony of Peter C. Dent, Electron Energy Corp.); 

Korinek and Kim, “Export Restrictions,” 9; Halada, March 2009; industry representative, e-mail to USITC 

staff, March 11, 2010. 67 Korinek and Kim, “Export Restrictions,” 4, 9, 26; USITC, hearing transcript, March 18, 2010, 50 

(testimony of Peter C. Dent, Electron Energy Corp.); Bradsher, “Backpedaling,” The New York Times, Sept. 

4, 2009, B4; USITC, hearing transcript, March 18, 2010, 49–53 (testimony of Peter C. Dent, Electron Energy 

Corp.); industry representative, interview with USITC staff, March 17, 2010. 
4-12 

BOX 4.1. SME exporters challenged by export control regulations 

Because many of the export control laws were drafted before nanotechnology products and processes were 

developed and commercialized, it is often unclear how the regulations apply to these products (or to other emerging 

technology products). SMEs and other sources have recommended that updates be speedier and address new 

technologies. 

In interviews with USITC staff, several nanotechnology and other high-technology SMEs cited significant costs and 

expenses incurred due to export controls. Examples cited include $3 million–$5 million in lost sales for one 

nanotechnology company; a reduction of 50 percent in one high-technology company’s military-related exports; an 

increase in annual licensing fees for one firm to about $50,000 in 2009 (almost 3,000 percent); export control costs of 

$3,000 on a one-time contract valued at $10,000; product price increases of as much as 200 percent; and lost work 

for companies. A U.S. company reported that it exports from its facility in Hungary rather than its home facility in the 

United States, despite higher shipping costs, because of the relative ease and speed of obtaining export control 

licenses in Hungary.

Numerous sources have stated that foreign customers prefer not to deal with U.S. licensing requirements, and thus 

often prefer suppliers based outside the United States. Some foreign suppliers are said to advertise that they are not 

bound by such export controls (e.g., advertising that they are “ITAR-free”). U.S. SMEs have suggested that they 

might be able to significantly increase their exports if the export control regulations could be simplified. 

Reflecting ongoing concern in the Administration about this issue, Secretary of Defense Gates announced on 

April 20, 2010, an Administration proposal to simplify the system. The Administration will work with Congress on this 

effort and plans to initiate the reform over the coming year, with the goals of creating a single export control list, a 

single licensing agency, a single enforcement/coordination agency, and a single information technology system. 

Sources: Joiner, “Dual-Use Export Controls on Nanotechnology,” Spring 2008; USITC, hearing transcript, March 18, 

2010, 15–16 (testimony of Honorable Donald A. Manzullo, United States Representative, 16th District, IL), 53–55 

(testimony of Peter C. Dent, Electron Energy Corporation), and 91–93, 139, 152–155 (questions and responses); 

USITC, hearing transcript, March 12, 2010, 35 (testimony of Walter Evans, Schwabe, Williamson & Wyatt) and 123–

26 and 184–5 (questions and answers); USITC, hearing transcript, March 10, 2010, 213–17 (testimony of Karen 

Bomba, Zoltek Corp.); industry representatives, telephone interviews with USITC staff, November 19, 2009, and 

February 5, 2010, e-mails to USITC staff, February 18-19, 2010, and interviews with USITC staff, January–March 

2010; the Coalition for Security and Competitiveness, written testimony to the USITC submitted by Peter Dent, filed 

March 26, 2010; Garamone, “Gates Proposes Revamp of Export System,” April 20, 2010; Gates, remarks, April 20, 

2010.

pharmaceuticals are more likely to be shipped by air. Chemical SMEs state that shipping 

can potentially add as much as 50 percent to a product’s price; small shipments to 

markets such as the EU can cost 300–500 percent more than containers.68

Foreign Barriers to Exporting

As with domestic factors, high-technology SMEs are generally affected by many of the 

same export constraints—such as market access concerns and financing—reported by 

other manufacturing companies. However, REACH, the new EU chemical regulatory 

system (see box 4.2), is considered a major trade impediment by many chemical and 

nanotechnology SMEs, as are EU directives, EU labeling requirements, and EU member 

 68 Industry representatives, interviews with and e-mails to USITC staff, January–March 2010. USITC, 

hearing transcript, March 12, 2010, 19–20 (testimony of Katy Coba, Oregon Department of Agriculture). 
4-13 

BOX 4.2 SMEs Find new EU chemical regulatory framework a constraint on exports to Europe 

Implemented on June 1, 2007, the Registration, Evaluation, Authorisation and Restriction of Chemical Substances 

(REACH) regulation is a new European Community (EC) regulation on the safe use of chemicals. Many expect that 

the high costs of compliance will induce some chemical SMEs to stop exporting to the EU, resulting in a market 

shakeout in late 2010 (the first deadline for registrations). REACH’s broad coverage also affects many other sectors, 

including textiles and manufacturers and consumers of automotive and airplane parts (e.g., General Motors has to 

ensure that the thousands of parts it imports into the EU from SMEs and others in its global supply chain meet 

REACH requirements). Of 65,600 companies already registered as of early 2010, 85 percent are SMEs. 

U.S. companies need to register the chemical substances they export to the EU and are required to have EU 

representation to do so. For example, although polymers themselves are exempt from registration, a U.S. chemical 

company marketing a polymer in the EU with 10 inputs has to register each of the inputs, even if those substances 

are already registered by another U.S. company. Registration dates run through 2018 and vary by tonnage and 

toxicity levels. Products sourced in the EU are exempted. 

The costs associated with registration vary greatly depending on variables such as tonnage shipped, the amount of 

data needed, the number of companies that may group together for a product, and the number of products each 

company must register. One source estimates that it can cost $1 million to get a product onto market one time. 

Another source estimates that, for some companies, a high-end estimate over a few years could be as much as $5 

million per product (an amount that can be divided among companies participating as a group). Also, given the 

requirements of the registration procedure, companies have expressed concern about the potential disclosure of 

confidential business information. 

SMEs are addressing REACH requirements in a variety of ways. Some have established a presence in the EU so 

that they can comply with the representation requirements; others are hiring the required EU representative(s). Some 

are forming consortia to register products, and some are working with a few large companies that have offered to 

register products for their SME customers, although such offers by large companies are reportedly the exception 

rather than the norm. 

Sources: Industry representatives, telephone interviews with USITC staff on November 19, 2009, and February 26 

and March 23, 2010; e-mail to USITC staff, February 18, 2010; and interviews with USITC staff, January–March 

2010; World Trade Organization, Technical Barriers to Trade (TBT) Committee, November 5–6, 2008; Johnson, 

written testimony to the USITC, January 28, 2010; Beattie, Implementation of REACH, 2007; USITC, written 

testimony (DeLisi, V.M. Fanwood Chemical), March 25, 2010.

state requests for additional product information.69 A number of chemical companies also 

cited exchange rate shifts as barriers and increasing competition from China and India.70

Labeling is also of significant concern to many chemical and nanotechnology companies. 

Labeling is already complicated, given the multiple and sometimes divergent labeling 

requirements in different countries, and the difficulties may be exacerbated by the EU’s 

implementation of the United Nation’s mandated Globally Harmonized System of 

Classification and Labelling of Chemicals (GHS), which would require additional 

labeling changes on many U.S. products.71 Moreover, in a joint effort with the 

 69 REACH-like programs are reportedly being implemented in other countries, including China, Turkey, 

and Vietnam. There is concern that the Chinese program could effectively limit Chinese imports of 

chemicals. Sources also state that, given their often limited representation overseas, U.S. SMEs can offer less 

input in development of new regulatory systems than large firms can. Industry representatives, e-mails to 

USITC staff, November 18, 2009, and February 8, 2010; Winston & Strawn LLP, “China to Introduce 

REACH,” March 2010. 70 Industry representatives, interviews with USITC staff, January–March 2010; DeLisi, written 

submission to the USITC, January 15, 2010; Johnson, written testimony to the USITC, January 28, 2010. 71 Industry representatives, interviews with USITC staff, January–March 2010; UN Economic 

Commission for Europe, “Globally Harmonized System,” April 7, 2010. One source states that the United 

States’ slower implementation of GHS has resulted in higher freight rates for U.S. SMEs. Industry 

representative, e-mail to USITC staff, April 7, 2010. 
4-14 

International Standards Organization under the terms of the Vienna Agreement, the EU is 

in the process of considering a standard that would require labeling for nanomaterials and 

products that contain nanomaterials. The EU’s newly implemented cosmetics law, as well 

as draft revisions to its novel foods regulation,72 is said to already contain such 

requirements.73

Industry representatives said that changes in labeling are costly and can cause companies 

to drop product lines rather than meet multiple and sometimes divergent labeling 

requirements in different countries. Also, they expressed the concern that the projected 

labeling of nanomaterials and products containing nanomaterials might not only change 

customers’ perceptions of new products, potentially restricting markets for many of them, 

but could also sweep up chemicals and food ingredients that have been marketed for 

years but happen to be nanomaterials (e.g., TiO2, used in pigments, sunscreens, and food 

coloring).74 This can have a disproportionate impact on SMEs, according to these 

representatives, since they don’t have personnel or funds to follow and implement 

changes in labeling requirements.75

Additional export constraints cited by several chemical and nanotechnology SMEs were 

the costs and overhead associated with complying with EU member country requests for 

additional documentation and EU directives addressing various chemicals. France, for 

example, recently asked U.S. nanotechnology companies to provide carbon footprint 

safety sheets for their products. Compliance with this request is said to be problematic, 

however, in that only one U.S. firm reportedly compiles such information at this time, 

and some of the necessary data are not available. Compliance with EU directives can also 

be costly: industry representatives noted that significant overhead may be incurred if 

SMEs are to meet assorted administrative requirements, even apart from the requirements 

of REACH. One example cited was the registration requirement for industrial 

preservatives under the biocidal products directive (BPD), imposing data costs alone of 

as much as $2.5 million per product. Moreover, as with chemicals overall, the products’ 

formulations and uses dictate whether they are addressed under the BPD or REACH, 

potentially leading to increased demands on SMEs’ already limited resources. Sources 

cite a “huge shrinkage” in the marketplace of available preservatives and formulations (as 

well as other chemicals) and their suppliers, because of the registration processes related 

to REACH and the directives.76

 72 The EC states that the revisions to the novel foods regulation are intended to increase the availability of 

new and innovative foods in the EU, protect consumers, and maintain food safety. Novel food is generally 

defined as “food that has not been used for human consumption to a significant degree within the Community 

before 15 May 1997.” “Proposal for a Regulation of the European Parliament and of the Council on Novel 

Foods and Amending Regulation (EC) no. XXX/XXXX [common procedure]” [sic], [SEC(2008) 12] 

[SEC(2008) 13], COM(2007) 872 final, 2008/0002 (COD), Brussels, January 14, 2008, 16, 

http://ec.europa.eu/food/food/biotechnology/novelfood/COM872_novel_food_proposal_en.pdf; “Proposal for 

a Regulation on Novel Foods,” n.d., 

http://ec.europa.eu/food/food/biotechnology/novelfood/initiatives_en.htm. 73 EC, “Outcome of the International Workshop,” July 8–9, 2010; Falkner et al., October 2009. Sources 

state that the cosmetics regulation has been implemented despite the lack of a standard international 

definition of nanomaterials, particularly those used in cosmetics. Some have also asked whether labeling 

systems violate WTO or TBT rules. A 2003 WTO case, for example, addressed EU labeling of products 

containing genetically modified organisms; in 2006, the WTO reportedly determined that the labeling rules 

breached international trade rules. 74 Industry representatives, interviews with USITC staff in Boston, MA, March 1–3, 2010. 75 Ibid. 

76 Industry representatives, telephone interviews with USITC staff, February 2, and March 23, 2010. 
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SME Strategies for Exporting

Companies have tried various strategies to overcome the barriers mentioned above.77 In 

many cases, they have formed consortia to share costs and risks related to regulatory 

programs and transportation, as well as to try to maximize their market presence and 

optimize transportation logistics. For example, companies have mentioned the creation of 

a consortium to work with EPA on developing nanotechnology definitions and 

regulations. Chemical SMEs reported grouping together to register products for REACH 

and individual EU directives, as well as to ship full containers of product overseas that 

are then distributed to individual customers upon arrival. Some chemical SMEs have 

partnered with larger companies to address regulatory issues such as REACH. SMEs also 

report establishing facilities overseas or developing an international presence by working 

with agents/distributors, particularly to comply with the EU representation required by 

REACH, to stay current with regulations, and to seek out new customers. Additionally, 

many SMEs have had positive comments regarding the export assistance provided by the 

U.S. Departments of Commerce in various states and by local U.S. Export Assistance 

Centers, part of the U.S. Commercial Service (USCS). 

Textiles and Apparel Industry 

Industry Background

Textile and apparel firms transform a basic fiber into a product, such as yarn or fabric, 

which is further manufactured into items such as apparel, sheets, towels, and textile bags 

for individual or industrial consumption.78 According to census data, in 2007 SMEs 

accounted for 88 percent of domestic textile enterprises and 92 percent of domestic 

apparel enterprises. It appears that larger firms are responsible for the majority of the 

exporting done by the industry. During that year, domestic SMEs accounted for 37 

percent of textile exports and 56 percent of apparel exports by value.

Domestic Barriers to Exporting

Reportedly, the most significant additional costs for exporting textile and apparel SMEs 

are associated with prospecting for foreign customers, understanding customs and foreign 

regulations, and receiving payment from foreign customers.79 In the United States, many 

textile and apparel SMEs rely on a single or relatively few domestic customers.80

Consequently, many textile and apparel SMEs do not have a domestic sales force or 

marketing strategy that can act as a foundation for building international sales. Several 

textile and apparel SMEs report that they do not have the resources or experience to 

navigate foreign customs and regulations, and they are unaware of government programs 

aimed at assisting them.81

 77 Industry representatives, interviews with USITC staff, January–March 2010; telephone interviews 

with USITC staff on February 26 and March 23, 2010; e-mails to USITC staff, February 18 and 26, 2010; 

Johnson, written testimony to the USITC, January 28, 2010; DeLisi 2010. 78 Census, 2002 Economic Census Industry Series Reports: Textiles (accessed March 23, 2010). 79 Industry officials, telephone interviews by USITC staff, February 17, 19, 23, and 26, 2010. 80 It is not uncommon for one of these customers to be the U.S. government, which is required, under 

some programs, to purchase domestic textile and apparel goods when available. 81 Industry officials, interviews and telephone interviews by USITC staff, January 27–March 2, 2010. 
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Many U.S. textile and apparel SMEs also contend that their products are often at a 

competitive disadvantage internationally because foreign governments subsidize textile 

and apparel exports through low-cost loans, marketing support, free trade missions, tax 

incentives, and currency manipulation. According to industry sources, U.S. export 

assistance programs such as the USCS Gold Key Program may open doors to SMEs,82

but they pale in comparison to the full-scale government support offered to exporters 

from other countries.83

Domestic SMEs also report that they are often unfamiliar with letters of credit, account 

receivable insurance, or ways of providing discounts or financing to international 

customers, or find it too costly and time-consuming to make use of these tools.84 Several 

textile and apparel firms that were interviewed report that payment terms of foreign 

customers have increased significantly since the onset of the global financial crisis: 

whereas payments from international customers were typically received in 30–60 days 

pre-crisis, they now average 90–100 days. As a result, exporting textile and apparel 

SMEs report higher accounts receivable, higher interest rates on bank loans, and a greater 

reluctance on the part of banks to offer financing.85

Foreign Barriers to Exporting

Reportedly, many textile and apparel SMEs do not export due to complexities and added 

costs of conducting business outside the United States.86 In addition to language and 

cultural differences that may exist, SMEs note that important business partnering 

arrangements can be difficult to establish and maintain in local markets. For example, 

several SMEs said that it can be difficult to find international freight, warehousing, and 

distribution partners in foreign countries.87According to one industry source, concern 

over Foreign Corrupt Practices Act (FCPA)88 compliance and consequences can further 

raise a U.S. firm’s costs and increase its risk in selecting important local business partners 

and arrangements.89

Industry sources also say that companies that control rights associated with specific 

brands may restrict distribution of that brand in foreign markets to companies that have 

entered into licensing and/or brand registration agreements. According to these sources, 

these agreements are sometimes exclusive in nature, thereby restricting others from 

entering certain markets. 

 82 Additional details regarding the USCS Gold Key program are available at www.trade.gov. 83 Industry sources also note that most SMEs are not aware of these programs. 84 Kay, written testimony to USITC, February 19, 2010; and, Industry officials, telephone interviews by 

USITC staff, February 23 and 26, 2010. 85 Industry officials, telephone interviews by USITC staff, February 17 and 23, 2010. 86 According to industry sources, while individual barriers may seem minor, collectively barriers can add 

significant costs and delays, especially to low-margin goods or to fashion goods where “speed to market” is 

essential. Kay, written testimony to USITC, February 19, 2010; and, Industry officials, interviews and 

telephone interviews by USITC staff, January 27–March 2, 2010. 87 Textile and apparel firms exporting large, bulky commodity shipments must often develop new freight 

delivery mechanisms in foreign markets or risk shipping costs exceeding low product margins. Mainstream 

shipping firms are reportedly typically too expensive for such shipments, given the low margins. Industry 

official, telephone interview by USITC staff, February 23, 2010. Also, according to one industry source, a 

recent shortage of international transport shipping containers increases the costs and difficulties of exporting. 

Industry official, interview by USITC staff, Boston, MA, March 2, 2010. 88 According to the U.S. Department of Justice, the FCPA prohibits corrupt payments to foreign officials 

for the purpose of obtaining or keeping business. Additional information is available from the U.S. 

Department of Justice at http://www.justice.gov/criminal/fraud/fcpa/docs/lay-persons-guide.pdf. 89 Industry officials, interviews and telephone interviews by USITC staff, January 27–March 2, 2010. 
4-17 

Additionally, according to one SME, the significant added labor, software changes, 

product modifications, and negotiating steps are associated with converting between the 

measuring system adopted by the U.S. textile and apparel industries and the metric 

system used by many foreign customers. These additional tasks may reduce U.S. firms’ 

ability or willingness to export.90

Several domestic SMEs stated that they must comply with U.S. regulations that are often 

more costly to implement than those applied to their counterparts abroad.91 Furthermore, 

SMEs note that it is not uncommon for local business regulations related to the 

environment, taxes, healthcare, and labor to vary by country. According to several U.S. 

textile and apparel SMEs, U.S. firms exporting to multiple countries often incur the costs 

of complying with regulations in each country, which, consequently, may make them less 

competitive than local suppliers abroad that need to comply only with local regulations. 

SMEs also note that documents required to export vary by country, and many countries 

lack the “transparency and predictability” needed to determine which documents are 

required. According to several textile SMEs that were interviewed, customs clearance in 

many Central American and Latin American countries can add significant delays and 

costs due to “excessive and ever changing paperwork requirements,” and “fees required 

by low-level bureaucrats.”92

Textile and apparel SMEs also report that export rebates in foreign markets harm U.S. 

SMEs’ ability to export. According to industry sources, such rebates are typically 

provided to firms that use domestic inputs. Additionally, SMEs note that value-added 

taxes (VAT) or goods and services taxes (GST) increase the cost of U.S. exports 

compared to local competitors in each market.93

A number of textile and apparel SMEs also reported that they can incur significant costs 

and delays as a result of foreign licensing, standards-setting, and labeling requirements. 

According to several SMEs, U.S. firms that export high-tech textiles or medical textiles 

can spend significant time and resources researching and then demonstrating that 

exported goods either are not subject to, or are in compliance with, in-country 

requirements.94 According to one SME, textile companies that export yarn or fabrics that 

contain chemicals or dyes (typically to EU countries) might need to provide additional incountry testing or documentation to certify the safety of the product or the product’s 

inputs.95 Moreover, labeling requirements for such products can vary greatly.96

The degree of international enforcement of intellectual property rights (IPR) also 

reportedly affects U.S. exports of textiles and apparel. Some U.S. manufacturers of high-

 90 Kay, written testimony to USITC, February 19, 2010; industry officials, interviews and telephone 

interviews by USITC staff, January 27–March 2, 2010. 91 Kay, written testimony to USITC, February 19, 2010; industry official, telephone interview by USITC 

staff, February 23, 2010. 92 Kay, written testimony to USITC, February 19, 2010; industry officials, interviews and telephone 

interviews by USITC staff, January 27–March 2, 2010. 93 Bieri, written testimony to the USITC, January 29, 2010; industry official, interview by USITC staff, 

Boston, MA, March 2, 2010. 94 Bieri, written testimony to the USITC, January 29, 2010; industry officials, interviews and telephone 

interviews by USITC staff, January 27–March 2, 2010. 95 According to one industry source, in the EU, restricted substances lists and REACH have varying 

requirements for products with chemical inputs. Research and compliance with these restrictions can add 

significantly to exporters’ costs. Industry official, telephone interview by USITC staff, February 19, 2010. 96 Industry officials, interviews and telephone interviews by Commission staff, February 17 and 23 and 

March 2, 2010. 
4-18 

tech yarns and fabrics, and apparel firms with branded products, are concerned about 

counterfeiting in foreign countries. SMEs in these sectors typically do not have the 

resources needed to prevent and seek enforcement of IPR violations.97

Several SMEs also note that high tariffs increase the cost of U.S. exported goods. One 

firm stated that high tariffs effectively preclude certain U.S. yarn manufacturers from 

exporting to Brazil.98 According to the Hosiery Association, U.S. SMEs are further 

harmed because many of these countries have preferential bilateral or multilateral textile 

trade agreements with other countries.99

SME Strategies for Exporting 

U.S. textile and apparel SMEs have several industry-specific export strategies. Some 

textile and apparel SMEs report that they enter foreign markets as a means to sell surplus 

inventory. Others export inputs to countries where low-cost labor and free trade 

agreements allow the final good to be processed or assembled abroad, then shipped back 

to the United States, where it is ultimately sold to the consumer. According to industry 

sources, U.S. textile and apparel firms are most competitive when they are highly 

automated and either address niche markets or can compete on the basis of quality.100

Textile industry sources reported that Internet sales do not typically attract new 

customers. Firms characterize their customers as “wanting to see and feel” samples and 

products. For some textile SMEs that do seek out new customers internationally, trade 

shows and trade fairs are reportedly “invaluable,” as they can offer face-to-face sales to a 

potentially large group of interested customers. Textile and apparel SMEs that export also 

reportedly use contacts made through associations, trade groups, formal and informal 

partnering, and government programs. According to industry sources, the success of each 

arrangement varies by firm.101 One domestic textile exporter reported that it enters one 

foreign market at a time, given that rules and business procedures typically vary by 

country. Another textile firm interviewed reports that the cost of entering Central 

American and Latin American markets is less than entering European markets.102

According to several textile SMEs interviewed, in some cases marketing directly to 

retailers domestically and internationally has spurred demand for their goods as inputs for 

finished apparel items. However, according to several industry sources, retailers of all 

sizes are increasingly sourcing directly from manufacturers in Asia that offer full supply 

chain solutions (typically this includes all stages, from yarn to full garment 

manufacturing, with the exception of design). According to industry sources, this 

precludes using many domestic SME textile suppliers that do not have the size or the 

established domestic relationships and partnering arrangements to offer complete 

sourcing or solutions.103

 97 Industry officials, interviews and telephone interviews by USITC staff, January 27–March 2, 2010. 98 Bieri, written testimony to the USITC, January 29, 2010; industry officials, interviews and telephone 

interviews by USITC staff, January 27–March 2, 2010. 99 Kay, written testimony to USITC, February 19, 2010. 100 Kay, written testimony to USITC, February 19, 2010; industry officials, interviews and telephone 

interviews by USITC staff, January 27–March 2, 2010. 101 Industry officials, interviews and telephone interviews by USITC staff, January 27–March 2, 2010. 102 According to several industry representatives, trade shows, travel expenses, advertising, and shipping 

are all typically less expensive in Central and South America than in many EU countries, thereby making it 

easier for SMEs with limited resources to enter these markets. Industry officials, interviews and telephone 

interviews by USITC staff, January 27–March 2, 2010. 103 Industry officials, interviews and telephone interviews by USITC staff, January 27–March 2, 2010. 
4-19 

Medical Devices

Industry Background

Medical devices are used by healthcare professionals to help diagnose, treat, and prevent 

various diseases and injuries.104 In the United States, SMEs represent 80 percent of the 

nearly 12,000 establishments in the medical device industry.105 Therefore, the success of 

this industry is heavily reliant on the contributions of SMEs to innovate and develop new 

products. 

The extent to which U.S. SMEs in the medical device industry export depends on the 

demand for the types of products that these firms specialize in manufacturing. For 

instance, less than 10 percent of in vitro diagnostic (IVD) firms106 export, largely due to 

privacy concerns, as foreign patients are often reluctant to submit samples that will be 

evaluated in U.S. laboratories.107 By contrast, more than 40 percent of SMEs that develop 

products in high demand, such as cardiovascular or orthopedic devices, export.108

Domestic Barriers to Exporting

U.S. SMEs seeking to export medical devices must first gain clearance from the U.S. 

Food and Drug Administration (FDA),109 a process which can be lengthy and costly for 

most Class 3 medical devices (the most highly regulated category).110 Further, because of 

the short product life cycles associated with most advanced medical devices, approved 

 104 Relevant NAICS codes for these devices include 325413, in vitro diagnostic substances and devices; 

334510 and 334517, electromedical equipment; 339112, surgical and medical instruments; 339113, 

orthopedic devices and hospital supplies; and 339114, dental equipment. 105 USITC, hearing transcript, March 12, 2010, 145 (testimony of Grant Ramaley, Aseptico, Inc.); 

Emergo Group, “2010 Medical Device Survey,” November 2010; IbisWorld, “Medical Instrument 

Manufacturing in the U.S.,” March 3, 2010. 106 In vitro diagnostic (IVD) medical devices refers to devices used to collect various samples of body 

fluids–such as blood, urine, and tissue–for the purposes of detecting diseases and diagnosing health problems. 

S&P, “Healthcare: Products and Supplies,” February 4, 2010, 26; industry representatives, e-mail 

correspondences with USITC staff, San José, CA, March 2, 2010. 107 Industry representative, e-mail correspondence with USITC staff, San José, CA, March 2, 2010. 

Another explanation is aging populations across Europe and Asia are driving demand for more cardiovascular 

and orthopedic devices, providing more export opportunities for U.S. SMEs that manufacture these products. 

S&P, “Healthcare: Products and Supplies,” February 4, 2010. 108 Industry representatives offer a very broad range of estimates, from less than 10 percent to as high as 

80 percent. These responses seemed to fluctuate based on the device. The statistic cited is a relatively 

conservative estimate based on responses from these representatives. Industry representatives, e-mail 

correspondences and telephone interviews with USITC staff, February 26–March 23, 2010. 109 “The FDA does not regulate devices that are both made and sold abroad by U.S. companies.” S&P, 

“Healthcare: Products & Supplies,” February 4, 2010. 110 Due to the diversity of ailments, medical devices range in complexity and are most commonly 

categorized into three classes based on the relative risk of the device. Class 3 devices are the most advanced 

medical products, pose the greatest potential risk to patients, and must commonly undergo clinical trials in 

order to be approved for sale in most countries. Examples include cardiac pacemakers, heart valves, and 

implantable orthopedic devices. Class 2 devices resembling products that are already on the market are 

required to submit a premarket notification, otherwise known as a 510 (k), which confirms whether or not the 

device under consideration is sufficiently similar to one that has already been approved for sale; 99 percent of 

devices required to submit a 510 (k) approval are class two devices. Most Class 1 devices are exempted from 

this process, given the extremely low risk of these products. Industry representative, telephone interview by 

USITC staff, February 23, 2010; S&P, “Healthcare: Products and Supplies,” February 4, 2010. 
4-20 

devices may only enjoy success on the market for one year before being rendered 

obsolete.111

The difficulty of accessing capital is reportedly a critical challenge for SMEs in the 

medical device industry seeking to export. Significant financial costs—it can cost up to 

$200 million to commercialize a Class 3 device—coupled with a lengthy product 

development cycle of up to two years for advanced medical devices can deter investors 

seeking a more immediate return on their investment; the estimated return on investment 

for investments in the industry is only 15–20 percent over 3–7 years.112

Foreign Barriers to Exporting 

According to several SMEs in the industry, complex regulatory procedures abroad can be 

a significant barrier to trade for SMEs in the medical device industry. During the 

approval process, nearly every country requires device manufacturers to implement a 

quality management system, verifying that the device fulfills stipulated requirements for 

the design and manufacture of medical devices. However, quality management systems 

are not standardized across all markets, often requiring SMEs to undergo redundant 

approval processes across countries.113 For instance, although most countries, including 

Australia, Canada, China, members of the EU, Japan, and the United States, accept a 

quality management system called ISO 13485, others, including Brazil, Russia, and 

South Korea, do not. Hence, an SME seeking to export into the latter markets must 

follow local regulatory procedures—which often entails arranging a third party to 

coordinate, submit, and translate required documentation into the local language—

regardless of whether or not the device has been approved in other markets.114

Problems arise even between countries that accept similar quality management systems. 

For instance, Canada requires quality management systems that have already been 

audited under the ISO 13485 standard to be assessed by Canadian-accredited inspectors, 

even if that system has been audited by another country with a similar approval process, 

such as the EU.115 Similarly, in Japan, foreign medical devices are required to undergo 

significant clinical trials even after the device has undergone similar tests abroad; the 

approval process can last up to three years in Japan.116 These additional steps delay the 

opportunity for U.S. SMEs to generate revenue from their products. 

Inadequate foreign reimbursement for commercialized medical devices may also be a 

significant barrier to exporting U.S. medical device SMEs. Although the typical end users 

for medical devices are hospitals and physicians’ offices, reimbursement decisions are 

commonly determined by third-party insurers, government agencies, and local 

distributors, who may have conflicting perceptions of a particular device’s value.117 As a 

 111 USITC, “Medical Devices,” March 2007, 2-2. 112 Industry representative, interview by USITC staff, Boston, MA, March 2, 2010. 113 USITC, hearing transcript, March 12, 2010, 119 (testimony of Phil Agress, AdvaMed); Emergo 

Group, “Country Regulatory Practices,” 2010. 114 U.S. firms seeking to export medical devices to Brazil are required to have all documentation 

translated into Portuguese by the FDA; companies are fined for improperly filing the required paperwork. 

Industry representative, interviews by USITC staff, Boston, MA, March 3, 2010. A similar process occurs in 

South Korea, where U.S. firms are required to work alongside local third-party affiliates to submit 

documentation, which must be translated into Korean. Emergo Group, “Country Regulatory Practices,” 2010. 115 USITC, hearing transcript, March 12, 2010, 145 (testimony of Grant Ramaley, Aseptico, Inc). 116 USITC, “Medical Device Equipment,” March 2007, 6–18. 117 S&P, “Healthcare: Products & Supplies,” February 4, 2010; USITC, “Medical Device Equipment,” 

March 2007; industry representatives, interviews by USITC staff, various locations, January–March, 2010. 
4-21 

result, U.S. medical device manufacturers may not receive a high enough price to cover 

the cost of developing, commercializing, and marketing their device, often receiving 

between one-half and one-third less revenue on devices sold abroad than domestically.118

SME Strategies for Exporting

U.S. medical device SMEs with little exporting experience commonly export into the EU 

first before selling to markets with more stringent regulations.119 The primary distinction 

between gaining approvals in the EU versus more difficult markets is the length and 

administration of clinical trials. Whereas Japan and the United States, for instance, 

require extensive clinical data, the EU simply requires “clinical evidence” to approve a 

device. Thus, a device that has already been placed in another market and has yielded 

demonstrable benefits does not need further clinical trials in order to be sold in the EU.120

Depending on the type of medical device and prior demonstration of “clinical evidence,” 

a medical device can be approved for sale in the EU within 3 months, compared to 10 

months for the United States and up to 2 years for Japan.121

U.S. medical device SMEs commonly consult with U.S. Export Assistance Centers, 

which are associated with the USCS, and hire medical and IVD device consultants to 

create opportunities in foreign markets. Specifically, the USCS provides SMEs with 

market research and can serve as a liaison with relevant foreign entities.122 Consulting 

firms assist many SMEs in implementing quality management systems; conducting 

internal audits to ensure that firms are compliant with local market regulations; and 

preparing the necessary documentation to facilitate device approval abroad.123

Computer Services 

Industry Background

Computer services include computer systems design, development, integration, and 

maintenance, as well as data processing, hardware installation, technical support, and 

various computer-related project management and consulting services. Some firms 

supply a single service such as software development, but many firms provide an array of 

complementary services.124 Many computer services firms have standardized platforms 

that are customized for specific types of customers. Broadly, the computer services 

market is dynamic, volatile, and growing rapidly due to increasing demand for 

information technology.125

One consequence of the international adoption of information technology is that valuable 

computer services are demanded globally. The short lifespan of software creates pressure 

 118 Industry representative, interview by USITC staff, Boston, MA, March 3, 2010. 119 Industry representatives, interviews by USITC staff, various locations, January–March, 2010. 120 Industry representative, telephone interview by USITC staff, February 23, 2010. 121 Ibid. 122 Industry official, interview by USITC Staff, Newport Beach, CA, March 3, 2010. 123 Emergo Group Web site, http://www.emergogroup.com (accessed March 25, 2010); industry 

representative, telephone interview by USITC staff, March 9, 2010. 124 Industry official, interview by USITC staff, Washington, DC, February 24, 2010. For example, firms 

may sell a package of hardware installation, customized software development for that hardware 

arrangement, and post-installation consulting services. 125 Moen et al., “Internationalization of Small Computer Software Firms: Entry Forms and Market 

Selection,” 2004. 
4-22 

to commercialize rapidly in all markets, so the incentives are for computer services firms 

to get involved in foreign markets simultaneously instead of sequentially.126

Computer services SMEs are responsible for much of the innovation in the industry. 

Computer services SMEs face low barriers to entry, and their segment of the market is 

characterized by high failure rates and short product life cycles. Many SMEs are quickly 

acquired by larger computer services firms once they develop a valuable product or 

service and, in some cases, being acquired is the explicit exit strategy of start-up firms. 

Computer services SMEs often supply a niche market—for example, providing software 

applications to the financial, logistics, or tourism sectors.127 Computer services firms are 

able to achieve large revenues with a small number of employees; famously, Craigslist’s 

30 employees generated revenue estimated at $100 million in 2008.128

Computer services SMEs become involved in foreign markets using a variety of 

mechanisms, including distributors or agents, licensing, indirect exports, and joint 

ventures. There are not always clear distinctions between these categories.129 Often the 

choice of engagement depends on the degree of face-to-face interaction necessary for a 

given service; customized services require more interactions and therefore a higher level 

of exporting-firm control, whereas standardized services can more easily be sold through 

intermediaries.130 One study found that software SMEs that sell through distributors are 

larger than firms that export directly; firms that already use distributors for domestic sales 

are more likely to sell through intermediaries abroad; and newer, more innovative 

technology increases the likelihood of alliances with distributors, as the reputation of the 

product or service and the relationships with clients have not yet been established.131

Growth in Internet use has benefited SME computer services exports by facilitating 

connections between buyers and sellers in different countries. The Internet has lowered 

the costs of entering foreign markets by simplifying export documentation, permitting 

electronic payments, providing market research, and quickly conveying client feedback. 

It has also increased international awareness, augmented the impression of a virtual local 

office in foreign countries, and reduced the “psychic distance” between countries.132 Most 

computer services SMEs are comfortable with online social networks and international 

communications technology. 

Domestic Barriers to Exporting

Domestic barriers faced by computer services SMEs that export include export controls 

on strategically important services such as encryption software. Export and re-export 

controls on commercial encryption products cover both software and hardware that 

incorporates encryption technology. Despite the publication of new rules in 2008 

 126 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997, 597. 127 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997. 128 Wolf, “Why Craigslist Is Such a Mess,” August 24, 2009. 129 Moen et al., “Internationalization of Small Computer Software Firms: Entry Forms and Market 

Selection,” 2004. 130 Burgel and Murray, “The International Market Entry Choices of Start-Up Companies in HighTechnology Industries,” 2000. 131 Burgel and Murray, “The International Market Entry Choices of Start-Up Companies in HighTechnology Industries,” 2000, 49. 132 Moen et al., “Internationalization of Small Computer Software Firms: Entry Forms and Market 

Selection,” 2004. The Internet has also increased the probability of unsolicited international orders. 
4-23 

designed to limit the number of encryption products that require review, U.S. regulations 

remain lengthy and complex, and some computer services SMEs are concerned they may 

accidentally be exporting in violation of these rules.133

Computer services SMEs also face constraints on access to export finance. Many banks 

consider computer services SMEs to be risky, due to a low asset base and the high failure 

rate in the industry.134 As one industry official noted, such firms often have long research 

and development periods with no sales, which looks risky on financial statements, and 

banks are generally reluctant to finance unproven technologies.135

Foreign Barriers to Exporting

Generally, developed countries have low tariffs on software, and developing countries 

encourage imports of software important to infrastructure, such as oil-related software, 

financial services software, and tourism-encouraging software for hotels and 

restaurants.136 However, many countries (and some U.S. states, such as Massachusetts) 

have strong regulations pertaining to the retention, integrity, and security of data, which 

can apply, for example, to software that tracks consumer behavior.137 One study found 

that the main foreign barriers faced by occasional software exporters include burdensome 

documentation and difficulties communicating with customers, while frequent exporters 

are more likely to express concern about payment delays and currency fluctuations.138

The former problems gradually decrease and the latter problems gradually increase as 

firms increase their software exports. 

There is high variance in the exportability of computer services produced by SMEs. 

Financial software is used by sectors that are heavily and idiosyncratically regulated by 

national authorities, and thus require customization; in contrast, cell phone software is 

fairly standardized. SMEs that develop software for specific entities like trade unions or 

unemployment funds must attend to foreign legal frameworks and business traditions 

when exporting.139 Tradability is also determined by similarity in business needs: U.S. 

SMEs that develop software for the airline industry leverage the fact that English is the 

international language of air traffic by exporting their services to aviation firms and civil 

aviation authorities in other countries.140

Many computer services SMEs face cultural barriers to exports. According to an industry 

official, the salience of cultural barriers is often higher for computer services than for 

manufacturing industries, due to the need to provide customer service and installation 

assistance; on the other hand, such barriers are lower in computer services than they are, 

for example, in healthcare services, as information technology (IT) workers tend to share 

a technology-oriented culture.141 After-sales customer support for computer services 

 133 Industry official, interview by USITC staff, Irvine, CA, March 5, 2010. 134 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997. 135 Industry official, interview by USITC staff, New York, NY, February 18, 2010. 136 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997, 597. 137 USTR conference, “Jobs on Mainstreet, Customers around the World: A Positive Trade Agenda for 

U.S. Small- and Medium-Sized Enterprises,” January 21, 2010. 138 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997, 599. 139 Rajala et al., “Software Vendor’s Business Model Dynamics Case: TradeSys,” 2003. 140 Industry official, telephone interview by USITC staff, January 27, 2010. 141 Industry official, telephone interview by USITC staff, March 2, 2010.
4-24 

exports requires both technical and interpersonal skills, and when a firm is selling 

through distributors, such skills need to be either available at or transferable to the 

intermediaries. 

U.S. computer services exporters of all sizes may benefit from a strong national brand in 

IT. This is partly due to U.S.-based multinational computer services firms promoting and 

raising the reputation of the U.S. industry. U.S. SME exporters of computer services also 

benefit from the international adoption of Microsoft and Apple software, and of English 

as the language of various operating systems.142

SME Strategies for Exporting

Export strategies employed by computer services SMEs are often oriented around 

networks and relationships, with SMEs frequently entering foreign markets through 

specific contacts. Computer services SMEs often operate in a culture of robust interfirm 

cooperation due to their relationships with hardware vendors, product development firms, 

and marketing organizations, which provide a strong orientation towards networks.143

SMEs that offer services complementary to IT hardware may have opportunities to enter 

markets via the established distribution networks of hardware manufacturers.144

Computer services SMEs that use distributors benefit from existing customer networks 

and local relationships along with the distributors’ experience, at the cost of sharing 

profits and training and monitoring the partner. From the distributor’s standpoint, the 

products and services supplied by computer services firms must reach a threshold sales 

volume in order to be worth the partnership. Distributors who offer a portfolio of similar 

products may already have necessary skills, but otherwise firms may send trainers to the 

foreign country or bring distributor representatives to headquarters for training.145

In some cases, larger partners already operating in foreign markets will propose 

partnerships with computer services SMEs, exchanging the large firm’s distribution 

networks and market intelligence for the technological capabilities of the SME. One SME 

described its large multinational partner as a “honey pot,” with potential partners 

“buzzing around and bumping into each other.”146 Computer services SMEs also can 

expand into foreign markets (and acquire technology) through outright purchases of other 

companies.147

Export strategies employed by computer services SMEs also include using pricing 

models that mitigate the risk of not receiving payment, such as pricing their services on 

the basis of number of individual searches, subscription fees, or amount of connection 

time (for example, supplying video game services through broadband networks on timebased charges). Successful SME computer services exporters often purchase domain 

names in various countries, provide multiple translations of their Web site (in some cases 

permitting non-Roman alphabet inputs from users), and offer customer support in various 

 142 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997, 600. 143 Coviello and Munro, “Network Relationships and the Internationalization Process of Small Software 

Firms,” 1997. 144 Bell, “A Comparative Study of the Export Problems of Small Computer Software Exporters in 

Finland, Ireland, and Norway,” 1997, 598. 145 Industry official, telephone interview by USITC staff, January 27, 2010. 146 Coviello and Munro, “Network Relationships and the Internationalization Process of Small Software 

Firms,” 1997, pg. 376. 147 Moen et al., “Internationalization of Small Computer Software Firms: Entry Forms and Market 

Selection,” 2004. 
4-25 

languages.148 More generally, computer services SMEs try to build flexibility into their 

core offerings, allowing them to reuse the largest possible percentage of their supplied 

services with different customers.149

Professional Services 

Industry Background

Professional services comprise a variety of services, including accounting, advertising, 

architecture, education, engineering, healthcare, law, and management consulting, among 

others. The commonality among these disparate sectors is that the services supplied are 

related to the skills and knowledge of highly trained individuals. Professional services 

suppliers are typically well-educated, and their professions are often licensed or 

otherwise regulated by governments or industry associations. Professional services firms 

usually provide highly customized solutions for each customer, as specificity is required 

in services like advice, knowledge, or project management. This requires both technical 

skills and interpersonal skills.150 Small professional services firms can develop strong 

reputations in boutique areas, such as intellectual property law or management consulting 

for the fashion industry.151

Professional services are frequently exported through the movement of suppliers or 

customers. The latter includes providing services to foreign firms establishing domestic 

subsidiaries, who often seek local accounting, legal, and management consulting services. 

Trade in some professional services also has an increasingly important cross-border 

component, as architecture firms and management consultants can now provide many 

services electronically that would formerly have required travel.152 However, many 

professional services SMEs emphasize the importance of the personal contact and faceto-face interaction they have with clients, and SMEs in sectors like management 

consulting often have to open local offices in order to achieve the necessary proximity to 

clients (especially when supplying services across time zones).153 One study of U.S. 

accounting SMEs found that those with greater international involvement placed higher 

importance on face-to-face meetings with clients than their less internationalized 

counterparts.154

Domestic Barriers to Exporting

In some cases, professional services SMEs are constrained by the availability of 

personnel. Engineering SMEs in the United States note that the number of U.S. graduates 

in mechanical, civil, electrical, chemical, and aeronautical engineering has declined in 

recent years, and there is a particular shortage of internationally oriented engineers.155 In 

one survey, U.S. accounting SMEs ranked their lack of in-house international expertise as 

 148 Moen et al., “Internationalization of Small Computer Software Firms: Entry Forms and Market 

Selection,” 2004. 149 Industry official, telephone interview by USITC staff, January 27, 2010. 150 Patterson and Cicic, “A Typology of Service Firms in International Markets: An Empirical 

Investigation,” 1995, 62. 151 Industry officials, interview by USITC staff, New York, NY, February 17, 2010. 152 Industry officials, interview by USITC staff, Miami, FL, March 4, 2010. 153 Ibid. 154 Bagchi-Sen and Kuechler, “Strategic and Functional Orientation of Small and Medium Sized 

Enterprises in Professional Services: An Analysis of Public Accountancy,” July 2000, 139. 155 Industry officials, interview by USITC staff, Houston, TX, March 1, 2010. 
4-26 

the strongest barrier to internationalization, outranking foreign barriers.156 However, this 

issue varies across professional services; for example, many foreign students are attracted 

to U.S. architecture schools and are subsequently available for employment by U.S. 

architecture SMEs.157

While international experience tends to be relatively common among U.S. professional 

services SMEs, there is wide variance in the breadth of firms’ international orientation. 

For example, architects are often influenced by styles and concepts from traditions in 

many countries.158 However, management consultants that focus on local clients, whether 

in the United States or abroad, tend to gain experience in country-specific business 

environments. Legal services lend themselves even more to country-specific practices, as 

legal services SMEs are institutionally oriented towards certain types of legal entities (for 

example, the specific legal status of corporations, which varies from country to country). 

Foreign Barriers to Exporting

Foreign barriers to entry vary significantly by sector. Barriers can be low in architectural 

services, as consumers of these services frequently hold international competitions which 

firms of any size can enter.159 However, legal services SMEs may face high entry costs 

due to the efforts required to understand the body of legal precedents in foreign countries, 

a skill that is needed to provide good counsel in foreign legal environments. When legal 

contracts are translated into multiple languages, parties often must agree which language 

version will be authoritative in case of a dispute, which requires a thorough 

understanding of foreign legal terminology.160

Even within sectors, there is variance in the exportability of professional services. One 

study found that U.S. accounting SMEs with greater international involvement earned a 

larger percentage of their revenue from auditing and management advisory services than 

did accounting SMEs that were not internationalized, suggesting that these services are 

more exportable than tax services (which require in-depth knowledge of a national tax 

system) or review and compilation services (which are more commoditized and therefore 

less lucrative).161 Likewise, practicing civil law in foreign jurisdictions is reportedly more 

difficult than practicing common law.162

Cultural and institutional differences are major issues for many professional services 

exports. Advertising services, for example, must adapt to some foreign cultural contexts 

more than others: U.S. advertising services require less cultural translation when exported 

to Canada (which receives U.S. television stations) and the EU (which has been exposed 

 156 Bagchi-Sen and Kuechler, “Strategic and Functional Orientation of Small and Medium Sized 

Enterprises in Professional Services: An Analysis of Public Accountancy,” July 2000, 141. 157 USTR conference, January 21, 2010. 158 Ibid. 159 For example, in 2007 the Abu Dhabi Tourism Authority and Tourism Development and Investment 

Company launched a design competition for the Sheikh Zayed National Museum, and U.S.-based firms 

Bernard Tschumi Architects and Eisenman Architects, each with under 30 employees, submitted proposals. 

However, the competition was won by UK-based Foster and Partners Ltd, which has over 1,000 employees. 

Stensgaard, “13 of the World's Top Architectural Firms in Sheikh Zayed National Museum Design 

Competition,” June 11, 2007. 160 Altay, “Difficulties Encountered in the Translation of Legal Texts: The Case of Turkey,” October 

2002. 161 Bagchi-Sen and Kuechler, “Strategic and Functional Orientation of Small and Medium Sized 

Enterprises in Professional Services: An Analysis of Public Accountancy,” July 2000, 133. 162 Industry officials, interview by USITC staff, New York, NY, February 18, 2010. Civil law is 

developed through legislation, whereas common law is developed through court decisions. 
4-27 

to the marketing efforts of U.S. firms since World War II) than for Asia. Some legal 

services SMEs are reluctant to enter emerging markets where the “rule of law” is not 

firmly established—i.e., there is less transparency and parties tend to trade on the basis of 

trust and family rather than paper contracts.163 For example, some legal services SMEs 

perceive that environmental laws in China and Latin America are far more often enforced 

against subsidiaries of foreign firms than against national companies, and these SMEs are 

reluctant to provide advice in an atmosphere of differential enforcement and legal 

ambiguity.164

Foreign regulation of professional services can be complicated and difficult for U.S. 

services providers to understand. Professional services providers are often required to 

have a combination of licenses, recognized credentials, and/or citizenship or residence in 

their host country, and in some cases these issues can only be addressed by teaming with 

local partners. Many SMEs lack information or experience in visa and work permit 

issues.165 One survey of U.S. professional services SMEs found that their top reported 

export challenge was burdensome and complex regulations, outranking problems with 

local partners and costs of doing business.166

SME Strategies for Exporting

Most professional services SMEs operate on the strength of their reputation, and they 

often enter foreign markets through relationships and referrals. Frequently it is a 

relationship with a large multinational firm that provides the key: for example, 

management consulting and accounting SMEs often work with large domestic clients that 

ask them to supply services to their foreign subsidiaries or to work with domestic 

subsidiaries of foreign firms, which leads to work for the foreign headquarters.167 Legal 

services SMEs may become involved internationally at the request of a client, as when 

someone who owns property in multiple countries seeks a law firm that can deal with 

property law issues across borders.168

SME exporters of professional services frequently join networks of service providers. 

Professional services are often complementary, and networks that comprise accounting, 

legal, management consulting, and other service providers can facilitate both referrals 

and ad hoc alliances that offer complete services packages to clients. Examples of 

networks of professional services SMEs include Interleges (an association of independent 

law firms in North America, the EU, Asia, and the Middle East) and the Society for 

Marketing Professional Services (a U.S.-Canadian network of architecture, engineering, 

planning, interior design, and construction firms), among many others.169

Many professional services SMEs deliver value to clients by having an international 

outlook and being comfortable with other cultures. They therefore try to hire employees 

from varied backgrounds, including employees who formerly worked for large 

multinational firms or in the military.170 Some SMEs send their employees to training 

 163 Industry officials, interview by USITC staff, New York, NY, February 18, 2010. 164 Ibid. 165 Ibid. 166 CompTIA, “Small and Medium-Sized Business Export Insights and Opportunities,” January 2010. 167 Industry officials, interview by USITC staff, New York, NY, February 17, 2010. 168 Industry officials, interview by USITC staff, New York, NY, February 18, 2010. 169 Industry officials, interview by USITC staff, New York, NY, February 18, 2010; Society for 

Marketing Professional Services, March 24, 2010. http://www.smps.org//AM/Template.cfm?Section=Home 170 Industry officials, interview by USITC staff, New York, NY, February 18, 2010. 
4-28 

events, conferences, and professional development seminars in foreign countries to 

improve their international expertise. In addition, new firms are often launched to take 

advantage of their founders’ international skills. Individuals born abroad who have come 

to study in the United States may start U.S. SMEs that export professional services to 

their country of origin, drawing upon familial and social networks. Professionals working 

for large international law or advertising firms will often leave to start new services 

SMEs, taking their international contacts with them.171

U.S. professional services SMEs benefit from the promotion of U.S. codes and standards. 

Eighty-five countries require that their listed companies use International Financial 

Reporting Standards, which share the same principles and conceptual frameworks as the 

U.S. Generally Accepted Accounting Principles (GAAP), and this reduces the adaptation 

costs of U.S. accounting SMEs that enter foreign markets. Even when standards are not 

harmonized, SMEs benefit when U.S. standards are known to be effective. For example, 

engineering standards for buildings, airports, fueling facilities, and other infrastructure in 

the United States are stringent, so engineering SMEs that meet these standards reportedly 

earn a presumption in foreign markets that their designs are of high quality.172 However, 

achieving legal harmonization between countries is more difficult; some U.S. state bar 

associations have developed proposals for cross-jurisdictional relationships whereby 

domestic and foreign jurisdictions would accept each other’s practicing lawyers, but such 

proposals are controversial.173

More generally, the perception that the United States has a strong business culture 

improves the exportability of management consulting services. This is especially true in 

emerging markets that aspire to develop a U.S.-like business culture. For example, the 

fact that U.S. architects are known for innovation and sustainability increases demand for 

them to work on new approaches, such as self-powering building designs, in places like 

China and India.174

 171 USITC, hearing transcript, March 10, 2010, 33 (testimony of Dr. Solomon Akinduro, AFRAM 

Corporation). 172 Industry officials, interview by USITC staff, Houston, TX, March 1, 2010. 173 Industry officials, interview by USITC staff, New York, NY, February 18, 2010. 174 USTR-Sponsored Conference. “Jobs on Main Street, Customers Around the World,”, January 21, 

2010
5-1

CHAPTER 5 

BENEFITS TO U.S. SMEs FROM 

INCREASED EXPORT OPPORTUNITIES 

Introduction

This chapter identifies the benefits to U.S. SMEs from the improved export opportunities 

provided by free trade agreements (FTAs) and other trading arrangements in which the 

United States participates. It begins with a brief discussion of information sources, 

followed by an overview summarizing U.S. participation in FTAs and selected other 

trading arrangements. Next, the benefits to U.S. SMEs of the increased export 

opportunities created by FTAs and other trading arrangements are described with respect 

to: 

 Market access: Under FTAs and other trading arrangements, governments can 

increase or improve market access by reducing duties and nontariff measures 

(NTMs) or through other rules that improve market access. Examples provided by 

U.S. SMEs include the benefits of duty reductions on: remanufactured goods under 

U.S. bilateral FTAs; on valves under the North American Free Trade Agreement 

(NAFTA); and on pharmaceutical products under the WTO Pharmaceutical 

Agreement, as well as benefits to the textile and apparel industry of the rules of 

origin adopted under the U.S.-Dominican Republic-Central American Free 

Trade Agreement (DR-CAFTA). 

 Trade facilitation:1 Under FTAs and other trading arrangements, governments can 

facilitate exports by improving customs procedures, harmonizing standards, 

providing for the mutual recognition of certification, and undertaking measures to 

facilitate the movement of workers. Examples provided by U.S. SMEs include the 

benefits for the telecommunications industry from mutual recognition agreements 

(MRAs); the benefits for the medical devices industry from a U.S.-Japan bilateral 

agreement; the benefit for the wine industry from mutual acceptance agreements 

(MAAs); and the benefits for producers of organic products from a U.S.-Canada 

bilateral agreement. 

 Regulatory environment: FTAs and other trading arrangements can result in a 

more favorable regulatory environment as signatories work to improve, harmonize, 

and make the regulatory environment more predictable. Examples provided by U.S. 

SMEs include the benefits to the wood pallet and container industry of U.S. 

participation in international phytosanitary agreements, and the benefits to the 

biotechnology industry of agreements that support the protection and enforcement 

of intellectual property rights (IPR). 

The information used in this chapter came from a number of different sources. These 

include public testimony from the three public hearings by the Commission for this 

investigation; written submissions received in conjunction with the hearings; 

 1

 Trade facilitation refers to a broad range of measures to streamline and simplify international trade 

procedures to allow for an easier flow of goods and services across borders. 
5-2

Commission staff interviews of public and private sector individuals throughout the 

United States; published information from private sector organizations such as the U.S. 

Chamber of Commerce and international organizations such as the OECD; and published 

economic literature.2

As stated elsewhere in this report, the information presented on the views of U.S. SMEs 

reflects the views of those particular SME representatives, and not the views of the 

Commission. Corroborating the views of the SME representatives was beyond the scope 

of this report. 

U.S. Participation in Free Trade Agreements and Selected 

Other Trading Agreements 

The U.S. government has sought to improve the international trading environment for 

U.S. firms through membership in the World Trade Organization (WTO) and 

participation in other multilateral, plurilateral, and bilateral trading arrangements, 

including mutual recognition agreements (MRAs), bilateral investment treaties (BITs), 

and trade and investment framework agreements (TIFAs). In addition, the United States 

has entered into 11 FTAs with 17 countries. Appendix D provides additional information 

on U.S. FTAs and on U.S. participation in other trading arrangements. U.S. FTAs are 

shown in table D.1. 

Benefits to SMEs of Increased Export Opportunities 

FTAs and other trading arrangements potentially create increased export opportunities for 

all U.S. firms. Those opportunities occur through increased or improved market access, 

better trade facilitation, and a more favorable regulatory environment. Figure 5.1 shows 

that the benefits to U.S. exporters may include: 

 reduced costs through tariff reduction, standards harmonization, mutual 

recognition of certification, easier information access; 

 reduced time to deliver products or services to markets or reduced delivery 

time to customers through customs facilitation and cross-country certification 

standardization; 

 reduced risks through greater IPR protection and enforcement, the institution of 

dispute settlement procedures, increased regulatory transparency, and more 

predictable regulatory and legal regimes; and 

 access to more and diverse markets.

Other than limited survey-based research, quantitative assessments of the impact of 

specific U.S. FTAs and other trading arrangements on SME exports are sparse. The 

general benefits of increased export activity have, however, been well researched, and are 

 2

 There is limited published economic literature that directly assesses how U.S. FTAs or other trading 

arrangements have benefited U.S. SMEs. Selected articles reviewed during the course of this investigation 

are cited in appendix E. 
5-3

supported by extensive economic studies and anecdotal evidence. Without specifying the 

exact provision or feature they liked, many SME representatives indicated general 

support for existing and pending FTAs, as well as other trading arrangements.3

 Specific 

benefits of FTAs and other trading arrangements largely fall into the same categories 

identified above—increased or improved market access, better trade facilitation, and a 

more favorable regulatory environment. 

Increased or Improved Market Access

Researchers and industry organizations have identified tariffs and nontariff measures 

(NTMs) as significant issues for exporters. In a study of trade barriers faced by SMEs, 

the OECD stated that 

Import tariffs still matter to exporting, in many sectors and markets. Many business 

surveys on trade barriers draw attention to the fact that import tariffs continue to 

cause problems for companies that wish to access foreign markets. . . . The practice 

 3

 USITC, hearing transcript, March 12, 2010, 20, 129 (testimony of Katy Coba, Oregon Department of 

Agriculture); USITC, hearing transcript, March 12, 2010, 120–121 (testimony of Philip Agress, AdvaMed); 

USITC, hearing transcript, March 10, 2010, 49 (testimony of Cory Simek, U.S. Department of Commerce, 

Commercial Service); USITC, hearing transcript, March 18, 2010, 81–82 (testimony of James Gore, JB 

Clawson International); USITC, hearing transcript, March 18, 2010, 101 (testimony of Jameson French, 

Hardwood Federation); Dixie Chemical Co., written submission to the USITC, January 28, 2010, 1; Fanwood 

Chemical Inc., written submission to the USITC, January 15, 2010, 1; The Manufacturing Institute, The 

Future Success of Small and Medium Manufacturers: Challenges and Policy Issues, 2006, 19–20. 

Trading arrangements* Opportunities* Benefits*

Multilateral

WTO goods trade agreements

General Agreement on Trade in 

Services

Trade-Related Aspects of 

Intellectual Property Rights

WTO sector-specific commitments

Plurilateral

Mutual recognition agreements

Mutual acceptance agreements

WTO Pharmaceutical Agreement

MOSS agreements

WIPO Internet Treaties

FTAs

Bilateral

FTAs

BITs

TIFAs

Country-specific trade relations 

agreements

Country-specific IPR agreements

Country-specific equivalence 

agreements

Market access

Reduce/eliminate tariffs

Reduce/eliminate NTMs

Restrict new barriers

Provides national treatment for 

goods

Provides national treatment for 

services

Trade facilitation

Facilitate passage through customs

Reduce transaction time

Streamline & reduce paperwork

Reduce TBT & SPS barriers

Mutually recognize certification

Harmonize standards

Ease movement of people

Regulatory environment

Protect investment

Protection and enforce IPR

Provide dispute settlement 

mechanisms

Ease access to information

Reduce market risk

Improve competition policy

Increase bilateral cooperation

Enterprise/firm

Increase output

Increase productivity

Expand business

Increase economies of scale

Increase business stability/reduce 

volatility

Increase profits

Increase employment

Increase employment stability and 

security

Increase wages

Export market

Open markets and opportunities

Reduce cost

Expedite movement of goods 

Expedite provision of services

Increase competitiveness

Increase export sales

Level the playing field

Increase market share

Reduce time to market

Increase market base

Diversify market base

Increase regional opportunities

Improve business environment

Trading environment with improved predictability and increased transparency

FIGURE 5.1 Trading arrangements create export opportunities with the potential to benefit all firms

* Illustrative examples of arrangements, opportunities, and benefits; not intended to be comprehensive.

Trading arrangements* Opportunities* Benefits*

Multilateral

WTO goods trade agreements

General Agreement on Trade in 

Services

Trade-Related Aspects of 

Intellectual Property Rights

WTO sector-specific commitments

Plurilateral

Mutual recognition agreements

Mutual acceptance agreements

WTO Pharmaceutical Agreement

MOSS agreements

WIPO Internet Treaties

FTAs

Bilateral

FTAs

BITs

TIFAs

Country-specific trade relations 

agreements

Country-specific IPR agreements

Country-specific equivalence 

agreements

Market access

Reduce/eliminate tariffs

Reduce/eliminate NTMs

Restrict new barriers

Provides national treatment for 

goods

Provides national treatment for 

services

Trade facilitation

Facilitate passage through customs

Reduce transaction time

Streamline & reduce paperwork

Reduce TBT & SPS barriers

Mutually recognize certification

Harmonize standards

Ease movement of people

Regulatory environment

Protect investment

Protection and enforce IPR

Provide dispute settlement 

mechanisms

Ease access to information

Reduce market risk

Improve competition policy

Increase bilateral cooperation

Enterprise/firm

Increase output

Increase productivity

Expand business

Increase economies of scale

Increase business stability/reduce 

volatility

Increase profits

Increase employment

Increase employment stability and 

security

Increase wages

Export market

Open markets and opportunities

Reduce cost

Expedite movement of goods 

Expedite provision of services

Increase competitiveness

Increase export sales

Level the playing field

Increase market share

Reduce time to market

Increase market base

Diversify market base

Increase regional opportunities

Improve business environment

Trading environment with improved predictability and increased transparency

FIGURE 5.1 Trading arrangements create export opportunities with the potential to benefit all firms

* Illustrative examples of arrangements, opportunities, and benefits; not intended to be comprehensive.
5-4

of tariff escalation is of importance to SMEs, who often sell processed goods rather 

than semi-processed or raw materials.4

The OECD further noted that NTMs are as important as tariffs, if not more so as 

impediments to SMEs’ internationalization.5

Tariffs and NTMs also have been identified by agricultural and manufacturing producers 

as barriers to exporting. In providing advice to SME exporters, a food export association 

stated that 

Duties make it more expensive to import certain products, and decrease the chances 

of success in a market. . . Non-tariff barriers often favor locally produced goods. 

Duties (tariffs) and non-tariff trade barriers continue to fall because of organizations 

like the World Trade Organization (WTO) and Bilateral Free Trade Agreements such 

as NAFTA, creating more opportunities for U.S. exporters than ever before.6

The National Foundation of Independent Business (NFIB) expressed similar concern. 

According to the NFIB, non-tariff barriers such as regulations and red tape are cited by 

40 percent of [SME] manufacturers as hampering their ability to increase sales. Tariffs 

limit sales for 37 percent of respondents.”7

Representatives of SMEs from various industries identified the reduction of duties as a 

general benefit of FTAs, especially NAFTA, as well as of multilateral trade liberalization 

under the WTO.8

 Table 5.1 shows that for most U.S. FTA partners, the trade-weighted 

applied tariff, including preferences, is generally lower than the MFN applied tariff. 

According to the National Association of Manufacturers (NAM): 

Many small companies that produce only in the United States believe that 

free trade agreements (FTAs) make all the difference in their ability to sell 

into foreign markets. Without the ability or the desire to establish foreign 

production to serve local markets overseas, many small companies face high 

tariff and non-tariff barriers in fast-growing markets. . . . Many small 

companies export either solely or mainly to Canada or Mexico. Without 

NAFTA, this would have been much more difficult. When asked, a number 

of companies informed us that “NAFTA has by far been the most beneficial 

[of our FTAs].” Other companies pointed out that the lack of an FTA has put 

them at a huge disadvantage with their competitors from the European Union 

(EU) or other countries that may have an FTA in place. For example, one 

said, “Free trade agreements to which the USA is not a party will often 

hinder our exports.”9

 4

 Fliess and Busquets, “The Role of Trade Barriers in SME Internationalisation,” OECD 2006, 6. 5

 Fliess and Busquets, “The Role of Trade Barriers in SME Internationalisation,” OECD 2006, 7. 6

 Food Export-Midwest and Food Export USA-Northeast, “Exploring Export Options: Export for Small 

& Medium Sized Companies” (accessed April 5, 2010). 7

 National Foundation of Independent Business, NFIB National Small Business Poll International Trade, 

2004, 4. 8

 Apparel industry official, telephone interview by USITC staff, February 23, 2010; manufacturing 

industry official, interview by USITC staff, Houston, TX, March 2, 2010; hospital supply industry official, 

interview by USITC staff, Miami, FL, March 3, 2010; aerospace industry official, interview by USITC staff, 

Miami, FL, March 3, 2010; textile industry official, interview by USITC staff, Boston, MA, March 2, 2010; 

USITC, hearing transcript, March 10, 2010, 255 (testimony of Thomas Dustman, Sunnen Products Co.); 

Cange International, written submission to the USITC, January 26, 2010, 3–4, 5. 9

 National Association of Manufacturers, written submission to the USITC, March 26, 2010, 2. 
5-5

TABLE 5.1 U.S. FTAs, average tariff rates, by partner 

United States and FTA 

partners MFN applied tariffa Applied tariff (including 

preferencesa Applied tariff 

(agricultural) 

Applied tariff 

(nonagriciultural) 

United States 1.9 1.3 2.9 1.2 

Australia 5.9 6.0 2.5 6.1 

Bahrain 6.0 6.0 22.9 3.5 

Canada 3.4 1.5 10.4 0.9 

Chile 5.7 0.7 1.7 0.6 

Costa Rica 5.1 5.1 11.1 4.6 

Dominican Republic 8.7 5.1 8.0 4.7 

El Salvador 7.1 4.0 13.3 2.4 

Guatemala 6.3 3.7 4.7 3.5 

Honduras 7.9 4.1 4.6 4.0 

Israel 3.0 1.1 7.0 0.8 

Jordan 9.5b

 5.6 b 9.3 b 5.1 b

Mexico 10.9 1.8 2.6 1.7 

Morocco 16.5 8.8 22.9 7.2 

Nicaragua 6.7 b 5.4 b 13.3 b 3.9 b

Oman 5.2 3.6 6.4 3.3 

Peru 2.9 2.2 3.4 2.0 

Singapore 0.0 0.0 0.5 0.0 

Colombiac

 11.8 7.9 9.9 7.7 

Panamac

 9.6 9.6 13.6 9.4 

South Koreac 7.1 7.1 90.4 3.7 

Sources: Word Bank, World Trade Indicators 2009-10, Country-specific “Trade-at-a-Glance Tables,” (accessed 

February 2010). Data definitions available at 

http://siteresources.worldbank.org/INTRANETTRADE/Resources/239054-

1261083100072/WTI2010_User_Guide.pdf. 

a Trade-weighted average. 

b Latest available data: 2006 or 2007. 

c FTA not yet implemented. 

Other benefits from lower tariffs and NTMs identified by SME representatives include an 

improvement in international competitiveness, or a so-called “leveling of the playing 

field,” in export markets as a result of duty reduction.10 At the Commission’s hearings for 

this investigation, a wide range of SMEs reported that improved access in FTA partner 

markets has substantially increased their exports. For example, U.S. potato industry 

representatives pointed to “the success of DR-CAFTA” for their industry, noting that 

after the agreement was implemented their market share increased by 83 percent as a 

result of the competitive advantages conferred by the DR-CAFTA tariff reductions.11

Industry representatives attributed increased apple exports to Morocco and Peru to the 

U.S. FTAs with these countries.12 A U.S. textile industry representative stated that most 

 10 Chemical industry official, interview by USITC staff, February 9, 2010; export financing industry 

official, interview by USITC staff, Miami, FL, March 4, 2010; food and beverage industry official, interview 

by USITC staff, Miami, FL, March 4, 2010; USITC, hearing transcript, March 12, 2010, 215 (testimony of 

Matt Harris, Washington State Potato Commission). 11 Washington State Potato Commission, written testimony to the USITC, March 12, 2010, 6; USITC, 

hearing transcript, March 12, 2010, 220 (testimony of Matt Harris, Washington State Potato Commission). 12 Industry officials, telephone interviews by USITC staff, December 2009–February 2010. 
5-6

of its exports are to countries with which the United States has signed FTAs or other 

trading arrangements.13

Market Access: Selected Examples of Trade Agreement Benefits to U.S. 

SMEs

The following section provides four examples of improvements in market access that 

benefited U.S. SME exports as a result of trade agreements: duty reductions on 

remanufactured goods under U.S. bilateral FTAs; duty reductions on valves under 

NAFTA; duty reductions on pharmaceutical products under the WTO Pharmaceutical 

Agreement; and rules of origin under the DR-CAFTA for the textile and apparel industry. 

Remanufactured goods: Reductions in tariffs and NTMs create export opportunities for 

SMEs

The U.S. remanufactured goods industry14 includes large and small firms, the majority 

being SMEs.15 Many countries restrict trade in remanufactured products through import 

bans, tariffs, regulations, and certification or inspection requirements. 16 According to 

SME remanufacturers, these barriers have inhibited export sales, and removing the 

barriers would make it easier to increase exports. One SME remanufacturer stated that 

companies in his industry do not export substantial amounts to South America, in part 

because of existing bans on imports of remanufactured products.17 According to Ron 

Giuntini, executive director of the OEM Product-Services Institute, “Remanufacturing 

represents perhaps the largest untapped resource for productivity improvement in 

American industry.”18

Early U.S. FTAs with Israel, Canada, Mexico, and Jordan did not include specific 

provisions covering remanufactured goods.19 It was not until the U.S. FTAs with Chile 

and Singapore in 2004 that market access for remanufactured goods was incorporated 

into the agreements by defining remanufactured goods in the agreements’ rules of origin 

chapter.20 Two years later in the 2006 DR-CAFTA, remanufactured goods were included 

 13 Buhler Quality Yarns Corp., written submission to the USITC, January 29, 2010, 2. 14 Remanufacturing is an industrial operation that uses existing products, recovered from commercial use, 

as inputs. Many parts of the recovered goods are still functional and technologically current, requiring only 

worn or outdated components to be repaired, replaced, or updated. A broad range of industries and companies 

remanufacture products, including companies from the earth-moving, automotive parts, electronics, medical 

device, and information technology industries. WTO, Negotiating Group on Market Access, Market Access 

for Non-Agricultural Products, December 5, 2005, 1. 15 Grose, “Wringing Gold From the Old,” ASEE PRISM, Summer 2007, 1 (accessed March 23, 2010). 16 WTO, Negotiating Group on Market Access, Market Access for Non-Agricultural Products: 

Negotiating NTBs Related to Remanufacturing and Refurbishing, TN/MA/W/18/Add.11, December 5, 2005, 

2, http://www.reman.org/pdf/WTO-reman.pdf. 17 Medical equipment remanufacturing company official, interview by USITC staff, April 21, 2010. He 

added that opening markets to remanufactured products would be most helpful to the automotive and aircraft 

industry. 18 Quoted in Grose, “Wringing Gold From the Old,” ASEE PRISM, Summer 2007, 1 (accessed March 23, 

2010). 19 Information for remanufactured goods and U.S. FTAs was derived principally from USTR, “Free 

Trade Agreements,” (accessed March 10, 2010). 20 The definition of remanufactured goods is fairly standard among these FTAs. It begins with the 

definition of “recovered goods,” which basically means individual parts obtained by complete disassembly of 

used goods and cleaned, inspected, tested, or otherwise processed as necessary for improvement to sound 

working condition. “Remanufactured goods” means industrial goods assembled in the territory of a party that 

are entirely or partially composed of recovered goods and that have similar life expectancies, meet similar 

performance standards, and have similar factory warranties to those of the new goods that they could replace. 
5-7

in the market access chapter as well as the rules of origin (ROO) chapter. These 

provisions continued in subsequent U.S. FTAs with Morocco, Bahrain, Oman, and 

Peru.21 In addition to lowering tariffs, these provisions opened markets—prior to the FTA, 

Peru prohibited the importation of remanufactured goods.22 According to the NAM, the 

provisions of the pending U.S.-Colombia and U.S.-Korea FTAs covering remanufactured 

goods would provide significant export and investment opportunities for U.S. firms 

involved in remanufactured products, such as machinery, computers, cellular telephones, 

medical equipment, automotive parts and equipment, and other devices.23

Valves: SMEs benefit from NAFTA duty reductions

The United States is the largest producer of industrial valves worldwide, with several 

large firms making a wide variety of valves and many SMEs producing valves for 

specific niche markets. Canada and Mexico are the largest export markets for U.S. 

industrial valves, most of which are used in energy-related and water and wastewater 

management sectors. 

Duty reductions under NAFTA, as well as its precursor, the U.S.-Canada FTA (CFTA), 

have benefited U.S. exporters of valves to Canada and Mexico. Under CFTA, tariffs on 

U.S. valve exports to Canada were reduced from 8 percent ad valorem to zero. NAFTA 

resulted in the reduction of tariffs on U.S. valve exports to Mexico from 10–15 percent to 

zero. One SME valve manufacturer contacted by the Commission stated that the NAFTA 

tariff reductions on valves allowed that company to improve its price-competitiveness in 

the Canadian and Mexican markets.24

WTO Pharmaceutical Agreement: Tariff elimination levels the playing field for SMEs

The WTO Pharmaceutical Agreement provides for reciprocal tariff elimination for a 

major share of pharmaceutical products and chemical intermediates used in the 

production of pharmaceuticals.25 Although large firms account for most pharmaceutical 

production and exports, SMEs have benefited from the agreement. According to U.S. 

government data, there were about 1,300 pharmaceutical SME exporters in 2007.26

Industry sources contacted by the Commission reported that the Pharmaceutical 

Agreement provides several advantages to SME exporters. In addition to duty elimination, 

several SMEs cited the ease of using the program, the establishment of a “level playing 

field,” and the establishment of a consistent trading environment to be among the benefits 

of the agreement. These benefits are of particular importance to SMEs, because SMEs 

 21 The FTAs differ on which remanufactured goods are allotted market access. For example, the FTAs 

with Chile and Singapore provide market access only to specific remanufactured products classified in HS 

chapters 84, 85, 87, and 90, whereas DR-CAFTA and the FTAs with Australia and Peru provide market 

access to all remanufactured products classified under HS Chapters 84, 85, and 87 (with few exclusions) and 

certain products of chapter 90 (all Chapter 90 products for the Peru FTA). The FTAs with Morocco, Bahrain, 

and Oman provide market access to all remanufactured goods. 22 USTR, 2005 National Trade Estimate Report on Foreign Trade Barriers: Peru, 481 (accessed April 9, 

2010). 23 National Association of Manufacturers, “Request for Comments Concerning Free Trade Agreement 

with Colombia,” September 15, 2009, 4; “Request for Comments Concerning Free Trade Agreement with the 

Republic of Korea,” September 15, 2009, 7. 24 Andy Ross (Ross Valve Manufacturing), telephone interview by USITC staff, March 18, 2010. 25 The agreement was implemented in 1995 as part of the Uruguay Round. Signatories to the WTO 

Pharmaceutical Agreement are the United States, Australia, Canada, the European Union and its 27 member 

states, Japan, Norway, Switzerland, and Macao. USTR, “Pharmaceuticals,” (accessed May 25, 2010). 26 Data are compiled from official Census statistics (NAICS 3254, Pharmaceuticals and Medicines). 
5-8

generally have fewer personnel and financial resources available to navigate the 

individual requirements of different export markets. Market consistency reduces the 

information acquisition costs, providing SMEs with improved and expanded export 

opportunities.27

Textiles and apparel: DR-CAFTA rules of origin support SME participation in regional 

production networks

The DR-CAFTA rules of origin provide incentives for companies located in partner 

countries to use U.S.-produced inputs rather than inputs from non-partners, in order to 

qualify for duty-free treatment under the FTA. 28 While the benefits to an individual firm 

of a particular FTA vary, industry sources reported that many U.S. SME textile 

companies facing low-cost Asian competitors would no longer be in business without the 

DR-CAFTA rules of origin provisions.29 Although the provisions were sometimes viewed 

as complicated, difficult to understand, and hard to enforce, they have reportedly 

benefited SMEs that export inputs to FTA countries for use in the production of products 

ultimately sold to U.S. customers. 30 As a result, these FTA provisions facilitate the 

establishment of regional supply chains whereby companies in FTA partner countries 

source components from U.S. companies, thereby increasing U.S. exports to the FTA 

partners. 

A written submission received for this investigation from Buhler Quality Yarns stated 

that “FTAs have proven to have the most benefits for our products, out of the 50 percent 

exported, about 40 percent are to countries with FTAs or other trade agreements. CAFTA 

and the Singapore FTA have been most beneficial to our company.” 31 In a 2008 

interview, a representative of Buhler also stated that a U.S. production facility would also 

“benefit from the various bilateral US FTAs [such as NAFTA and CAFTA], which 

usually require US or regional spun yarns in order for bringing garments made of those 

yarns duty free in the US market place.”32

 27 Industry officials, telephone interviews with USITC staff, March 5, 2010; industry officials, telephone 

interviews with USITC staff, February and March 2010; industry official, interview with USITC staff, 

Boston, MA, March 3, 2010; industry official, telephone interview with USITC staff, March 23, 2010; 

USITC, Advice Concerning the Addition of Certain Pharmaceutical Products and Chemical Intermediates, 

2006. 28 The DR-CAFTA eliminated duties on textiles and apparel that meet certain rules of origin. The rules of 

origin for apparel generally require that the “essential character component” for imports of most textile and 

apparel articles from the FTA countries be made from inputs produced in the FTA countries or the United 

States, usually from the yarn stage forward. Although there are exceptions, in general, under this “yarn 

forward” rule of origin, only the fibers may be from third countries. For additional information, see USDOC, 

ITA, Trade Information Center, “U.S.-CAFTA-DR Free Trade Agreement: Rules of Origin,” May 25, 2010. 29 Textile and apparel industry officials, interviews by USITC staff, February 19, 23, and 26, 2010, and 

March 2, 2010. 30 Ibid. 

31 Buhler Quality Yarns, Corp., written submission to the USITC, January 29, 2010, 1–2. 32 Face2Face, “Interview: Mr Werner Bieri—President & CEO, Buhler Quality Yarns Corporation,” 

May 26, 2008. 
5-9

Improved Trade Facilitation33

Trade facilitation refers to a broad range of measures to streamline and simplify 

international trade procedures to allow for an easier flow of goods and services across 

borders.34 Through trade agreements, countries can facilitate trade by streamlining and 

reducing the administrative burdens associated with customs procedures; harmonizing 

standards; arranging mutual recognition of certification; and taking steps to ease the 

movement of people. 

Customs Procedures

SMEs contacted by the Commission pointed to a number of ways in which improvements 

in customs procedures could lead to greater exporting opportunities. For example, 

measures such as reducing the amount of paperwork needed to file for exporting under 

NAFTA cut costs and shortened the time needed to conduct transactions.”35 Textile and 

apparel firms noted that FTAs typically add “transparency and predictability” to the 

export process, thereby facilitating and expediting the customs processes; 36 this 

improvement is reportedly very important to textile and apparel firms, for which “speed 

to market” is essential.37 Several Miami-based exporters commented that FTAs “reduce 

the time for producing permits,” make “customs move faster,” and help “move cargo all 

along the Americas.”38 Improving customs is particularly important for SMEs, as the 

administrative and financial burdens of customs procedures can be particularly onerous, 

and therefore discouraging, for their small staffs.39

Standards Harmonization and Mutual Recognition of Certification

By establishing standardized regulations or mutually recognized or accepted 

certifications, governments can help SMEs substantially cut their export costs. The WTO 

reported that “regulatory convergence is especially beneficial for [SMEs]” because such 

firms “necessarily devote a larger percentage of their operating budgets to regulatory 

compliance than do large enterprises, so they are particularly impacted by having to 

comply with a multitude of regulations across different jurisdictions.”40 For example, a 

representative of a small dental company noted that because of the role of certification in 

accessing foreign markets, establishment of an MRA could allow a company to enter up 

 33 Research on SMEs in other countries has also supported the USITC findings on the importance of 

increased trade facilitation. For example, a study of 15,000 firms in Asian countries (of which 60 percent 

were SMEs with under 100 employees) that focused on the role of trade facilitation suggested that reforms 

would both increase the probability of a firm’s exporting and increase the amount of its exports. Increased 

trade transparency and IT services were seen as especially effective in increasing exports, and SMEs’ 

exporting behavior was significantly more responsive to policy predictability than was the case for all firms. 

Li and Wilson, “Trade Facilitation and Expanding the Benefits of Trade,” June 2009, 1. 34 More information on trade facilitation is available from OECD, “Trade Facilitation,” (accessed May 25, 

2010); World Bank, “Trade Facilitation” (accessed May 25, 2010); WTO, “Trade Facilitation” (accessed 

May 25, 2010). 35 Manufacturing industry official, interview by USITC staff, Miami, FL, March 3–4, 2010; aerospace 

industry official, interview by USITC staff, Miami, FL, March 3, 2010; EVO, written submission to the 

USITC, April 2, 2010, 1–2. 36 Industry officials, telephone interviews by USITC staff, January 27, February 19, and 23, 2010. 37 Industry officials, telephone interviews by USITC staff, February 17, 23, and 26, 2010. 38 IT industry official, interview by USITC staff, Miami, FL, March 3–4, 2010; marine industry official, 

interview by USITC staff, Miami, FL, March 3–4, 2010; consulting industry official, interview by USITC 

staff, Miami, Fl, March 3–4, 2010. 39 USITC, hearing transcript, March 18, 2010, 142 (testimony of James Gore, JB Clawson International). 40 WTO, “The Importance of Regulatory Cooperation for Improving Governments’ Ability to Fulfill 

Legitimate Policy Objectives While Facilitating Trade,” June 15, 2009, 6. 
5-10

to “50 countries.”41 In addition, standardization may support the effectiveness of other 

market access opportunities, such as tariff reductions. According to a representative for 

the Emergency Committee for American Trade, “to the extent that the rules are simplified, 

standards are harmonized, and procedures are ones that are more consistent across 

borders, you find that smaller and medium-sized companies find it easier to comply with 

the requirements and take advantage of the reduction in tariffs that are provided.”42

Another way in which trading arrangements benefit SME exporters is through provisions 

that make it easier for individuals to move across borders. Many witnesses remarked on 

the difficulty of obtaining U.S. and foreign visas to support export-associated activities 

such as trade shows, product demonstrations, and training.43 Treaties such as NAFTA that 

ease the temporary entry of business people provide opportunities for SMEs to receive 

foreign customers and send suppliers abroad. This is critical for SME exporters of both 

manufactured goods and professional services, especially for industries with language- or 

cultural context-dependent services like advertising.44

Trade Facilitation: Selected Examples of Trade Agreement Benefits to U.S. 

SMEs

The following section provides four examples of improvements in trade facilitation that 

have benefited U.S. SME exports as a result of trade agreements. They include lower 

costs and increased speed to market for the telecommunications industry as a result of 

MRAs; standards harmonization for medical devices as a result of a U.S.-Japan bilateral 

agreement; mutual acceptance of certain practices and labeling rules for the U.S. wine 

industry as a result of MAAs; and mutual acceptance of certification for producers of 

organic products from a U.S.-Canada bilateral agreement.

Telecommunications: MRAs cut costs and increase speed to market

Telecommunications is included in many U.S. MRAs. Both the negotiation and the 

implementation phases of an MRA provide benefits to SMEs.45 The first phase calls for 

the mutual acceptance of test data, leading to equipment approvals by agencies in a target 

 41 USITC, hearing transcript, March 12, 2010, 175 (testimony of Grant Ramaley, Aseptico, Inc.). 42 USITC, hearing transcript in connection with Invs. nos. TA-131-034 and TA-2104-026, U.S.-TransPacific Partnership Free Trade Agreement: Advice on Probable Economic Effect of Providing Duty-Free 

Treatment for Imports, March 2, 2010, 261 (testimony of Calman J. Cohen, Emergency Committee for 

American Trade). 43 USITC, hearing transcript, March 12, 2010, 14 (testimony of Tim McCabe, The Oregon Business 

Development Department); USITC, hearing transcript, March 12, 2010, 49 (testimony of Ann Bunnenberg, 

Electrical Geodesics, Inc.); USITC, Hearing transcript, March 12, 2010, 85 (testimony of Katy Coba, Oregon 

Department of Agriculture); USITC, hearing transcript, March 10, 2010, 54–55 (testimony of Cory Simek, 

U.S. Department of Commerce, Commercial Services); USITC, hearing transcript, March 10, 2010, 158, 161, 

200–201 (testimony of Thomas Dustman, Sunnen Products Co.); USITC, Hearing transcript, March 10, 2010, 

202 (testimony of Rudi Roeslein, Roeslein & Assoc.); USITC, hearing transcript, March 10, 2010, 203 

(testimony of Karen Bomba, Zoltek Corp.); USITC, hearing transcript, March 18, 2010, 138 (testimony of 

Spencer Ross, National Institute for World Trade). 44 Industry officials, interview by USITC staff, New York, NY, February 18, 2010. 45 Telecommunication MRAs include two phases. In the first phase, a regulatory agency in the foreign 

market reviews the reports of the tests done to products within the United States for the U.S. market. Then, 

by comparing the U.S. tests and the foreign tests, they can determine whether to rate the product as 

acceptable within the foreign market. In the second phase, testing bodies within the United States are certified 

to test U.S. products to foreign standards. This will then allow the products to be exported directly to foreign 

market without passing through inspection. USTR negotiates these agreements on behalf of the FCC for all 

products involving networks and network access, radio frequency absorption, bandwidth emission, and 

absorption rates for radiation. Industry association official, telephone interview by USITC staff, February 3, 

2010. 
5-11

market; the second phase calls for mutual acceptance of the equipment approvals 

themselves. MRAs also deal with another significant impediment to SME exports: 

exporters’ need to find pertinent information about a market’s rules and regulations. 

Before and during negotiations, partner governments exchange research and information, 

resulting in a complete collection of relevant regulatory and legal information about all 

parties, collected at a single location within each country. This process of information 

exchange benefits potential SME exporters by reducing the time and other expenses 

associated with information acquisition—costs that SMEs typically can ill afford. As an 

industry official commented, “Just finding out the rules is a problem—larger companies 

with a local presence can more easily uncover the regulations than can an SME.”46

Consolidated testing and the associated reduction in the time to market are among an 

MRA’s most important benefits.47 MRAs reduce SME costs because SMEs can “get a 

product tested in one place, at one time against requirements to sell to multiple 

markets.”48 MRAs are especially useful for SMEs that focus on innovative and hightechnology products; because high-tech products have a relatively short life cycle, the 

faster a product can arrive at a destination market, the better it is for the producer.49

U.S.-Japan Market-Oriented, Sector-Selective Agreement: Harmonization reduces time 

and costs for SMEs

The principal export barrier for U.S. SME medical devices exporters is the set of 

differing and complex regulatory requirements among trade partners. For these SMEs, 

trading arrangements that help to harmonize standards and regulations across markets 

potentially offer increased export opportunities.50 For example, the U.S.-Japan MarketOriented, Sector-Selective (MOSS) Agreement has helped reduce the cost and time 

associated with exporting medical devices to Japan by streamlining Japanese approval 

and licensing procedures and establishing a more transparent pricing mechanism for 

devices.51

Before the MOSS agreement, significant clinical diagnostic tests conducted in the United 

States for medical devices had to be duplicated in Japan. These redundancies posed a 

formidable barrier for U.S. medical device SMEs seeking to export to Japan, as the cost 

of these tests proved prohibitively expensive—upwards of $100 million.52 Because of the 

MOSS Agreement, potential customers in Japan have become more willing to accept 

clinical test data from the United States in lieu of conducting another round of tests.53

Mutual Acceptance Agreements: SME wine exporters become more competitive abroad

U.S. FTAs provide several benefits to domestic SME wine exporters, particularly by 

lowering tariffs and delivering Mutual Acceptance Agreements (MAAs) covering 

oenological (winemaking) practices and labeling rules. Though FTAs lower tariff costs 

for all U.S. wine exports, they are particularly helpful to the export-competitiveness of 

 46 Telecommunications industry official, telephone interview by USITC staff, February 19, 2010. 47 Telecommunications industry official, telephone interviews by USITC staff, February 19 and 26, 2010. 48 Telecommunications industry official, telephone interview by USITC staff, February 19, 2010. 49 Ibid. 

50 USITC, Medical Devices and Equipment, 2007, 5–6. 51 Trade Compliance Center, “Report on the U.S.-Japan Market-Oriented, Sector-Selective Discussions 

on Medical Equipment and Pharmaceuticals” (accessed March 26, 2010). 52 E-mail survey of industry officials (in San Jose-based association) by USITC staff, March 2, 2010. 53 USITC, hearing transcript, March 12, 2010, 120 (testimony of Philip Agress, AdvaMed). 
5-12

SME wineries, which typically export small quantities of higher-value products.54 Lower 

tariffs benefit SME wineries because tariffs in many export markets are applied on an ad 

valorem (value) basis, raising the absolute cost of tariffs on high-value SME wine 

products.55

Under the oenological MAAs, which were established under the WTO TBT Agreement, 

signatories agree to accept wine from other signatory countries so long as the wine is 

produced in accordance with the laws and regulations of the signatory country.56 These 

MAAs benefit small U.S. wine exporters because they can lower costs of compliance 

with various foreign market regulations—as costs are proportionally higher for SMEs 

that export relatively small volumes—effectively establishing greater regulatory 

consistency among different export markets. 57 For example, the 2007 labeling MAA 

lowers production cost for U.S. wineries because wineries do not have to produce and 

affix different labels for each WTTG member market. In addition, SMEs do not have to 

specially produce wine to the standards of the export market country, which could be 

prohibitively costly given their relatively small scale of production. According to a U.S. 

industry source, the U.S.-EU MAA provides stability to the EU wine market. Prior to the 

agreement, the EU provided only derogations or temporary acceptance of certain U.S. 

winemaking practices.58 This constraint dissuaded U.S. SMEs from actively developing 

EU markets because of the uncertainty, cost, and time-intensity of the procedures for 

getting the European Commission’s approval to import shipments. A representative of JB 

Clawson, a company that represents the U.S. wine industry on matters of international 

affairs and trade policy, stated that “the U.S.-EU Bilateral Trade Agreement in wine has 

been very effective and helpful to us.” 59

 54 Several U.S. industry representatives indicated that a number of free trade agreements (FTAs) have 

been established with countries that are not traditional wine markets, so the benefits have been limited. 

Industry sources report that the U.S.-Korea FTA would have been much more beneficial if ratified soon after 

it was negotiated in April 2007. In the meantime, Korea has entered into FTAs with other leading wine 

exporters such as Chile and the EU, while the FTA awaits passage in the U.S. Congress. Industry official, 

interview by USITC staff, February 4, 2010; industry official, telephone interview by USITC staff, February 

11, 2010. 55 Trade agreements also indirectly benefit SMEs by improving market access to large U.S. wineries that 

use their considerable marketing resources to enter and develop markets, serving as “trailblazers” for the 

SME wineries that follow. Industry official, telephone interview by USITC staff, February 10, 2010. 56 The United States has entered into three such MAAs. Two agreements have been established with 

members of the World Wine Trade Group (WWTG), an organization comprising major non-European wineproducing nations, including Argentina, Australia, Canada, Chile, New Zealand, South Africa, and the United 

States. The MAA on mutual acceptance of winemaking practices among WTTG countries entered into force 

in December 2001. A second MAA, which entered into force in December 2007, established uniform bottlelabeling regulations. The third MAA, between the United States and the EU, entered into force in March 

2006. It related to winemaking practices, including materials, processes, treatments, and techniques permitted 

by law in the exporting party, though it excluded labeling, bottling, or packaging regulations. World Wine 

Trade Group, “World Wine Trade Group” (accessed March 12, 2010); Department of Commerce, 

International Trade Administration, “World Wine Trade Group” (accessed March 12, 2010); World Wine 

Trade Group, “Achievements” (accessed March 12, 2010); Department of Commerce, International Trade 

Administration, “Agreement on Mutual Acceptance of Oenological Practices,” Article 4(b) (accessed March 

12, 2010). 57 Industry official, interview by USITC staff, February 4, 2010; industry official, telephone interview by 

USITC staff, February 11, 2010. 58 Wine Institute, “Welcome to the Wine Institute” (accessed March 12, 2010). 59 JB Clawson also stated that about 15–20 percent of all U.S. wine is exported, and that SMEs represent 

99 percent of the wine industry but only 20–30 percent of export value. He added that competitiveness in the 

Korean market was eroding as a result of its FTAs with Chile and the EU. All information related to JB 

Clawson is from USITC, hearing transcript, March 18, 2010, 77, 80, 81, 97 (testimony of James Gore, JB 

Clawson International). 
5-13

U.S-Canadian Agreement for Organic Trade Equivalence: SME farmers and processors 

cut certification costs

On July 1, 2009, the United States and Canada entered into an equivalency agreement to 

recognize each other’s national organic certification programs. The equivalence 

agreement permits producers and processors that are certified to the National Organic 

Program (NOP) standards by a U.S. Department of Agriculture (USDA) accredited 

certifying agent to sell or label their product as organic in Canada without under going 

certification to the Canada Organic Product Regulation standards, and vice versa.60

Equivalency increases opportunities for U.S.-based NOP-certified organic agricultural 

exporters, primarily SMEs,61 to export to Canada by eliminating the fees associated with 

gaining Canadian organic certification.62 This change is estimated to save NOP-certified 

small organic producers and small organic processors exporting to Canada approximately 

$2,000 and $2,400, respectively. Equivalency also eliminates the $14,000–$20,000 fee 

that U.S.-based NOP-accredited certifying agents are charged to provide Canadian 

organic certification to U.S. organic producers and processors that export. These savings 

can be passed on to these organic exporters in the form of lower certification fees.63

More Favorable Regulatory Environment

The role of a favorable regulatory environment in supporting SME exports is important. 

Specific instances are difficult to identify, however, because the effect of a regulatory 

environment cuts across many sectors and may be seen as simply an overhead cost of 

exporting to a particular market. As with other overhead costs, they can be more 

burdensome to SMEs than large firms that can spread out these fixed costs over more 

products or markets. FTAs can provide SMEs with the benefit of transparency and 

predictability.64 For some FTA partners, where tariffs and NTMs are relatively smaller, 

the main benefit can be regulatory consistency.65

Regulatory Environment: Selected Examples of Trade Agreement Benefits to 

U.S. SMEs

The following section provides two examples of improvements in the regulatory 

environment that benefited SME exports as a result of trade agreements: the benefits to 

the wood pallet and container industry from U.S. participation in international 

phytosanitary agreements, and the benefits to the biotechnology industry from 

agreements that support IPR protection and enforcement. 

 60 USDA, “Agriculture Deputy Secretary Merrigan Announces U.S.–Canada Agreement for Organic 

Trade Equivalence,” June 17, 2009. 61 Industry official, e-mail message to USITC staff, February 25, 2010. 62 Dimatteo and Holmes, “The New Canadian Organic Regulations and the Case for Equivalency,” 

Organic Processing Magazine, April 2009. 63 These saving can vary greatly depending on the sales and size of a firm. Industry official, e-mail 

message to USITC staff, February 25, 2010. 64 Apparel industry official, interview by USITC staff, February, 19, 2010. 65 “Another company noted that in some of our FTA partner countries, like Australia, the real benefit has 

been regulatory consistency, rather than tariff reduction.” National Association of Manufacturers, written 

submission to the USITC, March 26, 2010, 2. 
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Wood packaging materials: International phytosanitary agreements allow U.S. producers 

to keep market share 

Phytosanitary standards, such as those in the International Plant Protection Convention 

(IPPC), make it easier for U.S. producers to produce and sell wood packaging materials 

such as pallets, crates, and containers for use in international trade. The IPPC standards 

replace a variety of national standards addressing the problems of pests harmful to plants 

and forests that are known to be transmitted in international shipments of goods 

transported on wood pallets or in wooden containers.66

Almost all U.S.-produced wood pallets and containers are made by SMEs, and more than 

half of all U.S. goods exports are shipped on wooden pallets or in wooden containers.67

The U.S. wood pallet and container industry comprises approximately 5,000 

manufacturers employing more than 50,000 workers.68 Absent IPPC standards, it is likely 

that disparate, inconsistent, and arbitrary regulations on the use of wood packaging by 

different countries, would have continued to disrupt international commerce. More than 

130 countries now require that pallets and other wood packaging materials be certified to 

the IPPC standard. Although the required treatment increases production costs, the wide 

acceptance of the IPPC standard establishes a single global standard for wood pallets that 

has allowed U.S. pallet producers to maintain their global market share. 

Intellectual property rights: Agreements protect SME innovation and exports

The United States is a party to a number of agreements and institutions that support IPR 

protection and enforcement, which benefit SME exporters. One of the most important 

trade agreements protecting IPR is the WTO Agreement on Trade-Related Aspects of 

Intellectual Property Rights (TRIPS). TRIPS requires all WTO members “to apply the 

substantive obligations of the world’s most important intellectual property conventions” 

and “ensures that critical enforcement procedures will be available in each member 

country to safeguard intellectual property rights.” 69 Other important intellectual property 

agreements are administered by the World Intellectual Property Organization (WIPO), 

which is part of the United Nations system. The WIPO Copyright Treaty and the 

Performance and Phonograms Treaty (together, the “WIPO Internet Treaties”) provide a 

legal framework for protecting copyrights and related rights in the digital environment. 

WIPO also administers the Patent Cooperation Treaty (PCT) and the Madrid System, 

which streamline and centralize requirements for seeking patents and trademarks in 

multiple countries. 70 In addition to these multilateral agreements, U.S. bilateral FTAs 

 66 The United States is one of 172 countries that are signatories of the convention. In 2002, the IPPC 

adopted the International Standards for Phytosanitary Measures Guidelines for Regulating Wood Packaging 

Material in International Trade (ISPM 15), which was revised in 2006 and 2009. International Plant 

Protection Convention, “International Standards for Phytosanitary Measures (ISPMs),” revision of ISPM 15, 

2009 (accessed March 16, 2010). 67 Industry official, telephone interview by USITC staff, March 12, 2010. 68 Bush and Araman, Updated Pallet and Container Industry Production and Recycling Research, 

October 11, 2008, 6, 28. 69 Uruguay Round Trade Agreements, Texts of Agreements, Implementing Bill, Statement of 

Administrative Action, and Required Supporting Statements: Message from the President of the United States, 

103d Congress, 2d Session, U.S. Government Printing Office: Washington DC, 1994, 981. 70 In a communication to the USITC for this study, an SME expressed “satisfaction” with the Madrid 

Protocol and encouraged the expansion of participating countries. The Merry Hempsters, written submission 

to the USITC, March 26, 2010, 2. 
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provide additional IPR protections.71 Intellectual property (IP) reliant industries, such as 

pharmaceuticals and biotechnology and the core copyright industries (including motion 

pictures, recording, and business and entertainment software), particularly support these 

“TRIPS plus” provisions. 

Many SMEs identified inadequate IPR protection and enforcement in foreign markets as 

an issue or barrier to exporting efforts.72 SMEs are a significant source of IP intensive 

products and services. IP is often a small firm’s most valuable asset, critical to the firm’s 

ability to raise capital. A 2008 study of Canadian SMEs found that small businesses 

reporting research and development investment were two times more likely to export than 

those without. 73 SMEs may be disproportionately affected by the sizable costs of 

obtaining foreign patents, since they have fewer financial resources than large firms. In 

2003, GAO estimated costs ranging from $160,000 to $330,000 for a U.S. firm to obtain 

and maintain a patent in nine foreign countries. One SME official interviewed estimated 

foreign patenting costs in excess of $500,000.74

Many innovative high-technology industries, such as the U.S. biotechnology industry, are 

composed primarily of SMEs and rely heavily on IPR protection.75 A comparison of a list 

of U.S. SMEs that were not owned by any other company and that were classified under 

“biological products, except diagnostic substances” (which falls under the broad drugs 

category) with the WIPO records of all firms seeking patent protection in more than one 

country under the Patent Cooperation Treaty revealed that 88 percent of the U.S. SMEs 

had filed for patent protection in multiple countries through WIPO. Because of the 

substantial cost of obtaining patents, it is likely that these firms have active plans to 

export or are exporting their IP (for example, by licensing technology to overseas 

customers).76

SME Company Performance and Hurdles

The benefits of increased market access, trade facilitation, and a better regulatory 

environment translate into tangible improvements in SME company performance. By 

 71 The IPR chapters of the FTAs add to the requirements of TRIPS in a number of areas, including (1) the 

extension of patent terms for delays caused by the regulatory process; (2) obligations to provide patent 

protection for animal and/or plant inventions; (3) linkage between patent status and the granting of drug 

marketing approval; (4) pharmaceutical test data protection; (4) the extension of copyright terms of protection; 

(5) protection against the circumvention of technological protection measures; (6) limited liability for Internet 

service providers that block infringing content online; (7) enhanced border measures; and (7) obligations to 

join specified IPR treaties such as the WIPO Internet Treaties. 72 See for example, USITC, Hearing transcript, March 12, 2010, 120 (testimony of Matt Nees, Software 

Association of Oregon); USITC, hearing transcript, March 10, 2010, 37 (testimony of Chris Albert, Media 

Wizard Inc.); USITC, hearing transcript, March 10, 2010, 150 (testimony of Thomas Dustman, Sunnen 

Products Co.); USITC, hearing transcript, March 18, 2010, 58–59 (testimony of Spencer Ross, National 

Institute for World Trade); USITC, hearing transcript, March 18, 2010, 98 (testimony of James Gore, JB 

Clawson International); USITC, hearing transcript, March 18, 2010, 210 (testimony of Joseph Reddix, The 

Reddix Group, LLC). 73 Orser, et al., Canadian SME Exporters, January 2008. 74 Industry official, telephone interview by USITC staff, February 24, 2010; GAO, International Trade, 

June 2003, 54. 75 The U.S. Supreme Court is regarded as having spurred the growth of the biotechnology industry with 

its 1980 decision in Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980), holding patentable a genetically 

engineered oil-eating bacterium. In the following decades, the industry grew from a handful of small firms to 

a major industry with a market capitalization of more than $400 billion. Barfield and Calfee, Biotechnology 

and the Patent System, 2007, 4. 76 Data are for SIC 2836 and were gathered from Orbis, a database containing financial information for 

more than 65 million international companies (accessed February 3, 2010). 
5-16

enabling SMEs to expand and diversify their markets, trading arrangements offer SMEs 

stability, higher output, and increased employment. SMEs have commented that 

exporting has kept them viable during the recent weakness in the U.S. economy.77 In 

general, “businesses involved in exporting, both large and small, are generally weathering 

the U.S. downturn much better than businesses tied solely to the domestic economy.”78

These perceptions are supported by economic analysis. For example, one study reported 

evidence that trade liberalization causes relatively faster growth in output and 

employment among high-productivity exporting firms, with a smaller body of results 

suggesting a less pronounced but still important effect of trade liberalization on firm 

productivity. 79 The OECD has also identified numerous benefits to SME company 

performance, including expanded output, productivity growth, increased economies of 

scale, improved profitability, and higher wages.80

Industry representatives identified two obstacles as impeding access to the benefits of 

FTAs and other trading arrangements. First, many SMEs simply do not know about 

existing U.S. trading arrangements and their provisions, and therefore cannot take 

advantage of the increased export opportunities they afford. 81 For example, some 

pharmaceutical industry representatives noted that many SMEs were unaware of relevant 

U.S. trade agreements. Although a few SMEs have internationally experienced personnel, 

many SMEs do not, and some may end up relying on contacts in other companies, state 

and federal agencies, or contract assistance for guidance.82 Second, SMEs that did know 

of trading agreements found them too confusing or complicated to understand, especially 

the rules of origin.83 With limited resources, SMEs generally lack the capacity to identify 

the benefits that might be useful and then to use the benefits. According to an SME, “The 

real barrier is the burden of understanding FTAs; from a business perspective, it is not 

feasible to staff up in order to understand the complexity, and there is too much 

paperwork for small shipments.”84

Widespread Benefits of Trade Agreements for U.S. SMEs

Anecdotal SME Support for FTAs

SMEs profiled by the Faces of Trade program sponsored by the U.S. Chamber of 

Commerce 85 illustrate the numerous FTA-related export opportunities and benefits. 

 77 Valve manufacturing industry official, interview by USITC staff, Houston, TX, March 1, 2010; IT 

industry official, interview by USITC staff, Houston, TX, March 1, 2010; home furnishings industry official, 

interview by USITC staff, February, 23, 2010. 78 Girard, “Small Businesses Have Big Stake in Free Trade Debate,” Business Intelligence, July 3, 2008. 79 Bernard, et al., “Firms in International Trade,” Summer 2007, 113–114. 80 OECD, Removing Barriers to SME Access to International Markets, OECD 2008, 14; Fliess and 

Busquets, “The Role of Trade Barriers in SME Internationalisation,” OECD 2006, 4. 81 TradeMoves LLC., written submission to the USITC, March 24, 2010, 2; remanufacturing industry 

representative, interview by USITC staff, April 8, 2010; delivery services company representative, interview 

by USITC staff, February 18, 2010. 82 Pharmaceutical industry officials, telephone interviews with USITC staff, February–March 2010; 

pharmaceutical industry official, interview with USITC staff, Boston, MA, March 3, 2010. 83 Accounting industry official, interview by USITC staff, Houston, TX, March 2, 2010; U.S. 

Commercial Services official, interview by USITC staff, Houston, TX, March 1, 2010; Massachusetts Export 

Center official, interview by USITC staff, Boston, MA, March 2, 2010. 84 Remanufacturing industry representative, interview by USITC staff, April 9, 2010. 85 Faces of Trade is a program developed by TradeRoots. TradeRoots was developed by the U.S. 

Chamber of Commerce to educate and inform the public about the benefits of international trade. Faces of 

Trade is dedicated to telling the success stories of small businesses across the country that were able to take 

advantage of the economic opportunities afforded by trade. U.S. Chamber of Commerce, TradeRoots, 

“TradeRoots” (accessed March 30, 2010). 
5-17

According to these SMEs, FTAs reduce tariffs for both exports to other countries and 

imports of production inputs; they also eliminate trade restrictions, facilitate the passage 

of goods through customs, ease dispute resolution, and provide intellectual property 

protection. The SMEs asserted that these changes reduce costs, increase competitiveness, 

and expand businesses. Many of the businesses in Faces of Trade predicted that opening 

trade with places like Chile, Colombia, and Peru would significantly increase their sales 

and growth, citing existing benefits from NAFTA. Higher sales and growth, in turn, 

would lead not only to an increase in profits but also to an increase in employment and 

wages. 

Appendix table D.2 provides a list of SME-identified opportunities and benefits of FTAs 

and some other trading arrangements identified to the Commission by SMEs. The list 

includes tariff reductions, reduction/elimination of trade barriers, increased market access, 

customs facilitation, trade facilitation, IPR protection, and dispute resolution. By far the 

most frequently SME-cited opportunities were tariff reduction, reduction/elimination of 

trade barriers, and trade facilitation. SMEs also cited many benefits associated with 

increased export opportunities—above all, increased competitiveness, especially with 

respect to Asian and European competitors; increased export sales; and increased 

employment. Other often mentioned benefits were expanded business opportunities, 

opening of new business opportunities, and increased regional opportunities. 

Measures of SME Support for U.S. Trading Arrangements

CompTIA, a nonprofit trade association focusing on the information technology (IT) 

industry, conducted a Web-based survey on exporting opportunities and challenges for 

SMEs from December 29, 2009, to January 14, 2010.86 The survey covered only U.S. IT 

companies with fewer than 500 employees and with experience selling to international 

markets. The survey targeted companies in the following industries: IT services firms, 

manufacturers, professional service firms, and retailers/wholesalers.87

According to CompTIA’s SME survey, FTAs are important to SMEs and provide 

numerous benefits. Out of the 393 SMEs that responded to the survey and had sold to 

international markets, 85 percent rated FTAs as “important” or “very important” for 

business. Among the various industries surveyed, manufacturers rated the importance of 

FTAs higher than did other industry segments. CompTIA’s analysis of the data indicates 

that medium-sized exporting companies, experienced exporters (those with more than 10 

years’ experience), and high-growth exporters are relatively more interested in countries 

with which the United States has FTAs.88 The FTA provisions that SMEs rated as most 

important were improved access to new markets (31 percent), reduction or elimination of 

nontariff barriers (25 percent), robust resolution of disputes (23 percent), and reduction or 

elimination of tariffs (20 percent). Ease of market access was relatively more important 

for medium-sized firms, with 37 percent responding that this was a principal concern. 

Dispute settlement was relatively more important for small-sized firms, with 29 percent 

responding that this was a principal concern. Reduction or elimination of nontariff 

barriers was relatively more important for micro-sized firms, with 29 percent responding 

that this was a principal concern. 

 86 CompTIA, “CompTIA” (accessed March 26, 2010); CompTIA, Small and Medium Size Business 

Export Insights and Opportunities, Executive Summary, January 2010. 87 A total of 410 firms qualified to participate in the SME section of the study, with an additional 250 

firms participating in the portion of the study focusing on reasons for not exporting. 88 CompTIA, Small and Medium Size Business Export Insights and Opportunities, January 2010, 

presented at the USTR conference “Jobs on Main Street Customers around the World” Washington, DC, 

January 21, 2010, slide 27. 
5-18

The CompTIA survey also illustrates the importance of FTAs and other trading 

arrangements in SMEs’ decisions to enter a new market. For example, 15 to 28 percent of 

the SME responses (depending on the industry) identified FTAs or BITs with the United 

States as influential in their decision to enter a particular market. FTAs and BITs were 

relatively more important for small sized firms. In addition, 7 to 24 percent of 

respondents (by industry) cited WTO commitments in a relevant industry sector as an 

influential factor. Medium-sized firms cited WTO commitments relatively more than 

micro or small sized firms. Finally, 7 to 22 percent of respondents (by industry) cited the 

existence of IPR protection as an influential factor, with medium-sized firms citing it 

relatively more often. 
6-1

CHAPTER 6 

POSITIONS OF INTERESTED PARTIES 

The Commission held three hearings in relation to its studies on export constraints facing 

small and medium-sized enterprises (SMEs). The hearings took place in St. Louis, MO 

(March 10, 2010); Portland, OR (March 12, 2010); and Washington, DC (March 18, 

2010). This chapter contains a summary of the views expressed to the Commission either 

via testimony, written submission, or both, and reflects the principal points made by the 

particular party. The views summarized are those of the submitting parties and not those 

of the Commission. Confirming the accuracy of, or otherwise correcting, the information 

described was beyond the scope of this report. 

The parties submitting comments were diverse, including a member of the U.S. Congress; 

representatives of U.S. state and federal government agencies, foreign governments, 

U.S. and foreign industry, and domestic and international organizations, including 

technical and trade associations; and academics. For the full text of hearing testimony, 

written submissions, and exhibits, see entries associated with investigations no. 332-509 

and 332-510 at the Commission’s Electronic Docket Information System 

(https://edis.usitc.gov/edis3-internal/app). Note that page numbers given in brackets for 

exhibits are not precise; because the exhibits volume is not paginated sequentially, the 

page numbers are those given by the Adobe PDF software. 

Donald A. Manzullo, U.S. Representative, 16th District of 

Illinois1

In testimony at the Commission’s hearing and in a written supplement, Congressman 

Manzullo said that his district in northern Illinois depends heavily on manufacturing and 

is experiencing high levels of unemployment (20–30 percent). Citing the important role 

exporting has played in bringing this region out of past recessions, he said that many 

successful SMEs in the region continue to maintain significant levels of exports, 

contributing new jobs to the local economy. He mentioned Barker Rockford, a producer 

of BMX starting gates, as an example, stating that it has grown from 4 to 13 employees 

because of exporting.2

In his testimony, Representative Manzullo stated that barriers to SMEs exporting are “all 

centered around constraints and resources.”3

 He listed the primary constraints as (1) 

limited financial and human resources; (2) bank regulations which decrease the 

availability of capital; (3) higher local production costs, which SMEs cannot easily avoid 

through outsourcing; and (4) exchange rate manipulation, which puts SME exporters at a 

 

1 USITC, hearing transcript, March 18, 2010, 7–17. 2

 USITC, hearing transcript. March 18, 2010, 8.

3

 USITC, hearing transcript, March 18, 2010, 11. 
6-2

disadvantage. He also said that the “[U.S.] export control system is the single, most 

significant constraint” on the ability of some SMEs to export.4

Representative Manzullo said that ways to promote SME exports include: 

 Facilitating trade by zeroing out tariffs; “streamlining trade dispute resolution 

procedures;” reforming patent documentation and filing; increasing transparency in 

international taxes, finance, customs procedures, and trade rules; and negotiating 

reciprocal recognition of technical certificates for professionals.5

 Studying the policy implications of allowing U.S. companies to file countervailing 

duty cases for currency misalignment. 

 Supporting export promotion programs that provide SMEs with information about 

exporting, foreign markets, and new business opportunities, and help them access 

trade finance options. 

 Supporting export control reforms, consistent with national security objectives, to 

allow more frequent updates of the control list to address emerging technologies 

and to modernize the electronic export system to help SMEs avoid inadvertent 

shipping errors. 

 Supporting foreign trade zones by “[reducing] the paperwork burden for SMEs to 

qualify for a Free Trade Zone.”6

Export-Import Bank of the United States7

In testimony at the Commission’s hearing and in a written supplement, Diane Farrell, 

speaking for the Export-Import Bank of the United States (Ex-Im Bank), said that the 

primary mission of the bank is to support U.S. exporters in order to create and sustain 

U.S. jobs. She said that the bank supported $4.4 billion in transactions for small 

businesses in the past year, representing about 88 percent of the Ex-Im Bank’s work, and 

that the bank has set a goal of doubling its support for small businesses to $8 billion in 

the next two years. She indicated that the bank will do this by improving outreach 

strategies and establishing new partnerships, as well as exploring new product 

possibilities. Ms. Farrell also stated that SMEs often do not have adequate cash flow or 

cannot get a loan to fulfill an export sales order; the Ex-Im Bank’s capital guarantee and 

insurance products enable small businesses to enter new markets, expand their borrowing 

base, and offer buyers financing, with the bank assuming up to 90 percent of the lending 

risk. 

Ms. Farrell said that almost all private sector export credit agencies (ECAs) operate in the 

short-term export credit area, while public ECAs operate primarily in the medium- and 

long-term credit range. She added that small SMEs tend to offer products and services in 

the short-term area. She noted in her testimony and accompanying PowerPoint 

presentation that the U.S., Canadian, and Japanese ECAs all offer official short-, 

 

4

 USITC, hearing transcript, March 18, 2010, 15. 

5

 USITC, hearing transcript, March 18, 2010, 12. 

6 USITC, hearing transcript, March 18, 2010, 15. 7 USITC, hearing transcript, March 18, 2010, 18–30; written testimony, March 24, 2010.
6-3

medium- and long-term export credit support, but said that the export credit agencies in 

the European Union (EU) do not provide any short-term export credit support and also do 

not offer any special programs for small businesses in the medium-and long-term area. 

Ms. Farrell stated in her written testimony that EU SMEs are expected to use standard 

programs they have available for exporters of all sizes. 

In her testimony, Ms. Farrell stated that there are two competitive challenges that US 

ECAs face. As described in the written supplement, the first is that the Ex-Im Bank 

supports a “made by” versus a “made in” policy, which means that the bank will finance 

only the U.S. portion of U.S. goods and services, while other ECAs will support up to 

100 percent even of exports that contain high levels of foreign content. The second, as 

stated in the testimony, is that ECAs such as Brazil, India and China, which are not 

members of the Organisation for Economic Co-operation and Development (OECD) and 

are thus not bound by the OECD’s rules, are becoming more competitive in the 

marketplace. Ms. Farrell added that concessional financing or other measures offered by 

these countries to their exporting firms do not allow U.S. companies to be as competitive. 

U.S. Department of Commerce, U.S. Commercial Service, St. 

Louis8

In his testimony, Cory Simek, Director of the U.S. Commercial Service (USCS) office in 

St. Louis, described the work of the USCS in promoting U.S. exports through its network 

of offices in the United States and around the world. He noted that SMEs accounted for 

nearly 85 percent of the “export successes” tallied by the USCS during 2009. He said that 

one of the largest barriers to SME exports is that many SMEs do not see themselves as 

part of the global marketplace and do not consider exporting to be an option. He indicated 

that the USCS works to educate U.S. firms about the process of exporting, together with 

other federal, state and local government agencies and with private sector partners such 

as the District Export Councils. 

Mr. Simek said that SMEs need help in the following areas to improve their export 

performance: practical help, conducting market research, developing business plans, 

marketing and selling internationally, and finding business partners. He noted that 

resources available to businesses include assistance from USCS trade specialists; the 

Trade Information Center telephone help line; the www.export.gov Web site; the USCS’s 

matchmaking service, which matches exporters with foreign business partners; and trade 

events sponsored by the USCS. He said that the USCS can also intercede with foreign 

customs or regulatory authorities when necessary, and help firms arrange trade financing 

with the assistance of the Ex-Im Bank or the Small Business Administration (SBA).9

In his testimony, Mr. Simek noted that it was easier for firms that were already exporting 

to one market to expand into a second market than it was for firms to begin exporting for 

the first time; “export-ready” firms are those that are producing a viable product, and 

have already been successful in the domestic market.10 The difficulty of obtaining U.S. 

visas is a significant barrier to exports; according to Mr. Simek, foreign importers may be 

 

8 USITC, hearing transcript, March 10, 2010, 7–16.

9

 USITC, hearing transcript, March 12, 2010, 11–16, 80–82. 

10 USITC, hearing transcript, March 12, 2010, 44–45. 
6-4

discouraged from considering U.S. goods because of the hurdles involved with obtaining 

visas.11

Aeronautical Repair Station Association12

In his testimony, Christian Klein, from the Aeronautical Repair Station Association 

(ARSA), stated that ARSA is an international trade association based in Alexandria, 

Virginia, that represents the aviation maintenance and manufacturing industries. He said 

that according to a study provided by ARSA in its written submission, SMEs account for 

85 percent of companies and 21 percent of employment in the industry.13 ARSA stated 

that the United States is a major exporter of aviation maintenance services, producing a 

$2.4 billion trade surplus, and that “the European market is by far the most important to 

U.S. repair stations serving foreign customers.”14

ARSA asserted that pending legislation for a new, multiyear Federal Aviation 

Administration (FAA) authorization law would hurt businesses; undermine exports in the 

industry; dramatically alter FAA’s oversight of foreign repair stations; and contradict 

already existing bilateral aviation safety agreements. As stated in his written testimony, 

“If the FAA bill passed by the House becomes law, it will not just become more difficult 

and expensive for U.S. repair stations to serve foreign customers, it will also become 

more difficult, and in some cases impossible, for foreign repair stations to work for 

U.S. air carriers, which means that you're going to see cost increases for U.S. airlines 

operating overseas, which is going to put them at a disadvantage against their foreign 

competitors.”15 Mr. Klein urged the Commission to do everything possible to ensure that 

legislators did not impede global trade in the aviation maintenance sector. 

AFRAM Corporation16

In testimony at the Commission’s hearing, Solomon Akinduro from AFRAM 

Corporation stated that AFRAM is an engineering and construction management 

company headquartered in St. Louis, with offices in other states and foreign countries. He 

said that the major barrier his firm faces is in dealing with the governments and 

businesses of foreign countries, and cited difficulties his firm is having in receiving 

payments from the governments of Ghana and Nigeria for over $500,000 in unpaid work. 

He said that one of AFRAM’s agents in Nigeria falsified documents releasing the 

ownership of the company to himself and took other illegal actions. He said that his firm 

would like to see how the U.S. government might help companies deal with obstacles like 

these in working with foreign companies and governments. 

 

11 USITC, hearing transcript, March 12, 2010, 54–55. 12 USITC, hearing transcript, March 18, 2010, 184–193. 13 In his testimony submitted for the record, Mr. Klein noted that “For purposes of the study, 

AeroStrategy defined SME as companies with less than $6.5 million in revenue or fewer than 50 employees.” 

Klein, written testimony to the USITC, March 18, 2010, 2. 14 ARSA, written testimony submitted to the USITC, March 18, 2010, 3. 15 USITC, hearing transcript, March 18, 2010, 188.

16 USITC, hearing transcript, March 10, 2010, 34–38.
6-5

Air Tractor, Inc.17

In a written submission, David Ickert, of Air Tractor, Inc. (AT), stated that AT is a small 

business located in Olney, Texas, that manufactures agricultural and forestry fire-fighting 

airplanes. According to the submission, the company exported 49 percent of the aircraft it 

sold in 2009, up from 10 percent about 10–15 years earlier. Ickert stated that a lack of 

resources is the most significant constraint to exports by U.S. SMEs, citing the following 

specific constraints:18

 “Market research and customer identification (including dealers/ distributors) in 

foreign markets; 

 Identifying and then solving legal and bureaucratic regimes and regulations 

required in each foreign market; 

 Financing—for internal working capital needs and for the end user foreign 

customer; 

 Protection of intellectual property rights; 

 Complex and unforgiving U.S. export control laws and regulations; and 

 Competition and barriers imposed/introduced by foreign governments.” 

Ickert stated that AT was able to overcome some of these constraints by identifying and 

using a commercial bank that embraced international trade support, as well as using the 

knowledge and networking opportunities provided by trade associations focusing on 

SMEs. He added, however, that most commercial banks have not promoted international 

trade as a line of business; many have minimum size transaction limits that SMEs cannot 

meet; and, in regard to trade associations, there are too few and many SMEs are unaware 

of them. He also stated that the biggest benefits of increased export opportunities have 

been increased market size, leading to increased sales and more jobs in Olney, TX, and 

AT’s ability to better withstand domestic economic fluctuations. 

Buhler Quality Yarns Corp.19

In a written submission, Werner Bieri, president & CEO, Buhler Quality Yarns Corp., 

stated that the company is engaged in the manufacturing, sales marketing, and 

distribution of spun yarns, with 145 full-time employees and annual sales of about $25 

million. According to the submission, the most significant constraints facing the company 

are nontariff barriers such as import licensing, excess document formalities and changing 

requirements, high import duties, export rebates, and lack of export financing. To 

overcome these difficulties, Mr. Bieri states that the company works with local agents 

and distributors and builds strong and lasting relationships with export customers. 

The submission cited benefits from free trade agreements (FTAs) and exporting. Mr. 

Bieri stated that out of the 50 percent of products that his company exports, 40 percent 

 

17 Ickert, written submission to the USITC, March 25, 2010. 18 Ickert, written submission to the USITC, March 25, 2010, 2. Bullet points are in the original.

19 Bieri, written submission to the USITC, February 9, 2010. 
6-6

are to countries with which the United States has FTAs or other trade agreements, and 

that the Central American Free Trade Agreement (CAFTA) and the Singapore FTA have 

been the most beneficial. In addition, he reported that exporting increases efficiency by 

allowing the company to manufacture larger production runs and encourages innovation 

by challenging it to contend with international competition. Mr. Bieri also listed the 

differences between exporting SMEs in Europe and the United States. According to Mr. 

Bieri, the positive differences for his company, as compared to European SMEs, are 

faster reaction time because of less regulated labor markets, generally lower 

manufacturing costs, and more interconnection in the supply chain in sales and marketing. 

The submission also states the negative differences for U.S. SMEs: no annual overtime 

rules; a lack of skilled workforce in lower management, maintenance and technical staff; 

and problems with the availability and cost of credit. 

CID Bio-Science, Inc.20

In his testimony, Leonard Felix, president of CID Bio-Science Inc., stated that his 

company has benefitted in several ways from its three-year relationship with the SBA, 

including access to business advice, market research, and other services; an SBA loan 

from a small bank, which helped the company weather the economic downturn; and the 

waiver of the SBA loan fees through the federal stimulus program. He added that the 

State of Washington’s shared work program, which allowed the company’s production 

staff to work four days a week and draw unemployment on the fifth day, also helped the 

company avoid further layoffs during the recession. He said that exports account for 

about 80 percent of the company’s sales and that it is “really not viable without the 

exports.”21

Mr. Felix stated that his company, which sells scientific instruments for plant physiology 

researchers, generally has focused on markets with many universities and a national 

interest in agricultural sciences or ecology (e.g., China and India). He said that once they 

identified Brazil as a potential market, the USCS assisted CID Bio-Science Inc. in 

entering that market, and the company now plans on working with the Commercial 

Service to enter Mexico. 

Mr. Felix said that the company generally works with distributor networks in foreign 

markets, though it often has arrangements in which it will sell directly to universities or 

government agencies and then pays the distributor a commission rather than having the 

distributor resell their products; working with public-sector organizations and academics 

often allows for easier clearance of customs. He stated that the amount of paperwork 

required to operate in different countries varies greatly, citing Argentina, Brazil, India, 

and Pakistan as countries with difficult customs procedures versus Korea and Japan, 

where procedures are easier. He added that the expense of travel constrains the 

company’s growth. Mr. Felix also pointed to the U.S. government’s export controls as a 

problem area, stating that they are complex and difficult to navigate and that information 

on compliance with export controls is not centralized. 

 

20 USITC, hearing transcript, March 12, 2010, 159–205. 

21 USITC, hearing transcript, March 12, 2010, 166. 
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The Coalition for Security and Competitiveness (CSC)22

In a written submission, the Coalition for Security and Competitiveness (CSC) cited five 

general themes that should guide reform of the U.S. export control system:23

 Draw clear lines of agency responsibility. 

 Control lists should be revised and reduced. 

 Complete the transition to an end user-based system. 

 Enhance cooperation with allies. 

 Enhance cooperation with the business community. 

The nine follow-up recommendations the CSC provides in the submission to expand 

upon the five themes involve a diverse set of efforts, ranging from policy actions to 

improved outreach, particularly to SMEs. For example, in regard to outreach, CSC 

suggests establishing an interagency task force to rapidly determine ways to make 

government agencies more accessible for SMEs, as well as providing a staff to counsel 

SME exporters. CSC states that SMEs are “disproportionately disadvantaged by the 

current export control system,” in that they do not have sufficient staff to ensure 

compliance; they lack access to “. . . agencies with licensing authority”; processing times 

are too long; and the process lacks transparency.24

Dixie Chemical Company25

This written submission notes that Dixie Chemical Co. is a privately held specialty 

chemical manufacturer located in Pasadena, Texas, with about 200 employees. Dixie 

Chemical states that it faces four main constraints to exporting: (1) name recognition; (2) 

transactions in foreign currencies; (3) collecting foreign receivables; and (4) logistics, 

such as delivery times and transportation costs for small shipments. 

Strategies the company uses to overcome export constraints in the EU and Asia include 

entering into alliances for logistics, billing, and collecting receivables; using 

agents/distributors in the EU and Asia to represent Dixie Chemical (e.g., by stocking 

products overseas and representing the company at key accounts); and leasing a bulk 

storage tank for major products. 

Dixie Chemical also cites two barriers that affect SMEs disproportionately: reluctance 

among Japanese companies to consider or purchase U.S. products; and the impact of the 

EU’s new regulation addressing chemicals—Registration, Evaluation, Authorisation and 

Restriction of Chemical substances (REACH)—on U.S. exports to Europe. Dixie 

Chemical generally exports directly from its U.S. operations rather than build foreign 

operations. One example of indirect exporting for the company involves its sales of paper 

 

22 Coalition for Security and Competitiveness, written submission to the USITC, March 26, 2010. 23 Excerpted from Coalition for Security and Competitiveness, written submission to the USITC, March 

26, 2010. 24 Coalition for Security and Competitiveness, written submission to the USITC, March 26, 2010, 3. 25 Dixie Chemical Co., written submission to the USITC (outline of testimony), January 28, 2010.
6-8

chemicals to paper service companies, which then export the products to customers 

worldwide. 

Dutchman Global26

According to a written submission filed by Dan Vander Meer, founder and CEO of 

Dutchman Global (a small exporter of heavy machinery), small exporters have found it 

difficult to access certain types of export credit during 2008 and 2009 (see box 2.2 for a 

discussion of the impact of the 2008-09 global recession on the availability of trade 

financing). He identified the lack of communication between small exporters, the Ex-Im 

Bank, and other government entities, such as the U.S. Commercial Service and the SBA, 

as a specific issue constraining small exporters. Additionally, he indicated that the Ex-Im 

Bank’s approval process was slow, and that Ex-Im Bank was perceived to favor large 

exporters over small ones. 

Electrical Geodesics, Inc.27

In her testimony, Dr. Ann Bunnenberg, president of Electrical Geodesics Inc., discussed 

some of the exporting challenges faced by her company, including long sales cycles, 

heavy regulation, and the emergence of complex issues as countries attempt to address 

rising health care costs. Dr. Bunnenberg said that small companies faced difficulties in 

accessing export financing; for example, small banks may refuse to accept international 

receivables as collateral or, more generally, may not have the necessary level of expertise 

or comfort with international transactions, while large banks may be uninterested in small 

international sales. Dr. Bunnenberg also stated that trade shows were useful and effective 

for small businesses seeking international customers, but added that the high cost of 

attending international trade shows and the difficulties in accessing visas (both for 

sending company representatives abroad and for bringing customers to the United States) 

restricted Electrical Geodesics Inc.’s ability to export. Dr. Bunnenberg also stated that 

global regulations on the medical device industry are in some cases becoming more 

complex. She added that Electrical Geodesics Inc. is now starting to work more with the 

Ex-Im Bank. 

Electron Energy Corporation28

Mr. Peter C. Dent addressed two topics during his testimony: (1) the limited availability 

of rare earth metals and (2) export controls. He said that Electron Energy Corp. produces 

rare earth magnets and that about 70 percent of Electron Energy’s products are used to 

manufacture magnets and magnet assemblies for military and space applications. He 

added that rare earth metals are also used in a variety of other applications, including 

“green technologies.” Mr. Dent stated that China now supplies almost 100 percent of all 

rare earth metals and oxides, leaving the United States “dangerously vulnerable.” He 

cited several recent Chinese government actions regarding rare earth metals: (1) it 

established production caps (thereby limiting the amount exported); (2) it established 

 

26 Vander Meer, written submission to the USITC, January 26, 2010. 27 USITC, hearing transcript, March 12, 2010, 45–136.

28 USITC, hearing transcript, March 18, 2010. 
6-9

export quotas; and (3) as of January 1, 2008, it increased export duties on the products 

from 10 percent to 25 percent. He added that industry experts reportedly have projected 

that Chinese consumption of rare earth elements would soon exceed production; this is 

expected to result in tight world supplies and higher prices and to put consumers at a 

“structurally competitive disadvantage.”29 He also stated that China has offered more 

access to rare earth elements to companies who agree to move their manufacturing and/or 

development to China. 

With reference to U.S. government export controls, Mr. Dent stated that although the 

company agrees they are necessary, “. . . export controls as currently administrated have 

negative consequences on our ability to export due to inflexibility in the system and 

outdated protocols.”30 He said that two U.K. customers refused to purchase Electron 

Energy’s product because of export controls (both reportedly stated that they had stopped 

doing business with U.S. companies because of export controls, with one citing 

contractual agreements that prohibited use of U.S. products for the same reason). He also 

stated that one of those customers eventually bought Chinese product(s) instead. Mr. 

Dent said that compliance with export controls has resulted in his company losing 

50 percent of its military exports, reducing company revenues by 5 percent, and that one 

customer told him that the customer’s company could triple their exports if it were not for 

“export control implications.”31 Moreover, Mr. Dent said that some European firms now 

advertise their systems as being “ITAR free, which can be considered a euphemism for 

no U.S. parts content,” prompting suppliers to find alternative sources for the system 

components they provide.32

Mr. Dent said that his company supports the recommendations of the National 

Association of Manufacturers and the Coalition for Security Competitiveness regarding 

export controls (he provided a copy of the Coalition’s recommendations as part of his 

post-hearing brief). When asked a question later in the hearing as to how he would 

change export controls, he suggested that the six agencies involved work together to 

provide less conflicting advice, and he also suggested that the list of controlled products 

be upgraded more often and incorporate more high-technology products. In response to a 

question about how other countries administer export controls, he mentioned that 

different countries interpret the Wassenaar Agreement differently. He also mentioned that 

innovation is key to new market participation in exports. 

In addition, he said that his company supports the recommendations of the U.S. Magnet 

Materials Association, a coalition of magnet suppliers, regarding rare earths. He cited 

several of the association’s recommendations in his testimony, including the creation of a 

high-level interagency working group. When asked how long it would take to start up a 

working mine, he said that it would be about 7–10 years, adding that Molycorp Minerals, 

the U.S. company that stopped mining in 2002—reportedly because of oversupply from 

the Chinese—is currently looking for about $400 million in funding to restart operations. 

Mr. Dent also stated that different geological areas contain different mixtures and 

amounts of individual rare earths. 

 

29 USITC, hearing transcript, March 18, 2010, 52. 30 USITC, hearing transcript, March 18, 2010, 53. 31 USITC, hearing transcript, March 18, 2010, 54. 32 Ibid.
6-10

Fanwood Chemical, Inc.33

Mr. V.M. (Jim) DeLisi stated in his written submission that several export issues, 

including the undervaluation of Chinese currency, present significant challenges to U.S. 

chemical SMEs that export. He stated, for example, that competing with Chinese 

products in third-country markets is difficult because price is a major consideration for 

these buyers. As chemical plants are profitable only at high capacity utilization rates, he 

stated that exports are considered “the icing on the cake” in that they often allow 

chemical companies to operate plants at full capacity.34 However, he added that “in many 

instances, Chinese ‘prices’ take away just enough incentive for these exports that they are 

not profitable and therefore not pursued.”35

Mr. DeLisi also stated that U.S. companies are at a disadvantage when foreign 

competitors can enter markets duty-free as beneficiaries of preference programs, such as 

regional FTAs between other countries/regions in which the United States is not a 

participant. He stated that successful completion of the Doha Round chemical sectoral 

initiative would eliminate such trade imbalances but that, until that occurs, it is very 

important for the United States to continue to negotiate FTAs with its trading partners. 

Mr. DeLisi said that a U.S.-Korea FTA, for example, would be important for U.S. 

chemical SMEs that export, especially given the EU’s FTA with Korea. He added that the 

Trans-Pacific Partnership FTA could also be very significant for U.S. chemical exporters, 

especially if it is eventually expanded to include Japan. 

He concluded by stating that a strong U.S. manufacturing base in the United States is 

essential, particularly as it provides a vehicle for SMEs to export to and through 

multinational firms (e.g., indirect exports). Therefore, he said, policies that help large 

companies export will also help SMEs, adding that for this reason, “internationally 

competitive tax, employment, environmental, and regulatory policies” are needed in the 

United States.36

Foreign Trade Association37

This written submission states that the Foreign Trade Association (FTA), founded in 

1919, is the oldest international trade association in Southern California and that its 

membership includes all of the various segments involved in international trade in 

Southern California. The submission states that the association’s members, including 

large and small companies, reported several areas in which they were having the most 

difficulty exporting: education, financing, U.S. and foreign regulatory hurdles, and the 

“extraterritoriality of U.S. laws and regulations.” 38 FTA then provides more specific 

comments for each. In regard to education, for example, it is states that many companies 

are not familiar with the basics of exporting. Although FTA applauds the establishment 

of the www.export.gov Web site, it asks that the structure of the information provided 

 

33 DeLisi, written submission to the USITC, January 15, 2010. 34 Ibid. 35 Ibid. 36 Ibid. 37 De Atouguia, written submission the USITC, March 24, 2010. 38 De Atouguia, written submission the USITC, March 24, 2010, 1.
6-11

there be reorganized to make it more user-friendly. It also suggests that private sector 

input across agencies be facilitated (perhaps in the form of an advisory group that bridges 

various agencies) to help coordination among agencies. 

FTA’s recommendations in regard to financing, particularly for smaller companies, are to 

continue expanding available funding; push forward with negotiations to change 

international rules for letters of credit to facilitate electronic transfer of data (e.g., bills of 

lading and air waybills); increase federal oversight of banks that refuse to lend; and make 

available comprehensive, “seamless” financing packages that include a variety of lenders 

and give priority to new initiatives. 

FTA’s recommendations addressing export regulations include the consolidation of all 

export data into one website, including information about export controls and lists of 

domestic and foreign parties with whom U.S. companies cannot do business. The FTA 

also recommends making information more readily available about issues such as 

embargoes, sanitary and phytosanitary certificates, and the Foreign Corrupt Practices Act. 

FTA also suggests leveling the playing field regarding nontariff barriers such as 

numerous and sometimes conflicting global regulatory requirements. 

Global Products International, Inc.39

In her testimony, Rebecca Herwick of Global Products International (GPI), Inc., stated 

that as a licensee for Harley-Davidson, the company designs, manufactures and 

distributes custom apparel, headwear, giftware, and collectible items. Ms. Herwick stated 

that GPI currently exports to 69 countries, with $2.3 million in exports in 2009; the 

company’s export difficulties, she said, are related to the significant paperwork required 

to export large numbers of low-valued goods. Ms. Herwick lists the following barriers to 

GPI’s exports: differing standards for product development and quality control within 

different countries; the need to get marketing knowledge and information from different 

countries; logistics and shipping; financial resources; legal fees; language barriers; and 

understanding varying exporting procedures in different countries. Ms. Herwick states 

that the company is interested in forming a small-business organization in Missouri in 

order to pool resources and be financially capable to participate in the U.S. Business 

Council and foreign business councils, as well as share knowledge, strategies, and legal 

advice. 

The Hardwood Federation and American Hardwood Export 

Council40

In a written submission and in testimony before the Commission, Jameson French, 

Chairman of the Board of the Hardwood Federation (HF), stated that HF is the largest 

public policy trade association that focuses specifically on federal policy issues impacting 

the hardwood industry. Its members are engaged in manufacturing, wholesaling, and 

distributing North American hardwood lumber, veneer, plywood, flooring, and related 

 

39 USITC, hearing transcript, March 10, 2010, 182–192. 

40 USITC, hearing transcript, March 18, 2010; French, written submission to the USITC, February 9, 

2010. 
6-12

products. A past Chairman of the American Hardwood Export Council (AHEC), Mr. 

French stated that AHEC is an association of hardwood producers engaged in the export 

of American-made hardwood products. 

Mr. French stated that the U.S. hardwood industry is composed almost entirely of small 

businesses and that industry increasingly relies on export markets, especially since the 

recent economic downturn. Mr. French identified four specific challenges that he said are 

affecting U.S. hardwood exporters: (1) foreign suppliers often compete under different 

rules and conditions (e.g., value-added duties, currency manipulation, labor laws, 

government subsidies, illegal logging, and energy policies); (2) fluctuating, unpredictable 

freight charges and the unreliability of U.S. ports make exporting a very difficult and 

risky business for SMEs; (3) the Animal and Plant Health Inspection Service (APHIS) of 

the U.S. Department of Agriculture (USDA) announced fee increases of 112 percent by 

2012 for phytosanitary certification, raising operating costs significantly and potentially 

harming the price-competitiveness of SMES; (4) bureaucracy, both at home and abroad, 

delays product shipments and increases costs, making it difficult for business to compete 

and meet customer requirements. Bureaucracy can be especially difficult for SMEs, who 

are often not prepared to deal with the hardships, byzantine regulations, and sometimes 

exorbitant and unexplainable fees they encounter, according to Mr. French. 

Mr. French stated that there are three specific reasons–domestic advocacy, international 

promotion, and self-regulation–that the U.S. hardwood industry is able to successfully 

export: 

 There is strong support and high participation rates in the industry’s trade 

associations, which are able to coordinate activities, such as government lobbying, 

for the benefit of all producers. 

 USDA Foreign Agriculture Service (FAS) Market Access Program (MAP) funding 

through AHEC gives the U.S. hardwood industry a sharp competitive edge in 

meeting the growing worldwide demand for hardwood products. 

 The National Hardwood Lumber Association created a set of voluntary rules for the 

sale and purchase of North American hardwood lumber, which have also been 

adopted for many foreign species of hardwood. These rules allow for the exchange 

of lumber by specification and eliminate the need for inspection before purchase 

making pre-delivery payment possible, which is particularly important for exports 

where delivery may not occur for several weeks to months. 

HBO Latin America Corporation41

Testimony about a new Argentinean law and other topics was provided by Miguel Angel 

Oliva, vice president for public relations and corporate affairs, HBO Latin America Corp., 

and Andres A. Castrillon, Esquire, Hughes Hubbard & Reed LLP, on behalf of HBO 

Latin America Corp. According to Mr. Oliva and Mr. Castrillon, Argentina’s October 10, 

2009, Media Law (Media Law) violates the U.S.-Argentina Bilateral Investment Treaty, 

 

41 USITC, hearing transcript, March 18, 2010, 197–199 and 199–205; Pierce and Mroczka, written 

submission to the USITC. 
6-13

the Trade-Related Investment Measures agreement of the World Trade Organization 

(WTO), and the 1994 General Agreement on Tariffs and Trade. 

Mr. Oliva and Mr. Castrillon stated that the Media Law arbitrarily discriminates between 

national and foreign programmers, placing foreign companies, such as HBO Latin 

America, at a competitive disadvantage. According to a written submission by Kenneth J. 

Pierce and Victor S. Mroczka of HBO Latin America Corp., article 65 of the Media Law 

requires cable operators to carry a minimum amount of national and Mercosur (Southern 

Cone Common Market) programming; article 67 of the Media Law establishes a screen 

quota for Argentine movies, requiring foreign programmers (but not national 

programmers) whose programming consists of more than 50 percent fictional content to 

use 0.5 percent of their annual revenue to acquire local Argentine films; article 83 of the 

Media Law makes expenditures on advertising carried by foreign signals ineligible for 

the income tax deduction available to advertising carried on national signals in the 

Argentine income tax law; article 94 of the Media Law subjects advertising or 

promotions to a new tax that discriminates against foreign programmers; and article 96 

applies a 5 percent tax rate to the gross advertising expenditures of foreign programmers, 

while applying only a 3 percent tax rate to domestic programmers. According to Mr. 

Oliva and Mr. Castrillon, HBO Latin America Corp. has been unable to engage the 

Argentine government in negotiations and does not believe that it can enforce arbitration 

decisions in Argentina. Consequently, HBO Latin America Corp. requests the direct 

involvement of the U.S. government, as it did in a similar situation in the Bahamas. 

Mr. Oliva also stated that it is difficult and takes too long to obtain Brazilian visas for 

travel from the United States and to obtain U.S. visas for travel from Brazil and 

Argentina. 

Herkules Equipment Corporation42

In a written submission to the Commission, Todd Bacon, CEO of Herkules Equipment 

Corporation, stated that Herkules is a small manufacturing company based in Michigan 

that builds high-tech equipment to assist assembly line workers who assemble vehicles. 

Mr. Bacon identified price points as the primary reason many small U.S. manufacturing 

firms have been unable to effectively compete against foreign manufacturers, such as 

those from China. Mr. Bacon stated that despite adopting the latest technologies through 

investment in research and development, his manufacturing company has continued to 

face pricing challenges from foreign manufacturers due to their ability to effectively 

compete on wages, overhead, and comparable technologies. 

The Hosiery Association43

According to a written submission filed by Sally Kay, president & CEO, the Hosiery 

Association, the legwear business is the healthiest segment within the overall U.S. 

apparel sector of textiles because of its “ability to leverage technology,” its vertical 

integration in manufacturing, and the speed with which it delivers products to market.44

 

42 Bacon, written submission to the USITC, March, 1, 2010. 43 Kay, written submissions to the USITC, January 28 and February 19, 2010. 44 Kay, written submission to the USITC, February 19, 2010.
6-14

According to Ms. Kay, there are 25,000 employees in the legwear business value chain, 

located in 21 states. Ms. Kay stated that 90 percent of the Hosiery Association’s 

membership base consists of SMEs. 

Ms. Kay said that 95 percent of the legwear market is outside the United States. She 

added, however, that while sock exports have totaled approximately $20 million in the 

past three years (to Singapore, Japan, Thailand, Qatar, Kuwait, Panama, Norway, 

Germany, Bermuda, Bahamas, and Denmark), few SMEs in the legwear industry have 

exported successfully. According to Ms. Kay, one of the most significant challenges 

facing the legwear industry is the limited knowledge of the industry within the U.S. 

government. Ms. Kay states that the government could be more effective in 

communicating regularly with the legwear industry, adding that “. . . federal officials who 

have taken the time to tour a hosiery facility, and engage in consistent dialogue with the 

company leadership have a far better understanding and appreciation for what actually 

transpires in the industry.”45

Ms. Kay said that exporting is difficult because the export documentation needed is not 

standardized from country to country, and because countries lack transparency and 

predictability. Ms. Kay stated that another reason exports are limited is that foreign 

regulations (environment, taxes, healthcare, labor, etc.) vary significantly. Ms. Kay also 

stated that it is difficult for U.S. SMEs to compete with producers from countries that 

have preferential access to markets, that have lower-cost production, or that have 

promotional activities that are heavily subsidized by their governments. 

Ms. Kay cited lack of financing as a challenge to many SMEs in the legwear sector, 

adding that SMEs have not had a positive experience with the Ex-Im Bank. Ms. Kay 

stated that more transparency and predictability would lead to increased exports and 

create more U.S. jobs. 

Hydra-Power Systems, Inc.46

According to testimony provided by Peter Herder, Outside Technical Sales, Hydra-Power 

Systems, Inc., his company has diversified into many markets, including the 

hydroelectric, nuclear power, steam turbine generation, mobile equipment, offshore and 

sub-sea oil and gas, and military markets. According to Mr. Herder, the International 

Traffic and Arms Regulation (ITAR) has been a barrier to exports. 

Mr. Herder stated that the ITAR process is overwhelming for SMEs, many of which 

either have never heard of the regulation or do not know how to comply with it. Mr. 

Herder estimated that Hydra-Power Systems has spent $20,000 researching how to stay 

in compliance with ITAR. Mr. Herder added that while it typically takes Hydra-Power 

Systems six weeks to produce its products, the ITAR process takes more than six months 

(in part due to the company’s lack of understanding of ITAR procedures). Mr. Herder 

went on to say that there are too many layers of government regulation, and that the 

review process could be streamlined by permitting simultaneous agency review of ITAR 

applications, rather than the sequential review that currently exists. Mr. Herder also 

 

45 Kay, written submission to the USITC, February 19, 2010. 46 USITC, hearing transcript, March 12, 2010, 155–161. 
6-15

contended that compliance with ITAR is difficult because, while a product may stay the 

same, ITAR classifications may change. 

Mr. Herder also noted that travel expenses to such locations as Brazil, the North Atlantic, 

Australia, and Asia can be a barrier to exporting. According to Mr. Herder, many Middle 

Eastern and European countries actively promote SMEs. Mr. Herder also stated that 

many countries, such as Scandinavia, have set up standards that can act as barriers to 

imports from other countries in that the standards can force expensive redesigns for 

products. 

Independent Film and Television Alliance47

The Independent Film and Television Alliance said in its submission that it represents 

about 150 firms, the majority of which are SMEs and U.S.-based exporters. The IFTA 

also stated that copyright piracy constrained the export activity of their members, noting 

that lawsuits in response to acts of piracy can be expensive and that the resulting 

judgments can be difficult to enforce. IFTA stated that its members encounter 

burdensome regulations in other countries, such as local dubbing requirements (which 

increase expenses) and screen quota requirements (which reduce export opportunities). 

IFTA cited the example of China, where distribution opportunities are limited by statelicensed entities responsible for importing foreign movies, and where censorship rules are 

nontransparent. The association also cited the example of India, where U.S. exporters 

face foreign ownership restrictions and burdensome customs regulations. The testimony 

suggests that IFTA members could export more if they could share the costs of attending 

international film festivals, or if the U.S. had bilateral co-production agreements with 

other countries. 

According to the testimony, one export strategy adopted by IFTA members is making 

agreements with international distributors in advance of production, which builds 

networks of local representatives. IFTA stated that its members also share financial and 

artistic resources through co-production agreements. Additionally, IFTA noted that SMEs 

in this industry rely on trade associations to provide advocacy, collect non-contractual 

royalties, and protect against piracy through copyright verification programs. 

Media Wizard, Inc.48

According to testimony provided by Chris Albert, president and chief executive officer, 

Media Wizard, Inc., has developed encryption software that prevents data from being 

downloaded or compromised. According to Mr. Albert, large U.S. companies deny the 

ability of small companies to introduce and market their product through unfair rules of 

trade and licensing. According to Mr. Albert, the top three domestic barriers facing 

Media Wizard are (1) licensing fees imposed by large companies, (2) the difficulty 

experienced by software SMEs located outside of California in attracting venture capital, 

and (3) the “ego” of large companies, which prevent large companies from working with 

small companies that have found solutions to problems that larger companies could not 

 

47 Independent Film and Television Alliance, written submission to the USITC, March 26, 2010. 48 USITC, hearing transcript, March 10, 2010, 37–43, 90–147 passim; Albert, exhibits/testimony, [32–

49].
6-16

solve themselves. Media Wizard also notes that it has found it difficult to establish 

contacts with foreign government procurement officials, such as in France and in 

Germany, and believes the U.S. government should be more helpful in establishing such 

contacts for SMEs. According to Mr. Albert, these barriers have resulted in lost domestic 

jobs and billions of dollars of lost revenue for U.S. SMEs. 

Medical, Laboratory & Technology Consultants49

In her testimony, Maria Hardy, chief executive officer of the Medical, Laboratory & 

Technology Consultants, discussed the most significant constraints that U.S. SMEs face 

in exporting, highlighting the considerable role that fear, lack of resources, and 

difficulties in raising capital play in discouraging SMEs from exporting. Further, 

according to Ms. Hardy, larger companies are able to rely on their “well-known name to 

obtain their contracts,” which often comes at the expense of SMEs who “are capable of 

taking these contracts . . . but look at the competition [from the larger companies] and 

won’t even apply.”50

One major obstacle, according to Ms. Hardy, is fear, including fear of exporting (“Many 

people are struggling so badly on the homefront that they would never dream of 

expanding to the global market”) and fear of acquiring debt by taking on loans (“many 

will simply allow the business to close rather than apply for a line of credit in the current 

economy”).51 She suggested that a greater availability of grants might address this issue 

of inadequate financing for SMEs. 

Ms. Hardy advised SMEs to first address their fears of exporting and recommended that 

they avail themselves of government resources such as “Export University 101,” offered 

by the USCS, and to acquire the International Marketing Plan workbook—a “priceless 

resource to implement an international trade plan” that also identifies strengths and 

weaknesses in an SME’s sales strategy.52

Ms. Hardy also suggested that SMEs might benefit from a mentoring or a certification 

program that would provide SMEs with a “standardized level of education and 

preparation” that could help these companies develop the confidence and knowledge 

necessary to enter new markets.53

The Merry Hempsters, Inc.54

According to a written submission filed by Gerry Shapiro of the Merry Hempsters, Inc., 

the Portland U.S. Export Assistance Center and the Oregon Economic and Community 

Development Department have assisted in profitable relationships overseas. He 

remarked that both entities have been very effective in presenting the Merry Hempsters’ 

brands to potential customers abroad, and have assisted the company in reaching out to 

 

49 USITC, hearing transcript, March 18, 2010, 197–205. 

50 USITC, hearing transcript, March 18, 2010, 199–200. 51 USITC, hearing transcript, March 18, 2010, 199, 203. 52 USITC, hearing transcript, March 18, 2010, 202. 53 USITC, hearing transcript, March 18, 2010, 203. 54 Shapiro, written submission to the USITC, March 26, 2010. 
6-17

potential foreign customers. According to their Web site, the company makes lip and skin 

care products using hemp seed oil.55

Mr. Shapiro stated that the Korean government has recently adopted new organic rules so 

strict that USDA-certified companies would be out of compliance if entering Korea after 

January 1, 2010. Mr. Shapiro added that he finds these new regulations to be threatening 

because even with the extra year given by the Korean government, the Merry Hempsters 

will not be in compliance. Mr. Shapiro requests that the U.S. government work to find a 

reasonable compromise before the 2011 deadline. 

Mr. Shapiro also stated that Canadian THC56 regulations severely restrict the Merry 

Hempsters’ ability to export and have on occasion caused shipments to be returned. He 

noted that Canadian regulations require finished products entering Canada that contain 

hemp oil to have labels in English and French stating that the raw material of the finished 

product contains 10 micrograms per gram THC or less. Also, according to Mr. Shapiro, 

Canadian regulations require that the product be tested at a U.S. Drug Enforcement 

Agency–approved lab, and that each batch produced must be tested in order to have a 

credible reference to the THC content. Mr. Shapiro stated that each test costs $250–$350. 

On the other hand, Mr. Shapiro expressed his satisfaction with the Madrid protocol, and 

said that he strongly encourages the U.S. Department of Commerce (USDOC) and any 

other relevant agency to expand the number of participating countries. 

MidAmerica St. Louis Airport57

In his testimony, Tim Cantwell, Director of the MidAmerica St. Louis Airport, stated 

that one of the airport’s goals is to increase SME air cargo business and to expand SMEs’ 

international business. He emphasized that international air cargo expansion depends on a 

balance of commerce and compliance, but that four federally mandated compliance 

factors specifically inhibit air cargo exports from SMEs out of the MidAmerica St. Louis 

airport. 

He said that the first factor is the requirement for ports of entry to be “User Fee” airports, 

thereby putting the burden on the businesses using the facility to supply the operating 

capital to finance its operations.58 He said that this creates a pricing disadvantage for the 

airport; causes the airport to not have certain capabilities; and, since User Fee airports do 

not have electronic remote filing, landing clearances have to be requested especially far 

in advance. The second factor, Mr. Cantwell said, is that the new transfer of authority 

between different compliance agencies has increased personnel requirements. He said 

that the third factor was that the technology used by agencies during compliance 

procedures is out-dated, limits efficiency, and increases costs. He added that the fourth 

factor is that the process to import or export a product that has not previously been 

shipped through the airport is overly burdensome. 

 

55 Merry Hempster Web site,” http://merryhempsters.com/our_philosophy.html (accessed June 26, 2010). 56 Tetrahydrocannabinol (THC) is a psychoactive component of the Cannabis sativa plant. 57 USITC, hearing transcript, March 10, 2010. 58 USITC, hearing transcript, March 10, 2010, 20–21.
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Midwest-China Hub Commission59

The Midwest China Hub Commission (MCHC) is a collaboration between government 

officials and private business associates to establish an expanded economic partnership 

with China. The Commission proposes that the St. Louis region become China’s primary 

gateway into the American heartland through dedicated cargo flights that connect the 

Midwest with China and through the development of a strong economic hub of ChineseAmerican business partnerships. 

The MCHC stated in its written submission that it supports efforts to expand the 

capabilities of SMEs to penetrate China and other global markets. The MCHC asserted 

that it has encouraged St. Louis businesses to think globally and investigate export 

opportunities. 

National Association of Manufacturers (NAM)60

In her written submission on behalf of NAM, Patricia Mears, Director of International 

Commercial Affairs, stated that it is the nation’s largest industrial trade association, with 

members in all 50 states, and that thousands of its members are SME exporters. She said 

that for many of these companies, their exports are “accidental”—i.e., generated by 

chance through a customer request, rather than through development of expertise in 

exporting. According to Ms. Mears, two conditions favoring SME exports include FTAs 

and the value of the U.S. dollar compared with other currencies. The issues for SMEs that 

export, as identified by Ms. Mears, include finding markets, standards and regulatory 

issues, export controls, trade facilitation, and finance. 

She stated that SMEs generally do not have staff dedicated to understanding foreign 

markets for their products and finding distributors or agents overseas, so assistance in 

those areas would help SMEs increase their exports. She added that strategies that have 

helped SMEs include developing Web sites and training sales personnel in multiple 

languages; asking colleagues in companies that produce compatible, but not competing 

products for recommended foreign distributors; and working with state and federal 

government agencies involved in export promotion. According to Ms. Mears, many 

SMEs do not know about such government programs, and would be more likely to use 

them if they were provided free of charge. 

Ms. Mears also stated that the volume of goods sold by SMEs overseas usually did not 

justify the costs of regulatory compliance in many export markets, particularly in Europe. 

She also called for the modernization of the U.S. export control system, which creates 

significant compliance costs for U.S. SME exporters. She cited other barriers to SME 

exports, including the high costs of shipping and the finding that Ex-Im Bank financing 

was of limited utility for small companies, since most lenders are unwilling to process the 

paperwork required for smaller-value transactions. Overall, according to Ms. Mears, 

 

59 Midwest-China Hub Commission, written submission to the USITC, March 26, 2010. 60 Mears, written submission to the USITC, March 25, 2010.
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small companies “face many of the same export challenges as large companies, but the 

scale of the problem is greater due to resource constraints.”61

National Institute for World Trade (NIWT)62

In his testimony, Spencer Ross of the NIWT stated that he established the National 

Institute for World Trade as an international consulting organization. He also has 

experience working for several multinational corporations and chaired the New York 

District Export Council for 10 years. 

Mr. Ross stated that the United States cannot tolerate the loss of the country’s 

manufacturing base and still maintain its quality of life, and that the United States should 

take retaliatory steps against IPR violations by China. In many cases, he said, U.S. 

intellectual property (IP) is lost to other countries through the licensing process, which 

many SMEs do not understand very well, and so SMEs may find that they lose control 

over their IP to foreign manufacturers.63 In response, he suggested, the U.S. government 

should develop a program that would consider an SME’s IP as a national treasure, which 

should optimally be transferred to another U.S. company, rather than transferred overseas 

through a license to a foreign manufacturer. He mentioned, for example, that this could 

be accomplished by the USDOC developing a matchmaking service between U.S. 

companies before a foreign licensing agreement could be completed, potentially delaying 

it long enough that U.S. firms could consider U.S. production rather than foreign 

licensing. He also suggested that the United States should undertake “re-development 

initiatives” similar to those in place in many developing countries, to recapture lost and 

newly emerging industries.64

As he noted in his testimony, another important way to increase exports is to increase 

language skills in the United States, particularly the languages of countries whose 

consumer markets are rapidly increasing. U.S. exporters can no longer depend on the rest 

of the world speaking English. 65 Mr. Ross cited the languages of the BRIC nations 

(Portuguese, Russian, Hindi, and Mandarin Chinese), and Arabic, Korean, and Japanese, 

as particularly important. These languages should be taught in U.S. schools, he argues, 

beginning at the elementary school level. He cited three other actions that would increase 

U.S. SME exports: accelerating the foreign visa process for visits to the United States, 

developing alternative energy sources to lessen dependence on Mideast oil, and raising 

professional standards for service jobs. Mr. Ross also noted that security measures, 

including export controls and onerous U.S. visa requirements, can add to the difficulties 

of SMEs trying to increase exports.66

 

61 National Association of Manufacturers, written submission to the USITC, March 25, 2010, 5. 62 USITC, hearing transcript, March 18, 2010, 57–63; Ross, written submission to the USITC, February 9, 

2010. 63 USITC, hearing transcript, March 18, 2010, 58–59. 64 USITC, hearing transcript, March 18, 2010, 93–95. 65 USITC, hearing transcript, March 18, 2010, 61. 

66 USITC, hearing transcript, March 18, 2010, 137–138, 155. 
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National Minority Business Council (NMBC)67

According to Fritz-Earle McLymont, Managing Director of the NMBC, small and 

minority-owned businesses can help the United States meet President Obama’s goal of 

doubling U.S. exports within five years. He stated that minority-owned firms are 

particularly well positioned to tap into emerging markets, since many such firms share 

cultural relationships with Asia, Africa, and Latin America, and he made several specific 

recommendations for ways to help minority firms export: 

 The Ex-Im Bank and other U.S. agencies should develop new criteria for 

evaluating loan guarantees to minority businesses. These criteria should take into 

account the fact that information systems in emerging markets are less 

sophisticated than in the United States and other developed countries. The criteria 

should rely more on the management skills, character, and potential of the foreign 

buyers. U.S. commercial attachés abroad could help these businesses to meet the 

new standards. China and India, for example, use less restrictive evaluation criteria 

to increase exports to emerging markets. 

 In addition to programs currently supported by the USCS, the SBA, and the Ex-Im 

Bank, U.S. government agencies should assist more minority firms in becoming 

“export-ready” by enhancing their operating knowledge about international trade. 

Long-term assistance is needed, and programs could work through academic 

institutions or mentorship organizations. 

 Government agencies should reach out to minority-owned businesses by using 

media outlets that target these communities, including ethnic publications and 

organizations and churches. 

NIMS Services Inc.68

Michael Nicholas, president/CEO, stated that NIMS Services Inc. (NIMS) is a 

Washington, D.C.,–based small business that markets and services various fuels and 

lubricants. He stated in the company’s written submission that the primary barriers to 

competing in the international markets are financing availability, a lack of willingness for 

larger contractors to establish joint ventures or other partnerships, and a lack of 

communication with federal agencies that are procuring goods and services. He also 

emphasized in his testimony the importance of access to credit and the need for assistance 

in accessing credit. He also asserted that a lack of knowledge in regard to understanding 

the policies and procedures for doing international business and financing international 

business operations is a barrier. He also stated that partnering with larger and experienced 

contractors is a method for overcoming these barriers, because such partners can give 

smaller businesses access to information and international markets they may not be able 

 

67 USITC, hearing transcript, March 18, 2010, 63–69; McLymont, written submission to the USITC, 

February 9, 2010. 68 USITC, hearing transcript, March 18, 2010, 87; Nicholas, written submission to the USITC, January 

28, 2010. 
6-21

to obtain on their own. He added that the facilitation of these partnerships would be 

beneficial for SMEs.69

North Carolina District Export Council70

Herman Metzler of the North Carolina District Export Council submitted a 2006 white 

paper from Metzler & Associates, “Global Insight # 1: An Introduction to International 

Business,” as well as slides from a presentation, “Exporting 101.” The paper provides 

information on the benefits to U.S. firms that export including the creation of higherpaying jobs, sales growth, and increased productivity for exporters. The paper asserts that 

many more companies could export and that trade barriers can be overcome. It states that 

some of the most difficult barriers to trade involve “cultural differences,” and advises 

potential exporters to develop personal relationships with foreign partners. The paper 

includes advice to exporters on intercultural communications. The presentation slides 

cover information for exporters, including facts about the services provided by the 

Service of Retired Executives (SCORE); the benefits of exporting; trade barriers, 

including cultural differences; other factors that impact exports, including prices and 

export terms; advice on finding foreign partners; and where exporters can find assistance 

from U.S. government agencies. 

Northwest Trade Adjustment Assistance Center71

Gary Kuhar, Executive Director of the Northwest Trade Adjustment Assistance Center 

(NWTAAC), noted that the organization administers the Trade Adjustment Assistance 

(TAA) program for firms in the U.S. Northwest states. He said that its mission is to assist 

SMEs that have been negatively impacted by imports by developing strategic plans that 

will help them be more competitive in both the domestic and global market. 

Mr. Kuhar stated in his submission that many of the firms it assists are not in a position to 

export, but the strategic adjustment plans it develops may still have an export component. 

He added that the primary barriers preventing SME exports include a lack of managerial 

knowledge and time to focus on export markets; a lack of financial resources to take on 

the risks associated with exporting; language deficiencies; a lack of resources to identify 

buyers; and a lack of understanding of the technical requirements and aspects of 

exporting, such as international contracts, licensing, export controls, transportation, 

letters of credit, and foreign distribution. 

 

69 USITC, hearing transcript, March 18, 2010, 87.

70 Metzler, written submission to the USITC, March 26, 2010. 71 Kuhar, written submission to the USITC, March 24, 2010. 
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Oregon Department of Agriculture72

Katy Coba, Director of the Oregon Department of Agriculture (ODA), stated that ODA 

works with approximately 34,000 farms, most of which are small family-owned farms, to 

market their products both domestically and abroad. She emphasized the importance of 

export markets to Oregon agriculture and stated that approximately half the value of 

Oregon production is exported. She further stated that the number one concern for 

agricultural exports from Oregon is a shortage of containers. Ms. Coba explained that 

because most imports come into the United States on the East Coast, there is often a 

shortage in containers available for exporters on the West Coast, which has driven up 

container prices. In addition, she asserted that nontariff barriers are also a tremendous 

impediment to exports and that concerns about certain pests and diseases often entirely 

prevent exports from entering markets. She also stated that the increased tariffs resulting 

from the Mexican trucking issue are preventing many agricultural products from the 

Pacific Northwest from entering Mexico. Lastly, she emphasized ODA’s support for 

FTAs and for USDA’s MAP program, which the ODA stated is critical to promoting 

Oregon agricultural products abroad. 

Oregon Nanoscience and Microtechnologies Institute 

(ONAMI)73

Mr. Robert D. “Skip” Rung stated that ONAMI helps grow research and commercialize 

technology. He said that nanotechnology start-up companies in the United States are 

crucial to maintaining competitiveness in future U.S. manufacturing markets, but that 

their success is not guaranteed given restrictive domestic policies, which potentially shift 

competitive advantages (and jobs) offshore. He noted that a company that is negatively 

impacted by domestic policies is not going to become an exporter and will likely lose 

market growth opportunities to foreign competitors who are not similarly affected by 

such constraints. Mr. Rung added that this will also disproportionately affect start-ups. 

As an example, Mr. Rung cited a new precautionary approach by the U.S. Environmental 

Protection Agency (EPA) regarding new applications for nanomaterials, such as 

antimicrobial nanosilver. He said that the EPA is no longer accepting applications for 

certification for such products, despite ongoing shipments to the United States by 

incumbent suppliers based in Australia, South Korea, and Japan. He stated that the U.S. 

company affected—Dune Sciences—was told by the EPA in the spring of 2009 not to 

apply for certification of their product, given the concern regarding nanosilver and “a 

stop on accepting new applications.” He said that this hampered Dune’s efforts to market 

their “green” product (treatments for linens and gowns intended to help reduce MRSA in 

hospitals), resulting in the loss of jobs and decreased innovation. 

Mr. Rung stated that whereas a similar situation regarding novel nanoproducts likely 

exists in Europe, it is less prevalent in Asia (e.g., in China and Korea). He said that the 

severity of current and future regulations in the United States and Europe is likely to 

 

72 USITC, hearing transcript, March 12, 2010. 73 USITC, hearing transcript, March 12, 2010, 154–9. Mr. Rung noted in his request to appear that he was 

not representing ONAMI in his remarks. 
6-23

create a competitive disadvantage for U.S. and European companies. He also added, in 

response to a question about whether, in the absence of domestic constraints, foreign 

barriers to such products exist, he said that other companies with materials of art in 

nanosilver form have ongoing development agreements and activities with foreign 

partners, so he is not aware of foreign barriers to the products. 

Oregon Tourism Commission dba Travel Oregon74

The mission of the Oregon Tourism Commission (OTC), according to Todd Davidson, 

OTC’s chief executive officer, is to encourage economic growth in Oregon by promoting 

tourism from domestic and international markets while encouraging increased 

expenditures by visitors to Oregon. Mr. Davidson stated in OTC’s written submission 

that the procedure for entering the United States is the primary barrier to international 

travel to the United States. He said that the procedural barriers to international tourism 

reduce visitation and include misinformation on the entry and exit requirements, long 

wait times at customs, and long visa processing times. In order to minimize the impact of 

these barriers, he recommended that the United States facilitate the issuance of nonimmigrant visas by improving overseas visa facilities and ensuring that the visa program 

is properly managed and funded. Mr. Davidson also suggested that benchmarks be 

established for visa wait times, that the visa waiver program be expanded, that the paper 

I-94W form be eliminated, and that visitors be properly informed about the electronic 

system for travel authorization. 

Pacific Northwest International Trade Association75

In his testimony, Walter E. Evans III of the Pacific Northwest International Trade 

Association, the leading trade advocacy group for Oregon and southwest Washington, 

stated that companies on the West Coast look to the Pacific Basin as their “natural 

market.”76 He stated that Pacific Northwest firms have “built deep, wide, and strong 

connections over the decades with Japan and other markets elsewhere in the Far East,” 

and international trade is a vital element of the Pacific Northwest economy.77

Mr. Evans stated that two strategic issues are “cornerstones” of successful trade policy: 

increased freight transportation efficiencies for export goods, and strong TAA 

programs.78 He commented that SMEs are most at risk from transportation delays in 

getting products to export markets and that increased investment in infrastructure is 

needed to facilitate SME export growth. On TAA, Mr. Evans asserted that the United 

States should have a “robust” retraining program for workers displaced by imports.79

Mr. Evans asserted that TAA should be an important part of broader U.S. trade policy to 

“get beyond the traditional fight between exporters and those whose jobs are threatened 

by trade.” 80 He strongly supports the TAA programs of the USDOC and the U.S. 

 

74 Davidson, written submission to the USITC, March 8, 2010. 75 USITC, hearing transcript, March 12, 2010. 76 USITC, hearing transcript, March 12, 2010, 30. 77 USITC, hearing transcript, March 12, 2010, 33. 78 Ibid. 79 Ibid. 80 USITC, hearing transcript, March 12, 2010, 34.
6-24

Department of Labor. His recommendations on increasing SME exports include 

increasing U.S. government trade missions and niche product trade missions sponsored 

by the USDOC; expanding loan guarantee programs; and using videoconferencing 

between exporters in the United States and importers and contacts in foreign markets that 

have been vetted by U.S. embassies.81

Pacific Seafoods82

In hearing testimony before the USITC, Charles Kirschbaum, Category Manager for Cold 

Water Shrimp Sales at Pacific Seafoods, stated that differential EU tariffs on U.S. and 

Canadian shrimp harm the U.S. West Coast shrimp industry. Specifically, Mr. 

Kirschbaum stated that the EU tariff on Oregon Pandalus jordani shrimp was assessed at 

a higher duty, 20 percent, compared with the Canadian Pandalus borealis shrimp 

(harvested off the East Coast of Canada), which was assessed 6 percent duty in 2009 and 

will become duty-free in 2010. He stated that the two shrimp varieties are nonetheless 

interchangeable: “they produce essentially the same finished product, and they’re going 

to the same markets.”83

Mr. Kirschbaum asserted that the higher tariff on Pandalus jordani shrimp, combined 

with the rapid growth of the Canadian East Coast Pandalus borealis shrimp industry, 

have contributed to a contraction of the U.S. West Coast shrimp industry, such that the 

number of processing facilities has fallen dramatically over the last 15 years. He stated 

that the Oregon shrimp industry needs equal access to export markets—including the EU, 

the world’s largest shrimp market—in order for the U.S. West Coast shrimp industry to 

expand. According to Mr. Kirschbaum, “We have a sustainable fishery off of our coast 

that is underutilized. And we have unfair access to the largest market in the world for this 

particular shrimp.” 84

The Port of Portland85

In hearing testimony, Greg Borossay, general manager of liner development at the Port of 

Portland, cited “equipment issues” as a significant export barrier.86 In particular, Mr. 

Borossay mentioned container shortages resulting from the global oversupply of 

container ocean carriers caused by high competition among foreign-owned companies in 

North America. According to Mr. Borossay, this competition is heightened by the 

relatively lower trans-Pacific rates, particularly in Europe and Asia, which encourage 

shipping companies to send cargo via the trans-Pacific route as opposed to the North 

American trade lanes, exacerbating the lack of availability of containers in North 

America.

In his testimony, Mr. Borossay said the world oversupply of carriers has resulted in about 

13 percent of the vessels idled. He said that this is problematic because these furloughed 

 

81 USITC, hearing transcript, March 12, 2010, 35, 96. 82 USITC, hearing transcript, March 12, 2010. 83 USITC, hearing transcript, March 12, 2010, 211. 84 USITC, hearing transcript, March 12, 2010, 212, 213, 227. 85 USITC, hearing transcript, March 12, 2010, 22–8. 86 USITC, hearing transcript, March 12, 2010, 22.
6-25

vessels typically contain empty containers, which can no longer be used; this has been 

occurring over the past 18 months and is likely to continue until the global economy 

improves. 

An additional problem for container ocean carriers, according to Mr. Borossay’s 

testimony, is that they face “significant rate increases from the class one railroads, with a 

near tripling of costs for empty repositioning from the major empty termination points of 

Chicago, the Northeast, and the Southland in California to the U.S. Pacific Northwest.”87

Mr. Borossay also said that ocean carriers are now passing along these cost increases to 

the exporters, which could eventually translate into a higher cost for the exported 

commodity from the U.S. relative to competitors overseas. 

Another problem for exporters, according to Mr. Barrosay, is the differences in 

equipment flows to and from North America and the “dead weight limitations on the 

vessels.” 88 He stated that “export cargo is more than double the weight of import cargo, 

which limits what can be loaded onto export vessels.” To address these challenges, Mr. 

Borossay said that the Port of Portland is trying to develop its import warehouse 

distribution system so as to maintain a sufficient container supply in North America. 

RAD-CON89

In a written submission, Mr. Christopher J. Messina of RAD-CON, a capital-goods 

manufacturer of steel equipment and technology, provided two policy recommendations 

that would “alleviate constraints” on RAD-CON’s exports.90 First, Mr. Messina stated 

that rules restricting the Ex-Im Bank from supporting his firm’s exports should be 

eliminated. According to Mr. Messina, the Ex-Im Bank is prohibited from supporting U.S. 

firms that support the production of products that are subject to trade orders, such as steel, 

a rule that affects his firm’s ability to export steel-processing equipment. He asserted that 

this rule came into effect in 2002 and was a “leftover” from the Section 201 protections. 

Mr. Messina argued that conditions in the U.S. steel industry have changed dramatically 

since the rule went into effect; he said that the prohibition currently benefits U.S. 

competitors and may actually hurt U.S. steel producers by limiting their availability to 

new domestic processing technology. 

Mr. Messina also suggested that U.S. trade policy should be focused on promoting free 

trade. He stated that retaliatory tariffs, such as the recent U.S. tariff on Chinese tires, only 

serve to protect a “narrow interest” and are “poisonous” to the environment for U.S. 

exporters, including exporters of capital equipment.91 Mr. Messina also commented that 

unilateral trade embargoes, such as the one against Iran, are ineffective, particularly when 

the embargoed country can obtain the same goods from other international suppliers such 

as Europe. He stated that these embargoes only serve to harm the interests of 

U.S. exporters. 

 

87 USITC, hearing transcript, March 12, 2010, 24. 88 USITC, hearing transcript, March 12, 2010, 26.

89 Messina, written submission to the USITC, February 26, 2010. 

90 Rad-Con, written submission to the USITC, February 26, 2010, 1.

91 Rad-Con, written submission to the USITC, February 26, 2010, 2.
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Reddix Corp92

Joseph W. Reddix, president and chief executive officer of the Reddix Group, stated in 

testimony that small exporters are constrained by limits on cultural awareness, 

understanding of business environment, and access to legal and accounting resources. Mr. 

Reddix discussed the strategy of forming teams or consortiums of small businesses as a 

way to address these constraints; such teams can pool their resources and display some of 

the strengths and advantages of large firms. He stated, for example, that a small firm 

interested in exporting to India could work with a team member who has experience with 

program management and application development in that country. He acknowledged 

that this strategy depends on having consortium members with a range of expertise. Mr. 

Reddix stated that the Federal government has made teams of small firms eligible for part 

of an acquisition contract worth $20 billion over 10 years. 

Mr. Reddix also noted that both small firms and teams of small firms can learn from the 

example of large exporters. He suggested that the U.S. government facilitate a 

mentorship program between international large firms and small firms interested in 

exporting. Mr. Reddix noted that he became comfortable with international transactions 

in part by working for large international firms before coming to his current position. Mr. 

Reddix stressed the importance of exporters’ acquiring both technical and interpersonal 

skills. 

Roeslein & Associates, Inc.93

In a written submission and hearing testimony, Rudi Roeslein, chief executive officer of 

Roeslein & Associates, Inc, identified the failure to recover payments from customers; 

the lack of uniformity across countries that apply the value-added tax (VAT) system—

such as the EU and China; import duties abroad; and “the intellectual property safeguard 

in China and their continued lack of [IP] enforcement” as the principle barriers for SMEs 

seeking to export.94 The company designs and builds can manufacturing processes.95 

According to Mr. Roeslein, “there’s not a very uniform approach . . .on issues around 

VAT,” as customers are able to delay or avoid paying what they owe in VAT.96 Mr. 

Roeslein added that these problems are compounded by difficulties that U.S. exporters 

experience in getting paid by their clients. Mr. Roeslein also suggested that the United 

States government could help SMEs overcome such barriers, including problems with 

collecting VAT revenue, overcoming import duties, and ensuring parity for SMEs in 

regard to import duties. 

 

92 USITC, hearing transcript, March 18, 2010, 205–239. 

93 USITC, hearing transcript, March 10, 2010, 190–99; Roeslein & Associates, Inc., written submission 

to the USITC, February 17, 2010. 

94 Roeslein & Associates, Inc., written submission to the USITC, February 17, 2010. Mr. Roeslein stated 

that China’s VAT (17 percent) is very high. He also said that import duties vary considerably among different 

countries depending on how a foreign government classifies a product, citing Brazilian duties of 35–40 

percent for products that his company tried to export. 95 Request to appear at the March 10, 2010 hearing, Roeslein & Associates, Inc., February 17, 2010. 96 USITC, hearing transcript, March 10, 2010, 196.
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Sauereisen Inc.97

In a written submission, C. Karl Sauereisen of Sauereisen Inc., a manufacturer of 

specialty adhesives and chemical-resistant construction materials, stated that the company 

favors “reciprocal” FTAs to remove trade barriers.98 Mr. Sauereisen stated that his firm 

faces a number of export barriers, including logistics and documentation issues, financing, 

and product application challenges. Mr. Sauereisen stated that his company faces typical 

export-related logistics challenges through the supply chain, including an “everproliferating” amount of regulatory and tariff paperwork.99 Mr. Sauereisen commented 

that the credit risks posed by foreign customers requires his firm to regularly negotiate 

export payment terms to ensure that the company is paid in a timely manner. Mr. 

Sauereisen stated that another problem posed by exporting is that the success of his 

company’s products depends on proper installation. He stated that contractors in China 

do not always apply the product properly, which puts the reputation of his company at 

risk, requiring his firm to make a significant investment in training. 

Mr. Sauereisen also commented that protectionism in certain export markets also hinders 

the firm’s exports. He cited an example of an asphalt-based membrane product that the 

firm exports to Venezuela. According to Mr. Sauereisen, in order to import the product, 

the Venezuelan importer is required to obtain extensive documentation certifying that the 

product cannot be manufactured domestically. He added that the authorization has to be 

renewed every six months, which is costly and time-consuming. 

Secondary Materials and Recycled Textiles (SMART)100

In SMART’s written submission, Jackwelyn R. King, SMART’s Executive Director,

identified the disproportionately negative impacts that tariff and nontariff barriers have 

on SMEs relative to large corporations. According to the statement, larger companies can 

overcome these barriers to trade by “restructuring operations, creating economies of scale 

and influencing domestic and international policy,” while SMEs are constrained by their 

relatively limited resources and small influence in competitive markets.101 Ms. King also 

said that these problems are more acute for SMEs in the second-hand textiles industry 

because of their relatively low profit margins; international restrictions on the imports of 

used textiles (31 countries impose these restrictions); “lack of ocean vessel capacity” 

because “carriers removed vessels from service in response to a dramatic drop in demand 

during the recession”; and poor knowledge of the industry on the part of U.S. officials, 

which limits the extent to which this industry’s concerns are appreciated in 

Washington.102

 

97 Sauereisen, written submission to the USITC, January 20, 2010.

98 Sauereisen, written submission to the USITC, January 20, 2010, 2. 99 Sauereisen, written submission to the USITC, January 20, 2010, 1.

100 King, written submission to the USITC, March 26, 2010. 101 King, written submission to the USITC, March 26, 2010, 2. 102 King, written submission to the USITC, March 26, 2010, 3.
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Software Association of Oregon103

In hearing testimony, Matt Ness, president of the Software Association of Oregon, 

identified the leading obstacles for SMEs seeking to export, including a lack of 

familiarity with export opportunities; the burdensome expenses associated with 

conducting market research; difficulties in protecting their intellectual property; and the 

convoluted rules on export restrictions, such as technology licensing. Mr. Ness also stated 

that companies should reach a “certain level of revenue” and require the removal of trade 

barriers before they can be successful exporters.104

Mr. Ness contrasted the sales strategies used by SMEs in the United States and those 

found in the EU: whereas SMEs in the EU typically grow their businesses by exporting to 

countries throughout the region, the United States SMEs typically establish a domestic 

presence before expanding their sales overseas. U.S. SMEs, according to Mr. Ness, are 

discouraged by the possibility of corruption abroad. 

Spartan Light Metal Products105

In his testimony, Mike Sparks, Spartan’s executive vice president of operations, 

mentioned that Spartan has been in business for almost 60 years and has three U.S. 

manufacturing facilities. He said they manufacture parts that are lighter and more durable 

than the norm, largely through use of magnesium and aluminum alloys. He added that 

their products have an extensive supply chain, often involving multiple parts sourced 

from multiple suppliers, maintaining a significant number of jobs in the value chain. 

Mr. Sparks stated that the company also exports, solely to serve their customers, and that 

their only barrier to exporting is the U.S. countervailing duty on magnesium, which 

provides an advantage to their competitors. Mr. Sparks explained that countries eligible 

for the North American Free Trade Agreement (NAFTA) can buy magnesium from 

global suppliers at a competitive price, manufacture the downstream product(s), and then 

ship the products to U.S. customers duty free under NAFTA. Mr. Sparks said that if the 

countervailing duty continues, it will result in continuing loss in U.S. jobs, declining U.S. 

manufacturing, and increased U.S. imports. He said that the North American Die Casting 

Association had estimated that the countervailing duty on magnesium has contributed to 

the loss of 1,675 direct jobs in the United States. 

He cited several changes since the implementation of the countervailing duty: (1) China 

now has an export tax of 10 percent on magnesium (versus an export tax rebate in 2005); 

(2) in June 2009, the United States and Mexico filed a WTO case against China over 

export restraints on raw materials; and (3) in November 2009 the EPA named the sole 

U.S. producer, U.S. Magnesium LLC, as a Superfund toxic site, prompting concern with 

Spartan and its customers about the reliability of their future supply and pricing. Mr. 

Sparks said that magnesium is now no longer a cost-effective substitute for aluminum in 

the United States and the magnesium business is moving out of the United States. He said 

that U.S. consumers of magnesium have a 30–40 percent disadvantage in the cost of raw 

materials and a resulting 15–20 percent price disadvantage. He said that his customers are 

 

103 USITC, hearing transcript, March 12, 2010, 36–44. 104 USITC, hearing transcript, March 12, 2010, 40. 105 USITC, hearing transcript, March 10, 2010. 
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switching to aluminum because of the cost differential and that Spartan has lost 45 

percent of its market share. Mr. Mike Dierks, vice president of Spartan, also noted in 

response to questions that the sole U.S. producer couldn’t provide enough magnesium to 

supply all of the consuming industries—although, he added, it is likely that the 

consumption of magnesium will decline sharply over the next five years if the duty is 

continued. Mr. Sparks stated, also in response to questions, that Russia and China, the 

subjects of the countervailing duty order, supply about 95 percent of the market. Canada 

is the other significant supplier, and there are also suppliers in Israel, France, and Norway, 

but all are concerned about selling in the United States at a price lower than that of the 

U.S. producer. In response to a question about whether Spartan has considered possibly 

establishing a facility outside the United States (e.g., in Canada or Mexico), they 

responded that although they would not wish to do this, it may be necessary for them to 

manufacture in Mexico. 

Mr. Sparks requested the Commission’s help and support in (1) either discontinuing or 

modifying the countervailing margin so that it excludes the magnesium alloy needed in 

the industry; (2) finding a way to protect the magnesium alloy industry as they have the 

raw materials supplier; or (3) trying to protect the sole U.S. producer without hurting 

downstream consumers. He said that if the countervailing duty were removed, they could 

export 30 percent more (about $40 million). 

Mr. Sparks also noted that Spartan belongs to a networking organization called Senior 

Executive Network. He said this organization is developing a national presence and could 

give “leverage” to several hundreds of companies.106

Sunnen Products Co.107

In his testimony, Thomas E. Dustman, International Sales Director of Sunnen Products 

Co., a producer of honing machines and related honing abrasives, detailed his company’s 

experience as an SME exporter and identified current export barriers. Mr. Dustman stated 

that in 2009 China, India, and Brazil were significant export markets for Sunnen Products, 

in addition to traditional leading markets of Western Europe and Canada. 

Mr. Dustman highlighted some of the following key issues that affect the company’s 

exports, including high import duties in China, India, Brazil, and Russia. He stated that 

duties on Sunnen’s exports of its honing machines to Brazil and India are both about 30 

percent each, with resulting lost sales in each market of $900,000 and $1.3 million, 

respectively, or the equivalent of 10 jobs in St. Louis for each market. According to Mr. 

Dustman, lost sales of the consumables used in honing operations, such as special 

abrasives, were also significant. He cited other key barriers, including (1) lengthy delays 

at foreign ports because of customs issues; (2) local competitors receiving favorable bank 

financing from which importers are excluded; and (3) import duties on “test or trial” 

consumables, which act as a disincentive to expanding exports and improving local 

manufacturing processes. 108 Also, Mr. Dustman noted other, lesser important, export 

issues, including the costs of travel for after-sales support; intellectual property theft, 

particularly copying of machines by Chinese competitors; and delays or refusals by U.S. 

 

106 USITC, hearing transcript, March 10, 2010, 279. 107 USITC, hearing transcript, March 10, 2010; Dustman, exhibits/testimony March 10, 2010, [2–13]. 108 USITC, hearing transcript, March 10, 2010, 158.
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immigration authorities to allow foreign workers or customers’ employees to enter the 

United States. 

With regard to overcoming some of these issues, Mr. Dustman stated that Sunnen 

attempts to source products locally in foreign markets, shift the shipping location to allow 

for intercompany transfers rather than shipping directly to the customer, and lower prices 

to certain markets. FTAs have allowed Sunnen to expand its business in Canada, but 

exports to Mexico and Central America remain small. Future FTAs would be helpful in 

reducing foreign import duties that currently provide an advantage to local producers in 

that market. Further, streamlining the U.S. export documentation would likely benefit 

Sunnen. 

Tiba Medical, Inc.109

In a written submission, Merat Bagha, president and chief executive officer of Tiba 

Medical, Inc., a manufacturer of hypertension diagnostic and treatment products, said that 

he would like to see more harmonization of countries’ regulatory regimes for medical 

devices and would like to address unfair competition and lack of transparency. Tiba 

Medical, according to his written submission, has obtained required regulatory clearances 

and registrations for its products from the relevant authorities in the United States, the 

International Standards Organization (ISO), the EU, Canada, Korea, Australia, and “a 

number of other smaller countries such as Argentina.”110 He stated that the company is 

working to obtain regulatory approval in Japan and China. He said that Tiba Medical has 

spent hundreds of thousands of dollars obtaining regulatory clearances and registrations 

and will continue to spend thousands of dollars annually to maintain its registrations. 

Mr. Bagha seeks greater harmonization of guidance and standards between the U.S. Food 

and Drug Administration (FDA); global bodies, such as the ISO, the International 

Electrotechnical Commission, and the Institute of Electrical and Electronics Engineers 

(IEEE); and other countries. He said that current harmonization efforts have been slow 

and tedious and added that better international coordination of guidance and standards, 

and further adoption of such guidance and standards by the FDA, would reduce costs and 

lessen approval time for all parties. Further, he noted that China, Brazil, and Japan should 

also be urged to “accept FDA and EU approvals without requiring a long, detailed and 

expensive approvals process,” as this would allow his company easier access to those 

markets.111 Mr. Bagha states that Tiba Medical has “given up on entering the markets in 

Brazil and Russia given the huge expenses involved and the lack of transparency in both 

of these markets.” 112 Italy, he notes, enforces its own laws for medical device registration 

that supersede EU regulations. 

Lastly, Mr. Bagha states that Chinese medical device firms “aggressively” copy U.S. and 

European technologies and market these at lower prices in world markets.113 Chinese 

medical device companies offer lower-quality products, but they are determined to gain 

market share and know-how. Tiba Medical has notified the FDA about Chinese 

 

109 Bagha, written submission to the USITC, March 26, 2010. 110 Ibid. 111 Bagha, written submission, March 26, 2010, 2. 112 Ibid. 113 Bagha, written submission, March 26, 2010, 1.
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companies marketing in the United States without regulatory clearances. However, Mr. 

Bagha noted that there is little U.S. enforcement, mentioning he has been told that it is a 

matter of available resources. 

TradeMoves LLC114

In a written submission, Shawn Marie Jarosz, Managing Director, said TradeMoves LLC 

is an SME consulting firm assisting companies with their importing and exporting 

interests. She focused on two points: the contrast between the trade information resources 

available to EU and U.S. SMEs, and the several major ways that SMEs are disadvantaged 

as compared with multinational corporations (MNCs). 

According to her submission, the EU offers access to its Market Access Database to EUbased companies at no cost to users.115 She said that the database covers foreign tariffs, 

taxes, import requirements and documentation, trade data, and trade barriers. She added 

that the database also allows firms to file complaints about export barriers directly to the 

EU Commission and to contact EU Commission offices and member state agencies for 

further information or to request market access assistance. In contrast, she said, 

comparable U.S. government information on foreign markets is spread across several U.S. 

government agencies, including the U.S. Trade Representative, USDA, USDOC, and 

USITC. Ms. Jarosz noted in her submission that “the EU database makes great strides to 

improve predictability and simplification in understanding other export markets for their 

exporters,” and recommended “a one-stop window with comprehensive trade information 

available to [U.S.] SMEs” as a critical component in supporting the President’s National 

Export Initiative.116

With regard to SMEs as compared to MNCs, Ms. Jarosz noted that SMEs generally 

export only one or two products and usually to only one market—the one that is the 

closest in geography and culture. She commented that SMEs may not know of existing 

FTAs or of those under negotiation, and therefore do not consider those FTA partner 

countries as potential new markets. Further, she said that SMEs lack the resources and 

funding to support personnel to evaluate preferential trade agreements to determine 

optimal sourcing strategies or market access costs. Finally, she stated that SMEs may not 

know about applicable rules of origin and the related documentation that is required to 

obtain lower tariffs. 

U.S. Chamber of Commerce117

In her written submission, Liz J. Reilly, Director, TradeRoots, the U.S. Chamber of 

Commerce, states that the Chamber of Commerce is the world’s largest business 

federation, representing more than 3 million businesses from all sectors and regions. She 

said that the U.S. Chamber’s TradeRoots program is a national trade education program 

designed to raise support for and awareness of international trade. In her submission, she 

calls for doubling the level of federal government support for export promotion programs 

 

114 Jarosz, written submission, March 24, 2010. 115 The EU Market Access Database can be found at http://madb.europa.eu/mkaccdb2/indexPubli.htm. 116 TradeMoves LLC, written submission to the USITC, March 24, 2010, 2. 117 Reilly, written testimony to the USITC, February 9, 2010. 
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from the current level of $335 million annually, and following the models of several 

successful state programs in Massachusetts, Nevada, Pennsylvania, and Florida. She 

states that businesses that have taken advantage of U.S. federal government export 

promotion programs are more successful exporters, but that many SMEs are not aware of 

those opportunities, so more money should be devoted to SME outreach. 

Ms. Reilly also stated that an important way to promote SME exports would be for 

Congress to pass the pending bilateral FTAs with Colombia, Panama, and South Korea, 

citing a study performed by the U.S. Chamber showing that the United States could lose 

more than 380,000 jobs and $40 billion in net export sales if the FTAs do not pass and 

similar bilateral FTAs between those countries and the EU and Canada do pass. Beyond 

simply reducing tariffs, her submission states that important aspects of the pending FTAs 

include reducing nontariff barriers, protecting intellectual property, opening up trade in 

services, and increasing opportunities from government procurement. Ms. Reilly 

presented a detailed discussion of the benefits to exports of each of the three pending 

FTAs. 

Washington State Potato Commission118

In his testimony, Matt Harris, Director of Trade at the Washington State Potato 

Commission, a trade association representing the approximate 250 potato growers in 

Washington state, briefly explained the potato trade. He noted that Washington state is 

the second-largest potato producer in the United States; that 9 out of 10 potatoes are 

marketed out of state; and that the farmgate value of the crop is over $690 million, with a 

value to the state of $3.5 billion. He stated that approximately 75 percent of the crop is 

sold to processors to be made into French fries, while 12 percent goes to the fresh market, 

9 percent to the dehydrated market, 3 percent to potato chips, and 1 percent to 

miscellaneous uses. 

One of the principal issues Mr. Harris testified about is a Canadian antidumping duty 

order applied to fresh potatoes exported to British Columbia. He said that Canadian 

authorities apply what the Washington State Potato Commission believes is a low selling 

price in analyzing the market for dumping by importers; as a result, the antidumping duty 

order has been in place for 25 years. He said that this reduces exports from Washington 

state to Canada, causing Washington producers to lose millions of dollars in potential 

sales. Mr. Harris said that the antidumping order has resulted in potato production 

shifting to Canada to supply global french fry producers. 

A second issue he mentioned is that Washington state exports of french fries are subject 

to a 20-percent retaliation duty imposed by Mexico against the United States as a result 

of the dispute between the countries regarding Mexican trucking activities in the United 

States. Mr. Harris testified that U.S. exports of french fries declined by almost $28 

million since the duties were imposed in April 2009, with Canadian producers benefiting 

from the lower U.S. market share. 

Mr. Harris stated that Washington state potato producers and processors were likely to 

lose significant market opportunities in Korea, Colombia, and Panama unless pending 

 

118 USITC, hearing transcript, March 12, 2010; exhibits/testimony, March 12, 2010, pt. 2, [40–53].
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U.S. FTAs were implemented with these countries. He said that in the absence of such 

FTAs, U.S. exporters of potatoes and potato products would lose markets to competitors 

from Europe and other regions with preferential market access in those countries. 

With regard to nontariff export barriers, Mr. Harris mentioned that most were 

phytosanitary measures affecting fresh potatoes and were encountered particularly in 

China, Europe, Japan, and Mexico. However, he said “We just acquired access or the 

ability to ship [fresh potatoes] to Russia.” 

West Coast Seafood Processors Association (WCSPA)119

In his testimony, Mr. Rod Moore, Executive Director of the WCSPA, a trade association 

representing shore-based seafood processors in California, Oregon, and Washington, 

compared the disproportionately high EU tariff imposed on U.S. exports of cold-water 

shrimp, Pandalus jordani, commercially harvested off the coast of Oregon, with the dutyfree treatment accorded to EU imports of similar shrimp exports from Canada, Iceland, 

and Norway. Mr. Moore introduced Mr. Doug Heater, sales manager of Bornstein 

Seafoods, and Charles Kirschbaum, category manager for cold water shrimp sales of 

Pacific Seafoods, to testify about export barriers to U.S. exports of Pandalus jordani

shrimp. (See positions of interested parties for Bornstein Seafoods and Pacific Seafoods). 

Mr. Moore stated that the immediate concern was high EU tariffs, and that he would not 

address nontariff barriers affecting U.S. exports of this type of shrimp. During the hearing, 

Mr. Moore stated that Europe is the best market for Oregon’s exports of Pandalus 

jordani shrimp. Later, in questioning by Commissioners, Mr. Moore described nontariff 

barriers encountered in exporting to Canada, which included tolerance levels for mercury 

in seafood that are lower than those set by the FDA. He noted that once the Canadian 

tolerance limits are exceeded, the exporter is recorded on a “Canadian bad guy list” and, 

in order to be removed from the list, the exporter must have three subsequent shipments 

within tolerance levels shipped to the same buyer in Canada. 120 But frequently, Mr. 

Moore stated, Canadian computers that track the “bad guy list” are not updated, and 

therefore exporters remain on the list. Later in his testimony, Mr. Moore noted that in 

Oregon, there is a rationalization process in the fishing fleet as a result of U.S. 

government restrictions on fishing to protect the Oregon fishery, and as a result there 

would likely be an influx of fishing boats trawling for shrimp, but these fishermen would 

likely have few markets. 

Wine Institute et al121

In his testimony, James Gore, representing the Wine Institute, California Association of 

Winegrape Growers, and Wine America, commented that the U.S. wine sector is 

dominated by SMEs, which “are the lifeblood of the industry, just as they are the 

lifeblood of the U.S. economy.”122 Mr. Gore touched on several points of importance to 

U.S. wine sector SMEs, including the need for reduced trade barriers and a call for 

 

119 USITC, hearing transcript, March 12, 2010; exhibits/testimony, part 2, March 12, 2010. 120 USITC, hearing transcript March 12, 2010, 235. 121 USITC, hearing transcript, March 18, 2010. 122 USITC, hearing transcript, March 18, 2010, 76. 
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increased government assistance for export promotion activities. Mr. Gore stated that 

major competitor countries such as Australia, Chile, and the EU benefit from government 

trade policies and promotional support that provide increased advantages to competitive 

exporters. 

Mr. Gore cited Chile as an example of a competitive wine exporter that negotiates more 

favorable trade agreements than the United States—ones that give their exporters 

competitive advantages in important export markets.123 He also commented that the EU is 

spending $400–$500 million annually for export promotion, compared to about $7 

million by the U.S. government, and that Australia has significantly more personnel 

dedicated to market development efforts than the United States. 

Mr. Gore commented that the U.S. government programs are very helpful for U.S. wine 

exports and should be expanded. He stated that the USDA’s MAP program is particularly 

effective in promoting U.S. exports. Mr. Gore asserted that a number of U.S. government 

programs, including the MAP program, other USDA/FAS assistance programs, and the 

Alcohol and Tobacco Tax and Trade Bureau’s International Trade Division, need to 

be enhanced and expanded.124 He stated that wine sector–specific trade initiatives such as 

U.S.-EU bilateral trade agreement in wine and the World Wine Trade Group’s 

agreements and consultations have been very effective in lowering trade barriers to U.S. 

wine exports.125

Zoltek Corporation126

In her testimony, Ms. Karen Bomba, Zoltek’s chief operating officer, stated that Zoltek 

manufactures carbon fibers in various forms used in industrial structures, such as wind 

turbine blades and automobile structures, among others. She said that their largest market 

is currently in Denmark, while the fastest-growing carbon fiber markets are in Asia, 

particularly China and India, and Zoltek currently has export licenses for customers in 

China, Turkey, Croatia, Russia, Thailand, and Singapore. Ms. Bomba said that exports of 

carbon fibers were originally controlled because they were used in components for 

ballistic missiles. She added that although uses are now much broader, there is still some 

sensitivity (e.g., possible use in centrifuges could be problematic in countries seeking 

nuclear capacity). 

Ms. Bomba said that Zoltek’s export customers are often put off by U.S. export controls 

that can lengthen cycles of testing, validating, and qualifying the product being marketed. 

She noted that Zoltek has two facilities–one in Hungary and one in the United States–and 

each applies for export control licenses in their respective countries. Ms. Bomba stated, 

however, that there are significant differences in applying for licenses in the two 

countries, saying that Hungary surpasses the United States in many areas–Hungarian 

authorities issue licensing faster, require significantly less documentation, and issue 

global export licenses. Given these differences, Ms. Bomba said that when U.S. exports 

require licenses Zoltek will usually ship the products(s) from Hungary so as not to lose 

the sale, even though the transportation costs might be higher. She added that some of 

 

123 USITC, hearing transcript, March 18, 2010, 79. 124 USITC, hearing transcript, March 18, 2010, 81–82. 125 USITC, hearing transcript, March 18, 2010, 82. 126 USITC, hearing transcript, March 10, 2010.
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Zoltek’s Chinese customers may purchase from Chinese or Taiwanese suppliers rather 

than from Zoltek because of the U.S. export controls. When asked if Zoltek’s exports 

would increase if the “red tape” were removed, Ms. Bomba said that they are currently 

supplying all of their customers, but from Hungary rather than the United States.127 She 

said that getting the product from Hungary can be a problem for some customers who 

might qualify product for use in their application based on its source. 

Ms. Bomba also mentioned several other challenges Zoltek faces. She said that REACH 

affects Zoltek in that some of the chemicals used in Zoltek’s sizings will not be allowed 

into the EU under REACH, and the company will also be paying for some of the testing 

of chemicals needed under REACH. In response to a question about tariffs the company 

faces, Ms. Bomba mentioned that they had explored shipping carbon fiber to Brazil but 

found that “[the tariff] was going to be 42 percent.”128 In response to other questions, 

Ms. Bomba mentioned difficulty in obtaining visas for their Hungarian engineers to enter 

the United States, saying that the process could take 9–18 months for a one- to two-year 

rotation. 

Ms. Bomba asked that the U.S. Bureau of Industry and Security reconsider the 

regulations for issuing licenses for carbon fibers; allow for de minimis sampling of small 

quantities to customers; accelerate issuance of licensing; and consider the idea of a global 

license. She added that a global license would allow Zoltek to ship more from the United 

States and might also allow it to supply more foreign customers from within the 

customer’s market (i.e., the company could ship to China and then use that product to 

supply customers). She also suggested that following the European model (in which 

companies can keep documents from the licenses and would then be allowed to ship 

immediately) might be helpful in the United States. 

 

127 USITC, hearing transcript, March 10, 2010, 233. 128 USITC, hearing transcript, March 10, 2010, 301. 

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APPENDIX A 

Request Letter



APPENDIX B 

Federal Register Notices 

62812 Federal Register / Vol. 229, No. 74 / Tuesday, December 1, 2009 / Notices 

4. Right-of-Way N–51242 for water 

storage tanks, road, water pipeline, and 

ancillary facility purposes granted to the 

City of Fernley, its successors or assigns, 

pursuant to the Act of October 21, 1976 

(43 U.S.C. 1761); 

5. Right-of-Way N–58193 for road and 

buried utility purposes granted to DB 

Fernley Investments, Ltd, its successors 

or assigns, pursuant to the Act of 

October 21, 1976 (43 U.S.C. 1761); 

6. Rights-of-Way N–63393 and Nev060169 for gas pipeline purposes 

granted to Paiute Pipeline Company, its 

successors or assigns, pursuant to the 

Act of February 25, 1920 (30 U.S.C. 

185); 

7. Right-of-Way N–73706 for 

communication purposes granted to 

Nevada Bell, its successors or assigns, 

pursuant to the Act of October 21, 1976 

(43 U.S.C. 1761); 

8. Right-of-Way N–75056 for gas 

pipeline purposes granted to Southwest 

Gas Corporation, its successors or 

assigns, pursuant to the Act of February 

25, 1920 (30 U.S.C. 185); 

9. Right-of-Way N–84710 for gas 

pipeline purposes granted to DB Fernley 

Investments, Ltd, its successors or 

assigns, pursuant to the Act of February 

25, 1920 (30 U.S.C. 185). Holders of 

rights-of-way N–51242, N–58193, N– 

63393, and N–84710 have submitted 

applications to exercise term extension 

and conversion to easement 

opportunities. The land conveyance will 

be subject to these modifications. 

10. The purchaser/patentee, by 

accepting patent, agrees to indemnify, 

defend, and hold the United States 

harmless from any costs, damages, 

claims, causes of action, penalties, fines, 

liabilities, and judgments of any kind 

arising from the past, present, or future 

acts or omissions of the patentee, its 

employees, agents, contractors, or 

lessees, or a third party arising out of, 

or in connection with, the patentee’s use 

and/or occupancy of the patented real 

property. This indemnification and hold 

harmless agreement includes, but is not 

limited to, acts and omissions of the 

patentee, its employees, agents, 

contractors, or lessees, or third party 

arising out of or in connection with the 

use and/or occupancy of the patented 

real property resulting in: 

(a) Violations of Federal, State, and 

local laws and regulations that are now, 

or in the future become, applicable to 

the real property; 

(b) Judgments, claims, or demands of 

any kind assessed against the United 

States; 

(c) Costs, expenses, or damages of any 

kind incurred by the United States; 

(d) Releases or threatened releases of 

solid or hazardous waste(s) and/or 

hazardous substance(s), as defined by 

Federal or State environmental laws, off, 

on, into, or under land, property, and 

other interests of the United States; 

(e) Other activities by which solid or 

hazardous substances or wastes, as 

defined by Federal and State 

environmental laws are generated, 

released, stored, used, or otherwise 

disposed of on the patented real 

property, and any cleanup response, 

remedial action, or other actions related 

in any manner to said solid or 

hazardous substances or wastes; or 

(f) Natural resource damages as 

defined by Federal and State law. This 

covenant shall be construed as running 

with the patented real property and may 

be enforced by the United States in a 

court of competent jurisdiction. 

11. Pursuant to the requirements 

established by Section 120(h) of the 

Comprehensive Environmental 

Response, Compensation and Liability 

Act (CERCLA) (42 U.S.C. 9620 et seq.), 

as amended by the Superfund 

Amendments and Reauthorization Act 

of 1988, (100 Stat. 1670), notice is 

hereby given that the above-described 

land has been examined and no 

evidence was found to indicate that any 

hazardous substances have been stored 

for 1 year or more, nor had any 

hazardous substances been disposed of 

or released on the subject property. 

Encumbrances of record, appearing in 

the BLM public files for the parcel 

proposed for sale, are available during 

normal business hours at the BLM 

Carson City District Office. 

No warranty of any kind, expressed or 

implied, is given by the United States as 

to the title, physical condition, or 

potential uses of the parcel of land 

proposed for sale, and the conveyance 

of any such parcel will not be on a 

contingency basis. It is the buyer’s 

responsibility to be aware of all 

applicable Federal, State, or local 

government laws, regulations, or 

policies that may affect the subject lands 

or its future uses. It is also the buyer’s 

responsibility to be aware of existing or 

prospective uses of nearby properties. 

Any land lacking access from a public 

road and highway will be conveyed as 

such, and future access acquisition will 

be the responsibility of the buyer. 

Federal law requires that bidders must 

be 

(1) United States citizens 18 years of 

age or older; 

(2) A corporation subject to the laws 

of any State or of the United States; 

(3) An entity including, but not 

limited to, associations or partnerships 

capable of acquiring and owning real 

property, or interests therein, under the 

laws of the State of Nevada; or 

(4) A State, State instrumentality, or 

political subdivision authorized to 

acquire and own real property. 

U.S. citizenship is evidenced by 

presenting a birth certificate, passport, 

or naturalization papers. Certification of 

bidder qualification must accompany 

the deposit. 

Only written comments submitted by 

postal service or overnight mail will be 

considered properly filed. Electronic 

mail, facsimile or telephone comments 

will not be considered as properly filed. 

Before including your address, phone 

number, e-mail address, or other 

personal identifying information in your 

comment, you should be aware that 

your entire comment—including your 

personal identifying information—may 

be made publicly available at any time. 

While you can ask us in your comment 

to withhold your personal identifying 

information from public review, we 

cannot guarantee that we will be able to 

do so. 

Any adverse comments regarding the 

proposed sale will be reviewed by the 

BLM Nevada State Director, who may 

sustain, vacate, or modify this realty 

action. In the absence of any adverse 

comments, this realty action will 

become the final determination of the 

Department of the Interior. 

(Authority: 43 CFR 2711) 

Linda J. Kelly, 

Field Manager, Sierra Front Field Office. 

[FR Doc. E9–28721 Filed 11–30–09; 8:45 am] 

BILLING CODE 4310–HC–P 

INTERNATIONAL TRADE 

COMMISSION 

[Inv. No. 332–509] 

Small and Medium-Sized Enterprises: 

U.S. and EU Export Activities, and 

Barriers and Opportunities 

Experienced by U.S. Firms 

AGENCY: United States International 

Trade Commission. 

ACTION: Institution of investigation and 

scheduling of hearing. 

SUMMARY: Following receipt of a request 

on October 6, 2009, from the United 

States Trade Representative (USTR) 

under section 332(g) of the Tariff Act of 

1930 (19 U.S.C. 1332(g)), the 

Commission instituted investigation No. 

332–509, Small and Medium-Sized 

Enterprises: U.S. and EU Export 

Activities, and Barriers and 

Opportunities Experienced by U.S. 

Firms, for the purpose of preparing the 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 229, No. 74 / Tuesday, December 1, 2009 / Notices 62813 

second in a series of three reports 

requested by the USTR relating to small 

and medium-sized enterprises. 

DATES:

January 26, 2010: Deadline for filing 

requests to appear at the public hearing. 

January 28, 2010: Deadline for filing 

pre-hearing briefs and statements. 

February 9, 2010: Public hearing 

(Washington, DC). 

February 23, 2010: Deadline for filing 

post-hearing briefs and statements. 

March 26, 2010: Deadline for filing 

written submissions. 

July 6, 2010: Transmittal of 

Commission report to the USTR. 

ADDRESSES: All Commission offices, 

including the Commission’s hearing 

rooms, are located in the United States 

International Trade Commission 

Building, 500 E Street, SW., 

Washington, DC. All written 

submissions should be addressed to the 

Secretary, United States International 

Trade Commission, 500 E Street, SW., 

Washington, DC 20436. The public 

record for this investigation may be 

viewed on the Commission’s electronic 

docket (EDIS) at http://www.usitc.gov/ 

secretary/edis.htm. 

FOR FURTHER INFORMATION CONTACT: 

Project Leaders Laura Bloodgood (202– 

708–4726 or laura.bloodgood@usitc.gov) 

or Justino De La Cruz (202–205–3252 or 

justino.delacruz@usitc.gov) for 

information specific to this 

investigation. For information on the 

legal aspects of this investigation, 

contact William Gearhart of the 

Commission’s Office of the General 

Counsel (202–205–3091 or 

william.gearhart@usitc.gov). The media 

should contact Margaret O’Laughlin, 

Office of External Relations (202–205– 

1819 or margaret.olaughlin@usitc.gov). 

Hearing-impaired individuals may 

obtain information on this matter by 

contacting the Commission’s TDD 

terminal at 202–205–1810. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server (http://www.usitc.gov). 

Persons with mobility impairments who 

will need special assistance in gaining 

access to the Commission should 

contact the Office of the Secretary at 

202–205–2000. 

Background: In his letter the USTR 

requested that the Commission provide 

three reports during the next 12 months 

relating to small and medium-sized 

enterprises (SMEs). In this notice the 

Commission is instituting the second of 

three investigations under section 332(g) 

for the purpose of preparing the second 

report, which is to be transmitted to the 

USTR by July 6, 2010. The Commission 

published notice of institution of the 

first investigation, investigation No. 

332–508, in the Federal Register of 

October 28, 2009 (74 FR 55581). As 

requested, in the second report 

(investigation No. 332–509) the 

Commission will: 

(1) Assist in analyzing the 

performance of U.S. SME firms in 

exporting compared to SMEs exporting 

in other leading economies. As one way 

of comparing the performance of U.S. 

SMEs to those in other countries, the 

Commission will compare the exporting 

activity of SMEs in the United States 

and the European Union (EU), and 

analyze the distinctions between U.S. 

and EU firms in terms of sectoral 

composition, firm characteristics, and 

exporting behavior. 

(2) Identify barriers to exporting noted 

by U.S. SMEs and strategies used by 

SMEs to overcome special constraints 

and reduce trade costs. 

(3) Identify the benefits to SMEs from 

increased export opportunities, 

including free trade agreements and 

other trading arrangements. 

To best aid the Commission in 

gathering information for the report, the 

Commission is seeking information in 

response to the following questions: 

• What are the most significant 

constraints that U.S. SMEs face in their 

efforts to export? 

• If SMEs have been successful in 

overcoming those constraints, what 

strategies have they adopted? 

• What particular benefits do SMEs 

believe they have received from 

increased export opportunities 

including those from free trade 

agreements and other trading 

arrangements; which trade agreements 

or other arrangements have been most 

beneficial? 

The USTR requested that the 

Commission deliver the second report 

by July 6, 2010. The Commission shortly 

expects to institute a third investigation, 

investigation No. 332–510, Small and 

Medium-Sized Enterprises: 

Characteristics and Performance, for the 

purpose of preparing the third report. In 

that report the Commission will, among 

other things, examine U.S. SMEs 

engaged in providing services, including 

the characteristics of firms that produce 

tradable services, growth in services 

exports, and the differences between 

SME and large services exporters. It will 

also examine U.S. goods and services 

exports by SMEs and identify trade 

barriers that may disproportionately 

affect SME export performance, as well 

as possible linkages between exporting 

and SME performance. In addition, the 

report will identify how data gaps might 

be overcome to enhance our 

understanding of SMEs in service sector 

exports. The USTR requested that the 

Commission transmit this third report 

by October 6, 2010. 

Public Hearing: The Commission will 

hold a joint public hearing in 

connection with this investigation and 

investigation No. 332–510 at the U.S. 

International Trade Commission 

Building, 500 E Street, SW., 

Washington, DC, beginning at 9:30 a.m. 

on Wednesday, February 9, 2010 (and 

continuing on February 10, 2010, if 

needed). Requests to appear at the 

public hearing should be filed with the 

Secretary no later than 5:15 p.m., 

January 26, 2010, in accordance with 

the requirements in the ‘‘Submissions’’ 

section below. Persons wishing to 

appear should indicate in their request 

to appear whether they plan to provide 

testimony with respect to investigation 

No. 332–509, investigation No. 332–510, 

or both investigations. All pre-hearing 

briefs and statements should be filed not 

later than 5:15 p.m., January 28, 2010; 

and all post-hearing briefs and 

statements responding to matters raised 

at the hearing should be filed not later 

than 5:15 p.m., February 23, 2010. In the 

event that, as of the close of business on 

January 26, 2010, no witnesses are 

scheduled to appear at the hearing, the 

hearing will be canceled. Any person 

interested in attending the hearing as an 

observer or non-participant may call the 

Office of the Secretary (202–205–2000) 

after January 26, 2010, for information 

concerning whether the hearing will be 

held. The Commission is also 

considering holding additional hearings 

in Portland, Oregon and St. Louis, 

Missouri. Notice of the time, date, and 

place of those hearings would be 

published at a later date. 

Written Submissions: In lieu of or in 

addition to participating in the hearing, 

interested parties are invited to file 

written submissions concerning this 

investigation. All written submissions 

should be addressed to the Secretary, 

and all such submissions (other than 

pre- and post-hearing briefs and 

statements) should be received not later 

than 5:15 p.m., March 26, 2010. All 

written submissions must conform with 

the provisions of section 201.8 of the 

Commission’s Rules of Practice and 

Procedure (19 CFR 201.8). Section 201.8 

requires that a signed original (or a copy 

so designated) and fourteen (14) copies 

of each document be filed. In the event 

that confidential treatment of a 

document is requested, at least four (4) 

additional copies must be filed, in 

which the confidential information 

must be deleted (see the following 

paragraph for further information 

regarding confidential business 

information). The Commission’s rules 

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62814 Federal Register / Vol. 229, No. 74 / Tuesday, December 1, 2009 / Notices 

authorize filing submissions with the 

Secretary by facsimile or electronic 

means only to the extent permitted by 

section 201.8 of the rules (see Handbook 

for Electronic Filing Procedures, http:// 

www.usitc.gov/secretary/ 

fed_reg_notices/rules/documents/ 

handbook_on_electronic_filing.pdf). 

Persons with questions regarding 

electronic filing should contact the 

Office of the Secretary (202–205–2000). 

Any submissions that contain 

confidential business information must 

also conform with the requirements of 

section 201.6 of the Commission’s Rules 

of Practice and Procedure (19 CFR 

201.6). Section 201.6 of the rules 

requires that the cover of the document 

and the individual pages be clearly 

marked as to whether they are the 

‘‘confidential’’ or ‘‘non-confidential’’ 

version, and that the confidential 

business information be clearly 

identified by means of brackets. All 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested parties. 

In his request letter, the USTR stated 

that his office intends to make the 

Commission’s reports available to the 

public in their entirety, and asked that 

the Commission not include any 

confidential business information or 

national security classified information 

in the reports that the Commission 

transmits to his office. Any confidential 

business information received by the 

Commission in this investigation and 

used in preparing this report will not be 

published in a manner that would 

reveal the operations of the firm 

supplying the information. 

By order of the Commission. 

Issued: November 25, 2009. 

William R. Bishop, 

Acting Secretary to the Commission. 

[FR Doc. E9–28764 Filed 11–30–09; 8:45 am] 

BILLING CODE P 

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 337–TA–644] 

In the Matter of Certain Composite 

Wear Components and Products 

Containing Same; Notice of Issuance 

of Limited Exclusion Order and Cease 

and Desist Order; Termination of 

Investigation 

AGENCY: U.S. International Trade 

Commission. 

ACTION: Notice. 

SUMMARY: The United States 

International Trade Commission hereby 

provides notice that it has determined to 

issue a limited exclusion order and 

cease and desist order and terminate the 

investigation. 

FOR FURTHER INFORMATION CONTACT: 

Michael K. Haldenstein, Office of the 

General Counsel, U.S. International 

Trade Commission, 500 E Street, SW., 

Washington, DC 20436, telephone (202) 

205–3041. Copies of non-confidential 

documents filed in connection with this 

investigation are or will be available for 

inspection during official business 

hours (8:45 a.m. to 5:15 p.m.) in the 

Office of the Secretary, U.S. 

International Trade Commission, 500 E 

Street, SW., Washington, DC 20436, 

telephone (202) 205–2000. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server at http://www.usitc.gov. 

The public record for this investigation 

may be viewed on the Commission’s 

electronic docket (EDIS) at http:// 

edis.usitc.gov. Hearing-impaired 

persons are advised that information on 

this matter can be obtained by 

contacting the Commission’s TDD 

terminal on (202) 205–1810. 

SUPPLEMENTARY INFORMATION: This 

investigation was instituted on April 25, 

2008, based on a complaint filed by 

Magotteaux International S/A and 

Magotteaux, Inc. (collectively, 

‘‘Magotteaux’’). The complaint, as 

supplemented, alleged violations of 

section 337 of the Tariff Act of 1930 (19 

U.S.C. 1337) in the importation into the 

United States, the sale for importation, 

and the sale within the United States 

after importation of certain composite 

wear components and products 

containing the same that infringe claims 

12–13 and 16–21 of U.S. Patent No. RE 

39,998 (‘‘the ‘998 patent’’). The 

complaint named Fonderie Acciaierie 

Rioale S.P.A. (‘‘FAR’’), AIA Engineering 

Ltd., and Vega Industries (collectively, 

‘‘AIAE Respondents’’) as respondents. 

FAR was subsequently terminated from 

the investigation on the basis of a 

settlement agreement, leaving the AIAE 

Respondents as the only remaining 

respondents. 

On May 8, 2009, the ALJ issued an ID 

finding the AIAE Respondents in 

default pursuant to Commission Rules 

210.16(a)(2) and 210.17, 19 CFR 

210.16(a)(2) and 210.17. On July 7, 

2009, the Commission determined not 

to review the ID and indicated that, in 

addition to the ALJ’s finding of violation 

pursuant to Rule 210.17, the 

Commission presumes the facts alleged 

in the complaint to be true with respect 

to the AIAE Respondents. The 

Commission also determined to waive 

Commission Rule 210.42(a)(ii), which, 

unless the Commission orders 

otherwise, requires that the ALJ issue a 

recommended determination on remedy 

and bonding in conjunction with any 

final initial determination concerning 

violation of section 337. The 

Commission encouraged the parties to 

the investigation, interested government 

agencies, and any other interested 

parties to file written submissions on 

the issues of remedy, the public interest, 

and bonding. The parties to the 

investigation and the IA filed 

submissions and response submissions 

concerning remedy, the public interest, 

and bonding on July 22, 2009, and July 

30, 2009, respectively. No other parties 

filed submissions. 

Having examined the record in this 

investigation, including the submissions 

on remedy, the public interest, and 

bonding and responses thereto, the 

Commission has determined that the 

appropriate form of relief is a limited 

exclusion order and a cease and desist 

order. 

The limited exclusion order prohibits 

the unlicensed entry for consumption of 

composite wear components and 

products containing same that are 

covered by one or more of claims 12– 

13 and 16–21 of the ‘998 patent and that 

are manufactured abroad by or on behalf 

of, or are imported by or on behalf of, 

AIA Engineering Limited or Vega 

Industries or any of their affiliated 

companies, parents, subsidiaries, or 

other related business entities, or their 

successors or assigns. 

The cease and desist order covers 

products that infringe claims 12–13 and 

16–21 of the ‘998 patent and is directed 

to defaulting domestic respondent Vega 

Industries and any of its principals, 

stockholders, officers, directors, 

employees, agents, licensees, 

distributors, controlled (whether by 

stock ownership or otherwise) and 

majority owned business entities, 

successors, and assigns. 

The Commission has also determined 

that the public interest factors 

enumerated in 19 U.S.C. 1337(d) and (f) 

do not preclude issuance of the aforementioned remedial orders, and that the 

bond during the Presidential period of 

review shall be set at 100 percent of the 

entered value for any covered composite 

wear components and products 

containing same. 

The authority for the Commission’s 

determinations is contained in section 

337 of the Tariff Act of 1930, as 

amended (19 U.S.C. 1337), and in 

sections 210.49—210.50 of the 

Commission’s Rules of Practice and 

Procedure (19 CFR 210.49–210.50). 

By order of the Commission. 

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5804 Federal Register / Vol. 75, No. 23 / Thursday, February 4, 2010 / Notices 

maximum of five minutes. If reasonable 

accommodation is required, please 

contact the BLM’s Prineville District at 

(541) 416–6889 as soon as possible. 

FOR FURTHER INFORMATION CONTACT: 

Christina Lilienthal, Public Affairs 

Specialist, 3050 NE Third, Prineville, 

OR 97754, (541) 416–6889 or e-mail: 

christina_lilienthal@blm.gov. 

Dated: January 29, 2010. 

Deborah J. Henderson-Norton, 

District Manager, Prineville District Office. 

[FR Doc. 2010–2426 Filed 2–3–10; 8:45 am] 

BILLING CODE 4310–33–P 

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 337–TA–665] 

In the Matter of: Certain 

Semiconductor Integrated Circuits and 

Products Containing Same; Notice of 

Commission Determination To Review 

in Part a Final Initial Determination 

Finding No Violation of Section 337 

and on Review To Take No Position on 

One Issue; Termination of the 

Investigation With a Finding of No 

Violation 

AGENCY: U.S. International Trade 

Commission. 

ACTION: Notice. 

SUMMARY: Notice is hereby given that 

the U.S. International Trade 

Commission has determined to review 

in part the final initial determination 

(‘‘ID’’) issued by the presiding 

administrative law judge (‘‘ALJ’’) on 

October 14, 2009, finding no violation of 

section 337 of the Tariff Act of 1930, 19 

U.S.C. 1337, in this investigation. On 

review, the Commission has determined 

to take no position on one issue, and to 

terminate this investigation with a 

finding of no violation. 

FOR FURTHER INFORMATION CONTACT: 

Sidney A. Rosenzweig, Esq., Office of 

the General Counsel, U.S. International 

Trade Commission, 500 E Street, SW., 

Washington, DC 20436, telephone (202) 

708–2532. Copies of non-confidential 

documents filed in connection with this 

investigation are or will be available for 

inspection during official business 

hours (8:45 a.m. to 5:15 p.m.) in the 

Office of the Secretary, U.S. 

International Trade Commission, 500 E 

Street, SW., Washington, DC 20436, 

telephone (202) 205–2000. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server (http://www.usitc.gov). 

The public record for this investigation 

may be viewed on the Commission’s 

electronic docket (EDIS) at http:// 

edis.usitc.gov. Hearing-impaired 

persons are advised that information on 

this matter can be obtained by 

contacting the Commission’s TDD 

terminal on (202) 205–1810. 

SUPPLEMENTARY INFORMATION: The 

Commission instituted Inv. No. 337– 

TA–665 on December 24, 2008, based 

on a complaint filed by Qimonda AG of 

Munich, Germany (‘‘Qimonda’’). 73 FR 

79165 (Dec. 24, 2008). The complaint 

alleged a violation of section 337 in the 

importation, sale for importation, and 

sale within the United States after 

importation of certain semiconductor 

integrated circuits and products 

containing same by reason of 

infringement of various claims of U.S. 

Patent Nos. 5,213,670 (‘‘the ’670 

patent’’); 5,646,434 (‘‘the ’434 patent’’); 

5,851,899 (‘‘the ’899 patent’’); 6,495,918 

(‘‘the ’918 patent’’); 6,593,240 (‘‘the ’240 

patent’’); 6,714,055 (‘‘the ’055 patent’’); 

and 6,103,456 (‘‘the ’456 patent’’). The 

complaint further alleged that there 

exists a domestic industry with respect 

to each of the asserted patents. The 

complaint named the following 

respondents: LSI Corporation of 

Milpitas, California (‘‘LSI’’); Seagate 

Technology of the Cayman Islands; 

Seagate Technology (US) Holdings Inc. 

of Scotts Valley, California; Seagate 

Memory Products (US) Corporation of 

Scotts Valley, California; and Seagate 

(US) LLC of Scotts Valley, California 

(collectively ‘‘Seagate’’). Qimonda 

accuses of infringement certain LSI 

integrated circuits, as well as certain 

Seagate hard disk drives that contain the 

accused LSI integrated circuits. 

The ALJ conducted an evidentiary 

hearing from June 1–9, 2009. Prior to the 

hearing, Qimonda tacitly withdrew 

three of the asserted patents: The ’055 

patent, the ’240 patent, and the ’456 

patent. Qimonda did not present 

evidence regarding those patents at the 

hearing, and did not include any 

analysis of those patents in its posthearing briefing. 

On October 14, 2009, the ALJ issued 

his final ID. The ID formally withdrew 

the ’055 patent, the ’240 patent, and the 

’456 patent from the investigation. The 

ALJ found that based on his claim 

constructions, Qimonda had not 

demonstrated that it practices any of the 

patents in suit. Accordingly, the ALJ 

ruled that an industry does not exist in 

the United States that exploits any of 

the four remaining asserted patents, as 

required by 19 U.S.C. 1337(a)(2). The 

ALJ ruled that certain LSI products 

infringe certain claims of the ’918 

patent, but that no accused products 

infringe any of the other asserted 

patents. The ALJ ruled that all of the 

asserted claims of the ’918 patent, and 

some of the asserted claims of the ’434 

patent, are invalid under 35 U.S.C. 102, 

but that the asserted claims of the ’670 

and ’899 patents are not invalid. 

On October 27, 2009, Qimonda filed 

a petition for review of the ID. Qimonda 

did not petition for review of the ALJ’s 

finding of no violation of section 337 as 

to the ’670 patent. Thus, only three 

patents—the ’434, ’899, and ’918 

patents—remain in suit. On November 

5, 2009, the Respondents and IA filed 

responses to Qimonda’s petition. 

Having examined the record of this 

investigation, including the ALJ’s final 

ID, the petition for review, and the 

responses thereto, the Commission has 

determined to review the final ID in 

part. Specifically, the Commission has 

determined to review and to take no 

position on whether U.S. Patent No. 

6,424,051 to Shinogi anticipates, under 

35 U.S.C. 102, any of the asserted claims 

of the ’918 patent. See Beloit Corp. v. 

Valmet Oy, 742 F.2d 1421, 1422–23 

(Fed. Cir. 1984). 

The Commission has determined not 

to review the remainder of the ID. 

Accordingly, the Commission has 

terminated this investigation with a 

finding of no violation. 

The authority for the Commission’s 

determination is contained in section 

337 of the Tariff Act of 1930, as 

amended (19 U.S.C. 1337), and in 

sections 210.42–46 of the Commission’s 

Rules of Practice and Procedure (19 CFR 

210.42–46). 

By order of the Commission. 

Issued: January 29, 2010. 

Marilyn R. Abbott, 

Secretary to the Commission. 

[FR Doc. 2010–2319 Filed 2–3–10; 8:45 am] 

BILLING CODE 7020–08–P 

INTERNATIONAL TRADE 

COMMISSION 

[Inv. No. 332–509; Inv. No. 332–510] 

Small and Medium-Sized Enterprises: 

U.S. and EU Export Activities, and 

Barriers and Opportunities 

Experienced by U.S. Firms and Small 

and Medium-Sized Enterprises: 

Characteristics and Performance 

AGENCY: United States International 

Trade Commission. 

ACTION: Notice of time and place of 

additional public hearings in St. Louis, 

MO, and Portland, OR, and reaffirming 

of time and place of Washington, DC 

hearing. 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 23 / Thursday, February 4, 2010 / Notices 5805 

SUMMARY: The Commission will hold a 

public hearing on these investigations in 

St. Louis, MO, beginning at 9:30 a.m. on 

March 10, 2010 at the Hilton St. Louis 

at the Ballpark, and in Portland, OR, 

beginning at 9:30 a.m. on March 12, 

2010 at the Holiday Inn Portland 

Airport. As previously announced, the 

Commission will also hold a public 

hearing on these investigations in 

Courtroom A at the U.S. International 

Trade Commission Building, 500 E 

Street, SW., Washington, DC, beginning 

at 9:30 a.m. on Tuesday, February 9, 

2010 (and continuing on February 10, 

2010, if needed). 

ADDRESSES: All written correspondence 

should be addressed to the Secretary, 

United States International Trade 

Commission, 500 E Street, SW., 

Washington, DC 20436. The public 

record for these investigations may be 

viewed on the Commission’s electronic 

docket (EDIS) at http://www.usitc.gov/ 

secretary/edis.htm. 

FOR FURTHER INFORMATION CONTACT: 

Project Leaders Justino De La Cruz (202– 

205–3252 or justino.delacruz@usitc.gov) 

or Laura Bloodgood (202–708–4726 or 

laura.bloodgood@usitc.gov) for 

information specific to these 

investigations. For information on the 

legal aspects of these investigations, 

contact William Gearhart of the 

Commission’s Office of the General 

Counsel (202–205–3091 or 

william.gearhart@usitc.gov). The media 

should contact Margaret O’Laughlin, 

Office of External Relations (202–205– 

1819 or margaret.olaughlin@usitc.gov). 

Hearing-impaired individuals may 

obtain information on this matter by 

contacting the Commission’s TDD 

terminal at 202–205–1810. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server (http://www.usitc.gov). 

Persons with mobility impairments who 

will need special assistance in gaining 

access to the Commission should 

contact the Office of the Secretary at 

202–205–2000. 

Background Information: The 

hearings relate to the second and third 

of a series of three investigations that 

the Commission is conducting under 

section 332(g) of the Tariff Act of 1930 

(19 U.S.C. 1332(g)) at the request of the 

United States Trade Representative 

(USTR). The Commission received the 

request for the investigations on October 

6, 2009. The Commission delivered its 

report to the USTR on the first 

investigation, No. 332–508, Small and 

Medium-Sized Enterprises: Overview of 

Participation in U.S. Exports, on 

January 12, 2010, and it is available to 

the public at www.usitc.gov. The 

Commission is scheduled to deliver its 

reports to the USTR on the second and 

third investigations, investigation No. 

332–509, Small and Medium-Sized 

Enterprises: U.S. and EU Export 

Activities, and Barriers and 

Opportunities Experienced by U.S. 

Firms, and investigation No. 332–510, 

Small and Medium-Sized Enterprises: 

Characteristics and Performance, by 

July 6, 2010, and October 6, 2010, 

respectively. Notices announcing 

institution of the three investigations 

were published in the Federal Registers 

of October 28, 2009 (74 FR 55581); 

December 1, 2009 (74 FR 62812); and 

December 11, 2009 (74 F.R. 65787). The 

second and third notices also 

announced the Washington, DC hearing 

and the intent to hold additional 

hearings in St. Louis, MO and Portland, 

OR. 

Public Hearings: The times and places 

of the three hearings and deadlines for 

filing requests to appear and any pre- or 

post-hearing briefs or statements or 

summaries of testimony are as follows: 

Washington, DC: 

The hearing will be held in 

Courtroom A at the U.S. International 

Trade Commission Building, 500 E 

Street, SW., Washington, DC, beginning 

at 9:30 a.m. on Tuesday, February 9, 

2010 (and continuing on February 10, 

2010, if needed). 

January 26, 2010: Deadline for filing 

requests to appear. 

January 28, 2010: Deadline for filing 

pre-hearing briefs, statements, or 

summaries of testimony. 

February 9, 2010: Public hearing 

(Washington, DC). 

February 10, 2010: Public hearing, 

second day if needed. 

February 23, 2010: Deadline for filing 

post-hearing briefs or statements. 

St. Louis, MO: 

The hearing will be held at the Hilton 

St. Louis at the Ballpark, One South 

Broadway, St. Louis, MO 63102, 

beginning at 9:30 a.m. local time on 

Wednesday, March 10, 2010. 

February 24, 2010: Deadline for filing 

requests to appear. 

February 26, 2010: Deadline for filing 

pre-hearing briefs, statements, or 

summaries of testimony. 

March 10, 2010: Public hearing (St. 

Louis, MO). 

March 26, 2010: Deadline for filing posthearing briefs or statements. 

Portland, OR: 

The hearing will be held at the 

Holiday Inn Portland Airport, 8439 NE 

Columbia Boulevard, Portland, OR 

97220, beginning at 9:30 a.m. local time 

on Friday, March 12, 2010. 

February 26, 2010: Deadline for filing 

requests to appear. 

March 2, 2010: Deadline for filing prehearing briefs, statements, or 

summaries of testimony. 

March 12, 2010: Public hearing 

(Portland, OR). 

March 26, 2010: Deadline for filing posthearing briefs or statements. 

The above hearings will be open to 

the public. Accordingly, persons 

testifying should not include 

confidential business information in 

their testimony. Any person desiring to 

submit confidential business 

information to the Commission in these 

investigations should do so in writing in 

accordance with the procedures set out 

in the ‘‘Written Submissions’’ section 

below. 

To assist the Commission in the 

preparation of the two reports, the 

Commission is particularly interested in 

obtaining information and views on the 

following: 

• The most significant constraints 

that U.S. SMEs face in their efforts to 

export. 

• The strategies that SMEs have 

adopted to address or overcome those 

constraints. 

• The benefits to SMEs of increased 

export opportunities from free trade 

agreements or other trading 

arrangements. 

• The U.S. free trade agreements or 

other trading arrangements that have 

been most beneficial to SMEs that 

export. 

• The characteristics of SMEs that 

export services. 

• How exporting affects SME 

business performance. 

• The extent to which U.S. SMEs 

have global operations. 

• How SMEs based in the United 

States differ in their exporting activities 

from SMEs based in the European 

Union and other leading economies. 

In the event that as of the close of 

business on the deadline for filing 

requests to appear no witnesses have 

filed requests to appear at a hearing, that 

hearing will be canceled. Any person 

interested in attending a hearing as an 

observer or non-participant may call the 

Office of the Secretary (202–205–2000) 

after the deadline for filing requests to 

appear for information concerning 

whether that hearing will be held. 

Notice of Appearance: Written 

requests to appear at the Commission 

hearings must be filed with the 

Secretary to the Commission in 

Washington, DC by 5:15 p.m. Eastern 

Time of the filing deadline for the 

hearing at which the person wishes to 

appear. The request, which may be in 


srobinson on DSKHWCL6B1PROD with NOTICES
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the form of a letter and which should be 

on company or other appropriate 

stationery, should identify the hearing 

at which the person wishes to appear, 

the investigation to which their 

testimony pertains (it could be both 

investigations), their name, title, and 

company or other organizational 

affiliation (if any), address, telephone 

number, e-mail address, and industry or 

main line of business of the company if 

any they are representing. Requests to 

appear must be made by post mail or 

delivered in person (see ‘‘ADDRESSES’’). 

The Commission will also accept 

requests to appear filed by e-mail to 

SMEhearings@usitc.gov, or through 

Laura Bloodgood at 

laura.bloodgood@usitc.gov. The 

Commission does not accept requests 

filed by fax. 

Pre- and Post-Hearing Briefs And 

Statements, Summaries: Participants are 

encouraged to provide a pre-hearing 

brief or statement or, in lieu thereof, 

may provide a one-page summary of the 

testimony they plan to present. Such 

summaries will be placed in the public 

record and therefore should not include 

any confidential business information. 

Any confidential business information 

included in a pre-hearing brief or 

statement should be submitted in 

accordance with the procedures set 

forth below under ‘‘Written 

Submissions.’’ Post-hearing briefs and 

statements would generally be for the 

purpose of responding to matters raised 

at the hearing, including questions 

asked by the Commissioners or 

testimony presented by other interested 

parties. 

Written Submissions: In lieu of or in 

addition to participating in the hearing, 

interested parties are invited to file 

written submissions concerning these 

investigations. All written submissions 

should be addressed to the Secretary to 

the Commission, and all such 

submissions (other than pre- and posthearing statements) should be received 

not later than 5:15 p.m. Eastern Time, 

March 26, 2010. One signed original (or 

a copy so designated) and fourteen (14) 

copies of each document must be filed. 

In the event that confidential treatment 

of a document is requested, at least four 

(4) additional copies must be filed, in 

which the confidential information 

must be deleted (see below for further 

information regarding confidential 

business information). Written 

submissions may be filed by post mail 

or delivered in person (see ADDRESSES), 

or filed using the Commission’s 

electronic filing procedure described 

below. 

To use the Commission’s electronic 

filing procedure, filers must first be 

registered users of the Commission’s 

Electronic Document Information 

System (EDIS), accessible from the 

USITC Web site (http://www.usitc.gov/ 

secretary/edis.htm). The Commission’s 

rules for electronic filing are available in 

its Handbook on Electronic Filing 

Procedures (http://www.usitc.gov/ 

secretary/fed_reg_notices/rules/ 

handbook_on_electronic_filing.pdf). All 

written submissions must conform with 

the provisions of section 201.8 of the 

Commission’s Rules of Practice and 

Procedure (19 CFR 201.8). Persons with 

questions regarding electronic filing and 

EDIS should contact the Office of the 

Secretary (202–205–2000). 

Any submissions that contain 

confidential business information must 

also conform with the requirements of 

section 201.6 of the Commission’s Rules 

of Practice and Procedure (19 CFR 

201.6). Section 201.6 of the rules 

requires that the cover of the document 

and the individual pages be clearly 

marked as to whether they are the 

‘‘confidential’’ or ‘‘non-confidential’’ 

version, and that the confidential 

business information be clearly 

identified by means of brackets. All 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested parties. 

In his request letter, the USTR stated 

that his office intends to make the 

Commission’s reports available to the 

public in their entirety, and asked that 

the Commission not include any 

confidential business information or 

national security classified information 

in the reports that the Commission 

transmits to his office. Any confidential 

business information received by the 

Commission in these investigations and 

used in preparing this report will not be 

published in a manner that would 

reveal the operations of the firm 

supplying the information. 

By order of the Commission. 

Issued: January 29, 2010. 

Marilyn R. Abbott, 

Secretary to the Commission. 

[FR Doc. 2010–2260 Filed 2–3–10; 8:45 am] 

BILLING CODE 7020–02–P 

DEPARTMENT OF JUSTICE 

Notice of Lodging of Modification of 

Consent Decree Under the 

Comprehensive Environmental 

Response, Compensation and Liability 

Act 

Notice is hereby given that on January 

28, 2010, a proposed Amended Consent 

Decree in United States v. Nassau 

Metals Corporation, Inc., Civil Action 

No. 3: 96–CV–562, D.J. Ref. 90–11–3– 

1057A was lodged with the United 

States District Court for the Middle 

District of Pennsylvania. 

In this action the United States sought 

reimbursement of response costs 

incurred in connection with the release 

or threatened release of hazardous 

substances at the C&D Recycling 

Superfund Site, Luzerne County, 

Pennsylvania (the ‘‘Site’’). The Consent 

Decree obligates the Settling Defendant 

to reimburse $753,222 of the United 

States’ past response costs paid in 

connection with the Site, and to pay 

future response costs to be incurred by 

the United States at the Site as well. 

The Department of Justice will receive 

for a period of thirty (30) days from the 

date of this publication comments 

relating to the Consent Decree. 

Comments should be addressed to the 

Assistant Attorney General, 

Environment and Natural Resources 

Division, and either e-mailed to 

pubcomment-ees.enrd@usdoj.gov or 

mailed to P.O. Box 7611, U.S. 

Department of Justice, Washington, DC 

20044–7611, and should refer to United 

States v. Nassau Metals Corporation, 

Inc., Civil Action No. 3: 96–CV–562, D.J. 

Ref. 90–11–3–1057A. 

The Consent Decree may be examined 

at the Office of the United States 

Attorney, Middle District of 

Pennsylvania, 228 Walnut Street, Suite 

220, Harrisburg, PA 11754, and at U.S. 

EPA Region 3. During the public 

comment period, the Consent Decree 

may also be examined on the following 

Department of Justice Web site, http:// 

www.usdoj.gov/enrd/ 

Consent_Decrees.html. A copy of the 

Consent Decree may also be obtained by 

mail from the Consent Decree Library, 

P.O. Box 7611, U.S. Department of 

Justice, Washington, DC 20044–7611 or 

by faxing or e-mailing a request to Tonia 

Fleetwood (tonia.fleetwood@usdoj.gov), 

fax no. (202) 514–0097, phone 

confirmation number (202) 514–1547. In 

requesting a copy from the Consent 

Decree Library, please enclose a check 

in the amount of $3.50 (@ 25 cents per 

page reproduction cost) payable to the 

U.S. Treasury or, if by e-mail or fax, 

forward a check in that amount to the 

Consent Decree Library at the stated 

address. 

Maureen Katz, 

Assistant Chief, Environmental Enforcement 

Section, Environment and Natural Resources 

Division. 

[FR Doc. 2010–2261 Filed 2–3–10; 8:45 am] 

BILLING CODE 4410–15–P 


srobinson on DSKHWCL6B1PROD with NOTICES

Federal Register / Vol. 75, No. 40 / Tuesday, March 2, 2010 / Notices 9431 

Designated Federal Officer, NAGPRA 

Review Committee, National Park 

Service, National NAGPRA Program, 

1201 Eye Street, NW., 8th Floor (2253), 

Washington, DC 20005. 

Information about NAGPRA, the 

Review Committee, and Review 

Committee meetings is available on the 

National NAGPRA Program Web site, at 

http://www.nps.gov/history/nagpra. For 

the Review Committee’s meeting 

procedures, click on ‘‘Review 

Committee,’’ then click on ‘‘Procedures.’’ 

Meeting minutes may be accessed by 

going to the Web site; then clicking on 

‘‘Review Committee;’’ and then clicking 

on ‘‘Meeting Minutes.’’ Approximately 

fourteen weeks after each Review 

Committee meeting, the meeting 

transcript is posted for a limited time on 

the National NAGPRA Program Web 

site. 

The Review Committee was 

established in Section 8 of the Native 

American Graves Protection and 

Repatriation Act of 1990 (NAGPRA), 25 

U.S.C. 3006. Review Committee 

members are appointed by the Secretary 

of the Interior. The Review Committee 

is responsible for monitoring the 

NAGPRA inventory and identification 

process; reviewing and making findings 

related to the identity or cultural 

affiliation of cultural items, or the return 

of such items; facilitating the resolution 

of disputes; compiling an inventory of 

culturally unidentifiable human 

remains that are in the possession or 

control of each Federal agency and 

museum, and recommending specific 

actions for developing a process for 

disposition of such human remains; 

consulting with Indian tribes and Native 

Hawaiian organizations and museums 

on matters affecting such tribes or 

organizations lying within the scope of 

work of the Committee; consulting with 

the Secretary of the Interior on the 

development of regulations to carry out 

NAGPRA; and making 

recommendations regarding future care 

of repatriated cultural items. The 

Review Committee’s work is carried out 

during the course of meetings that are 

open to the public. 

Dated: January 14, 2010. 

David Tarler, 

Designated Federal Officer, Native American 

Graves Protection and Repatriation Review 

Committee. 

[FR Doc. 2010–3763 Filed 3–1–10; 8:45 am] 

BILLING CODE P 

INTERNATIONAL TRADE 

COMMISSION 

[Inv. No. 332–509 and Inv. No. 332–510] 

Small and Medium-Sized Enterprises: 

U.S. and EU Export Activities, and 

Barriers and Opportunities 

Experienced by U.S. Firms and Small 

and Medium-Sized Enterprises: 

Characteristics and Performance 

AGENCY: United States International 

Trade Commission. 

ACTION: Rescheduling of Washington, 

DC public hearing. 

SUMMARY: The Commission has 

rescheduled to March 18, 2010, the 

Washington, DC public hearing in these 

investigations previously scheduled for 

February 9–10, 2010. The February 9–10 

hearing was cancelled when Federal 

Government activity was cancelled due 

to a snow storm. 

Persons wishing to appear at the 

March 18 hearing should file requests to 

appear, or confirm earlier requests to 

appear, in accordance with the 

procedures below. The dates and 

procedures relating to hearings in these 

investigations in St. Louis, MO, on 

March 10, 2010, and Portland, OR, on 

March 12, 2010, remain the same as 

previously announced. 

DATES: 

March 8, 2010: Deadline for filing 

requests to appear at the Washington 

hearing. 

March 10, 2010: Deadline for filing prehearing briefs, statements, or 

summaries, Washington hearing. 

March 18, 2010, 9:30 am: Washington 

public hearing. 

March 26, 2010: Deadline for filing posthearing briefs and statements for the 

Washington hearing. 

ADDRESSES: All Commission offices, 

including the Commission’s hearing 

rooms, are located in the United States 

International Trade Commission 

Building, 500 E Street SW., Washington, 

DC. All written submissions should be 

addressed to the Secretary, United 

States International Trade Commission, 

500 E Street, SW., Washington, DC 

20436. The public record for this 

investigation may be viewed on the 

Commission’s electronic docket (EDIS) 

at http://www.usitc.gov/secretary/ 

edis.htm. 

FOR FURTHER INFORMATION CONTACT: 

Project Leaders Justino De La Cruz (202– 

205–3252 or justino.delacruz@usitc.gov) 

or William Deese (202–205–2626 or 

william.deese@usitc.gov) for 

information specific to these 

investigations. For information on the 

legal aspects of these investigations, 

contact William Gearhart of the 

Commission’s Office of the General 

Counsel (202–205–3091 or 

william.gearhart@usitc.gov). The media 

should contact Margaret O’Laughlin, 

Office of External Relations (202–205– 

1819 or margaret.olaughlin@usitc.gov). 

Hearing-impaired individuals may 

obtain information on this matter by 

contacting the Commission’s TDD 

terminal at 202–205–1810. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server (http://www.usitc.gov). 

Persons with mobility impairments who 

will need special assistance in gaining 

access to the Commission should 

contact the Office of the Secretary at 

202–205–2000. 

Background Information: As 

previously announced, the hearings 

relate to the second and third of a series 

of three investigations that the 

Commission is conducting under 

section 332(g) of the Tariff Act of 1930 

(19 U.S.C. 1332(g)) at the request of the 

United States Trade Representative 

(USTR). The Commission delivered its 

report to the USTR on the first 

investigation, No. 332–508, Small and 

Medium-Sized Enterprises: Overview of 

Participation in U.S. Exports, on 

January 12, 2010, and it is available to 

the public at www.usitc.gov. The 

Commission is scheduled to deliver its 

reports to the USTR on the second and 

third investigations, investigation No. 

332–509, Small and Medium-Sized 

Enterprises: U.S. and EU Export 

Activities, and Barriers and 

Opportunities Experienced by U.S. 

Firms, and investigation No. 332–510, 

Small and Medium-Sized Enterprises: 

Characteristics and Performance, by 

July 6, 2010, and October 6, 2010, 

respectively. Notices announcing 

institution of the three investigations 

were published in the Federal Register 

of October 28, 2009 (74 FR 55581); 

December 1, 2009 (74 FR 62812); and 

December 11, 2009 (74 FR 65787). A 

notice announcing the time and place of 

the hearings in St. Louis, MO and 

Portland, OR was published in the 

Federal Register of February 4, 2010 (75 

FR 5804). 

Washington Hearing: The rescheduled 

Washington hearing will be held in the 

U.S. International Trade Commission 

Building, 500 E Street, SW., 

Washington, DC, beginning at 9:30 a.m. 

on Thursday, March 18, 2010. The 

hearing will be open to the public. 

Accordingly, persons testifying should 

not include confidential business 

information in their testimony. Any 

person desiring to submit confidential 

business information to the Commission 

in these investigations should do so in 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

9432 Federal Register / Vol. 75, No. 40 / Tuesday, March 2, 2010 / Notices 

writing in accordance with the 

procedures set out in the ‘‘Written 

Submissions’’ section below. 

Notice of Appearance: Written 

requests to appear at the Washington 

hearing must be filed with the Secretary 

to the Commission in Washington, DC 

by 5:15 p.m. March 8, 2010. The 

request, which may be in the form of a 

letter and which should be on company 

or other appropriate stationery, should 

identify the hearing at which the person 

wishes to appear, the investigation to 

which their testimony pertains (it could 

be both investigations), their name, title, 

and company or other organizational 

affiliation (if any), address, telephone 

number, e-mail address, and industry or 

main line of business of the company if 

any they are representing. Requests to 

appear must be made by post mail or 

delivered in person (see ADDRESSES). 

The Commission will also accept 

requests to appear filed by e-mail to 

SMEhearings@usitc.gov, or through 

Laura Bloodgood at 

laura.bloodgood@usitc.gov. The 

Commission does not accept requests 

filed by fax. Persons who previously 

filed requests to appear in connection 

with the February 9–10 hearing dates 

should re-confirm their earlier requests 

to appear or indicate that they will be 

unable to appear. 

Pre- and Post-Hearing Briefs and 

Statements, Summaries: Participants are 

encouraged to provide a pre-hearing 

brief or statement or, in lieu thereof, 

may provide a one-page summary of the 

testimony they plan to present. Such 

summaries will be placed in the public 

record and therefore should not include 

any confidential business information. 

Any confidential business information 

included in a pre-hearing brief or 

statement should be submitted in 

accordance with the procedures set 

forth below under ‘‘Written 

Submissions.’’ Post-hearing briefs and 

statements are generally for the purpose 

of responding to matters raised at the 

hearing, including questions asked by 

the Commissioners or testimony 

presented by other interested parties. 

Written Submissions: In lieu of or in 

addition to participating in the hearing, 

interested parties are invited to file 

written submissions concerning these 

investigations. All written submissions 

should be addressed to the Secretary to 

the Commission, and all such 

submissions (other than pre- and posthearing statements) should be received 

not later than 5:15 p.m., March 26, 2010, 

in investigation No. 332–509 and May 

28, 2010, in investigation No. 332–510 

as previously announced. One signed 

original (or a copy so designated) and 

fourteen (14) copies of each document 

must be filed. In the event that 

confidential treatment of a document is 

requested, at least four (4) additional 

copies must be filed, in which the 

confidential information must be 

deleted (see below for further 

information regarding confidential 

business information). Written 

submissions may be filed by post mail 

or delivered in person (see ADDRESSES), 

or filed using the Commission’s 

electronic filing procedure described 

below. To use the Commission’s 

electronic filing procedure, filers must 

first be registered users of the 

Commission’s Electronic Document 

Information System (EDIS), accessible 

from the USITC Web site (http:// 

www.usitc.gov/secretary/edis.htm). The 

Commission’s rules for electronic filing 

are available in its Handbook on 

Electronic Filing Procedures (http:// 

www.usitc.gov/secretary/ 

fed_reg_notices/rules/ 

handbook_on_electronic_filing.pdf). All 

written submissions must conform with 

the provisions of section 201.8 of the 

Commission’s Rules of Practice and 

Procedure (19 CFR 201.8). Persons with 

questions regarding electronic filing and 

EDIS should contact the Office of the 

Secretary (202–205–2000). 

Any submissions that contain 

confidential business information must 

also conform with the requirements of 

section 201.6 of the Commission’s Rules 

of Practice and Procedure (19 CFR 

201.6). Section 201.6 of the rules 

requires that the cover of the document 

and the individual pages be clearly 

marked as to whether they are the 

‘‘confidential’’ or ‘‘non-confidential’’ 

version, and that the confidential 

business information be clearly 

identified by means of brackets. All 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested parties. 

In his request letter, the USTR stated 

that his office intends to make the 

Commission’s reports available to the 

public in their entirety, and asked that 

the Commission not include any 

confidential business information or 

national security classified information 

in the reports that the Commission 

transmits to his office. Any confidential 

business information received by the 

Commission in these investigations and 

used in preparing this report will not be 

published in a manner that would 

reveal the operations of the firm 

supplying the information. 

By order of the Commission. 

Issued: February 24, 2010. 

Marilyn R. Abbott, 

Secretary to the Commission. 

[FR Doc. 2010–4264 Filed 3–1–10; 8:45 am] 

BILLING CODE 7020–02–P 

DEPARTMENT OF JUSTICE 

[OMB Number 1190–0006] 

Civil Rights Division, Disability Rights 

Section; Agency Information 

Collection Activities Under Review 

ACTION: 60-Day Notice of Information 

Collection Under Review: 

Nondiscrimination on the Basis of 

Disability in State and Local 

Government Services (Self-Evaluation). 

The Department of Justice, Civil 

Rights Division, Disability Rights 

Section, will be submitting the 

following information collection request 

to the Office of Management and Budget 

for review and approval in accordance 

with the Paperwork Reduction Act of 

1995. The information collection 

extension is published to obtain 

comments from the public and affected 

agencies. Comments are encouraged and 

will be accepted until May 3, 2010. This 

process is conducted in accordance with 

5 CFR 1320.10. 

We request written comments and 

suggestions from the public and affected 

agencies concerning the extension of a 

currently approved collection of 

information. Your comments should 

address one or more of the following 

four points: 

(1) Evaluate whether the collection of 

information is necessary for the proper 

performance of the function of the 

agency, including whether the 

information will have practical utility; 

(2) Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information; 

(3) Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

(4) Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology 

(e.g., permitting electronic submission 

of responses). 

Comments and/or suggestions 

regarding the item(s) contained in this 

notice, especially regarding the 

estimated public burden and associated 

response time should be directed to 

John Wodatch (phone number and 

address listed below). If you have 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

APPENDIX C 

Additional Information on Chapter 2: 

EU-U.S. SMEs Comparison

C-3 

TABLE C.1 U.S. government support for SME exporting activities, selected programs 

Federal government Financial assistance—Loans, insurance, and grants 

Department of Agriculture (USDA)a Foreign Agriculture Service (FAS): The FAS administers the USDA export 

credit guarantee programs to help U.S. agricultural exporters finance the 

marketing and distribution of their products abroad. Key programs include: 

Market Access Program: Provides direct cost-share assistance to nonprofit 

agricultural trade associations that assist U.S. companies in entering and 

expanding sales in foreign markets and international marketing activities, 

including trade shows, television commercials, in-store promotions, required 

package and label changes, and other marketing efforts. 

Financial guarantees/insurance: The Commodity Credit Corporation (CCC) 

programs encourage exports to buyers in countries where credit is necessary 

to maintain or increase U.S. sales, but where financing may not be available 

without CCC guarantees. The Export Credit Guarantee Program focuses on 

exports of agricultural commodities, and the Facility Guarantee Program 

focuses on exports of capital goods and services that contribute to U.S. 

agricultural exports. 

Export incentive programs: The goal of the Export Enhancement Program 

is to help U.S.-produced agricultural goods compete with products from 

subsidizing countries. The Dairy Export Incentive Program aims to develop 

export markets for U.S. dairy products where they are not competitive 

because of the presence of subsidized products from other countries. 

Export-Import Bank (Ex-Im Bank)b Ex-Im Bank is the official export credit agency of the United States. Ex-Im 

Bank reported that in FY 2009, 88 percent of its transactions were with 

SMEs. General export financing programs include: 

 Pre-export financing: Working-capital funds to acquire inventory and 

finance export-accounts receivables to fulfill export sales orders. 

Harmonized with SBA export working-capital loan program (see 

below). 

 Export credit insurance: Insurance policies that cover political and 

commercial risks on export receivables. 

 Buyer financing: Loan guarantees and direct loans to provide 

international buyers with medium- and long-term financing for 

purchases of capital goods and services produced in the United 

States. 

 Structured and project financing: Guarantees and direct loans to 

finance U.S. exports for the construction and operation of projects 

through structured finance transactions. 

 Transportation equipment financing: medium- and long-term financing 

products that can assist U.S. manufacturers in selling transportation 

equipment to international buyers. 

Overseas Private Investment 

Corporation (OPIC)c OPIC financing provides medium- to long-term funding through direct loans 

and loan guaranties to eligible investment projects in developing countries 

and emerging markets. Programs include: 

 Small-business financing: Direct loans and loan guaranties for small 

businesses to facilitate and support an overseas investment by a U.S. 

business. 

 Small-business political risk insurance coverage: Insurance against 

loss or damage resulting from political violence, expropriation, or the 

inability to convert local currency. 
C-4 

TABLE C.1 U.S. institutional support for SME exporting activities—Continued 

Federal government Financial assistance—Loans, insurance, and grants—continued

Small Business Administration 

(SBA)d The SBA is an independent agency of the federal government that was 

founded to aid, counsel, assist, and protect the interests of small business 

concerns. SBA’s export finance program consists of three specialized loan 

guarantee programs under which SBA itself does not make loans; instead, it 

guarantees loans made to small businesses by private and other institutions. 

Programs include: 

 Export Express: Can be used to finance a variety of export-related 

costs, including market development (for trade shows, translation of 

product literature), transaction costs, equipment for the production of 

exports, and standby letters of credit. SBA offers exporters and 

lenders a streamlined method of obtaining SBA-backed financing for 

loans and lines of credit up to $250,000 to develop or expand firms’ 

export markets. 

 Export Working Capital Loan: Targeted to small businesses that are 

able to generate export sales but need additional working capital to 

support these sales. Loans (typically for one year or less) can be 

structured to support financing for single transactions, export 

contracts, and lines of credit. 

 International Trade Loan: Can be used to finance the acquisition, 

construction, modernization, improvement, or expansion of long-term 

fixed assets and to refinance loans originally used for these purposes. 

Loan maturity can be up to 25 years. 

Trade and Development Agency 

(TDA)e TDA provides grant funding to U.S. firms for foreign infrastructure-based 

projects. TDA funds various forms of technical assistance, early investment 

analysis, training, orientation visits, and business workshops. 

Federal government Non-financial assistance—Export-related business support services 

Department of Agriculture (USDA)a The FAS offers export marketing services to assist new and experienced 

exporters in finding customers, drawing on resources that include databases 

of foreign buyers of U.S. agricultural product and of U.S. suppliers. The FAS 

also provides country research, economic analysis, and technical assistance. 

Trade promotional events: The FAS overseas offices offer many 

international promotion opportunities for U.S. exporters, including seminars, 

hotel and catalog promotions, and support for USDA-endorsed world trade 

shows. 

Other assistance: USDA provides funding for State Regional Trade 

Groups—non profit international trade associations which assist U.S. food 

and agricultural exporters in entering and expanding sales in foreign markets. 

For example, services offered by the Western United States Agricultural 

Trade Association include trade events and activities that target markets 

around the globe; 50 percent cost reimbursement on international marketing 

expenses for branded food and agricultural products; and export education 

seminars and one-on-one meetings with an international marketing 

consultant. The Southern United States Trade Association (SUSTA) Minority 

Export Training program gives export training to small to medium-sized 

minority- and woman-owned agricultural growers and processors that are 

new to exporting. The training aims to prepare firms for their first exporting 

experience, to help firms develop an international business plan, and to teach 

basic exporting techniques.f
C-5 

TABLE C.1 U.S. institutional support for SME exporting activities—Continued

Federal government Non-financial assistance—Export-related business support services—

Continued 

Department of Commerce 

(USDOC)g

International Trade Administration (ITA): Provides export promotion and 

marketing services, counseling, and information programs for U.S. exporters. 

U.S. Commercial Service (USCS): Helps U.S. companies, especially SMEs, 

to increase their international market share and sales through a global 

network of more than 1,700 trade specialists located in 107 domestic offices 

and 150 posts in 80 countries. 

Business Information Centers (BICs): Provide country/regional information 

through Web- and telephone-based counseling. Several important BICs exist 

for China, the Middle East and North Africa, and India. 

Trade Information Centers (TICs): Advise U.S. firms on all U.S. 

government export programs and guide U.S. firms through the export 

process. TICs provide market assistance, tariff and customs information, 

trade leads, assistance with access to U.S. free trade partners, and reference 

to state and local organizations that provide export assistance. 

U.S. Export Assistance Center (USEAC) Network: A nationwide network 

joining representatives of ITA, the U.S. Export-Import Bank (described 

below), and the SBA. USEACS are located in more than 100 cities 

throughout the United States and serve as one-stop shops that provide SMEs 

with specialized export marketing and trade finance support. Many USEACs 

are co-located with other federal, state, and local entities and with privatesector entities to better meet the needs of small exporters. 

District Export Councils (DECs): A nationwide network of volunteers who 

supply expertise to SMEs interested in exporting. DECs work with USEACS 

and organize events such as trade finance seminars. 

Assistance available from USDOC includes: 

 Market research reports, provided at no cost. These cover specific 

country markets and identify opportunities for generating sales. 

 Information and counseling via online access to resources and via 

personalized counseling. 

 Strategy and planning assistance to help firms develop and improve 

their international business strategy. 

 Advertising and promotional events to increase brand awareness and 

market exposure for U.S. products and services worldwide. 

 Market entry and expansion assistance to help firms find and establish 

relationships with potential overseas business partners. 

 International Buyer Program: Attracts qualified foreign buyers and 

sales representatives to U.S. trade shows. 

 Trade Fair Certification: A cooperative partnership arrangement 

between private-sector trade show organizers and the U.S. 

government to increase U.S. exports and expand U.S. participation in 

foreign trade shows. Once an event is certified, participating U.S. 

exporters can receive USCS export assistance services. No federal 

financial assistance is provided, although some states may have 

programs to provide financial assistance to U.S. firms. 

 Trade missions (and virtual trade missions by teleconference): USCS 

leads trade missions to foreign countries to promote U.S. exports and 

increase U.S. job opportunities. Trade missions are fee-based; virtual 

trade missions are typically offered at no cost. 

 Other export-related assistance is available through the Service Corps 

of Retired Executives and the Minority Business Development 

Agency. 
C-6 

TABLE C.1 U.S. institutional support for SME exporting activities—Continued

Federal government Non-financial assistance—Export-related business support services—

Continued

USDOC—Continued Standardized and customized services (fee based) include: 

 Gold Key Service: Assistance for U.S. exporters, including help 

identifying markets and potential customers, launching products, and 

working with regulatory or technical standards matters. 

 International company profile reports and international partner search. 

 “Featured U.S. Exporter” directory listing on USCS websites 

worldwide. 

 Customized services (Platinum Key Service) provides single company 

promotion, trade missions, and customized market research. 

Department of State (USDOS)h USDOS country desk officers are available to provide country-specific 

information from both the United States and abroad through U.S embassies 

and consulates. 

The Office of Commercial and Business Affairs works with other U.S. 

government trade promotion providers and the U.S. embassies around the 

world to support U.S. business by providing commercial information and 

identifying market opportunities for U.S. firms and advocating on their behalf. 

The Business Visa Center works to facilitate visa application procedures for 

U.S. companies and their business partners and customers. 

Small Business Administration 

(SBA)d SBA Office of International Trade: This office works in cooperation with 

other federal agencies and public- and private-sector groups to encourage 

small business exports and to assist small businesses seeking to export. 

Through the USEACs, SBA district offices and other service-provider 

partners, SBA directs and coordinates export initiatives that encourage small 

businesses in going global. 

Small Business Development Centers: Located throughout the United 

States to provide technical and export assistance, particularly to SMEs that 

are new to exporting. 

Trade Mission Online: A searchable database of U.S. small businesses 

looking to export, for use by foreign SMEs and by other U.S. firms looking for 

U.S. partners or suppliers. 

Trade and Development Agency 

(USTDA)e USTDA organizes conferences and orientation visits to provide U.S. 

exporters with the opportunity to meet with key foreign decision makers. It 

publishes electronic and hard-copy market information to assist U.S. firms 

looking for export opportunities. USTDA also organizes workshops, 

conferences, and symposia worldwide. 
C-7 

TABLE C.1 U.S. institutional support for SME exporting activities—Continued

Federal government Non-Financial assistance—Export-related business support services—

Continued

Regional, state, and local 

government 

Financial and non-financial assistance 

U.S. Export Assistance Centers 

(USEACs)i A national network of USDOC, Ex-Im Bank, and SBA offices. USEACs 

located in major metropolitan areas throughout the United States, often 

collocated with state export promotion offices. USEACs are one-stop shops 

that provide small- or medium-sized business with local, personalized export 

assistance. 

State and local governments As discussed in chapter 2, many states and cities also maintain their own 

domestic and foreign trade offices to support SME exporting activities. 

Services offered vary by state, but typically include some form of export 

counseling; market research; market entry strategy development; product 

and pricing information; searches for agents and distributors; foreign 

company background checks; foreign trade missions; trade shows; and 

training programs and seminars. 

Sources: The primary sources consulted for the information on U.S. federal programs were USDOC, ITA, Export 

Programs Guide, 2009, and GAO, Export Promotion, March 2009. Additional information is available from the 

agency websites cited below. 

Note: This table is not a comprehensive catalog of U.S. government export promotion programs. Please consult the 

referenced sources and Web sites for more complete information. 

a

 USDA, FAS, “Selling U.S. Products,” (accessed May 27, 2010). 

b

 Ex-Im Bank, “U.S. Exporters,” (accessed May 27, 2010). c

 OPIC, “Small Business Assistance,” (accessed May 27, 2010). 

d

 SBA, “Export Finance Programs,” (accessed May 27, 2010). 

e

 USTDA, “U.S. Businesses—Getting Started: U.S. Exporters,” (accessed May 26, 2010). f

 Southern United States Trade Association website, (accessed May 27, 2010); Western United States 

Agricultural Trade Association website, (accessed May 27, 2010). 

g

 USDOC, ITA, “Our Services,” (accessed May 26, 2010); USCS, “U.S. Commercial Service Assistance,” 

(accessed May 27, 2010); USDOC, “The International Buyer Program,” (accessed May 27, 2010); USDOC, “Trade 

Fair Certification,” (accessed May 25, 2010). h

 USDOS, “Doing Business Abroad,” (accessed May 27, 2010); and “Doing Business in International Markets,” 

(accessed May 27, 2010); “Business Visa Center,” (accessed May 25, 2010). i

 USDOC, “EAC,” (accessed May 25, 2010). 
C-8 

TABLE C.2 EC institutional support for SME exporting activities, selected programs 

Direct financial assistance: These are programs in which the EC acts as the starting point in the chain of risk 

sharing in SME lending. No direct EC funding is provided. Instead, support is provided through national or regional 

banks, credit institutions, or investment funds located in the SME home country, which combine their own products 

and services with EC funding. Programs are managed at the national or regional/local level. A key goal is to 

increase the volume of credit available to SMEs and to encourage these financial intermediaries to develop and 

expand their SME lending capacity.a

European Investment Fund (EIF) The EIF is a specialized EU financial body for SMEs. It is a “fund of 

funds” that invests in venture capital, private equity, and mid-market 

funds, to improve the availability of risk finance to high-growth and 

innovative SMEs.b

European Investment Bank (EIB) The EIB is the long-term lending bank of the EU. It works to further EU 

objectives by making long-term finance available for investment projects 

through loans, technical assistance, guarantees, and venture capital. 

Loans are provided through intermediaries such as commercial banks. 

Targeted at investments by SMEs as well as at providing SME working 

capital for projects lasting between 2 and 12 years, with maximum 

amount of €12.5 million ($15.32 million) per loan.c

Competitiveness and Innovation 

Framework Program (CIP) 

CIP financial instruments target SMEs in different phases of their life 

cycle and support investments in technological development, innovation 

and eco-innovation, technology transfer, and the cross-border expansion 

of business activities. CIP funds are used to guarantee loans to SMEs 

provided by a range of financial institutions involved in SME lending to 

facilitate access to loans and equity finance for SMEs where market 

gaps have been identified. CIP financial instruments are implemented by 

the EIF and selected financial institutions. One of the CIP programs is 

the Enterprise Europe Network, described in more detail below.d

Support for the internationalization of SMEs: The EC provides support for a wide range of programs to support 

SME exports. A number of these programs do not provide direct funding to SMEs, but are directed at intermediate 

and/or public authorities.a

 

Enterprise Europe Network (EEN) The EEN provides a wide range of business services targeted at SMEs 

and other entrepreneurs in more than 40 countries (both EU members 

and non-EU members, including EU candidate countries, members of 

the European Economic Area, and other participating third countries). 

The EEN is the largest European business support and innovation 

network for SMEs. Key goals of the EEN are to provide a one-stop shop 

to help firms find information on developing and expanding their 

businesses, overcome legal obstacles, and identify potential business 

partners.e

EU Gateway Program The Gateway Program was designed to help EU SMEs introduce 

products into the Japanese and Korean markets. The program works in 

sectors such as health care and medical technologies, construction and 

building technologies, information and communication technologies, 

environment and energy-related technologies, interior design, and 

fashion design. It arranges trade missions and offers financial and 

logistical support, strategic preparation, and a tailored search for 

business contacts.

European Business and 

Technology Center (EBTC) India 

The EBTC was established as a center for promoting European clean 

technologies in India. This New Delhi-based center offers a wide range 

of activities, including information and intelligence services, assisting 

services, and specific sector activities. The EBTC is co-funded by the EC 

and the European Association of Chambers of Commerce and Industry 

(Eurochambres), in partnership with 16 business and research 

organizations from four sectors (biotechnology, energy, environment, 

and transport). 
C-9 

TABLE C.2 EC institutional support for SME exporting activities, selected programs—Continued

EU-Japan Center for Industrial 

Co-operation (Japan Center) 

Co-sponsored by the EC and the Japanese government, the Japan 

Center aims to develop trade and partnership between enterprises in 

Europe and Japan. Its offices in Brussels and Tokyo provide companies 

with information on markets, cultures, and regulations. The Japan Center 

also runs management training programs, supports student internships, 

and organizes trade missions to promote the development of new 

contacts. 

China IPR Helpdesk for SMEs 

(China Helpdesk) 

The China Helpdesk was established to provide free information, advice, 

and training support to European SMEs to protect and enforce their IPR 

in China. 

Executive Training Program (ETP) The ETP provides free training to EU firms seeking to improve their 

ability to penetrate the Japanese and Korean markets. 

Events for SMEs EU SME Week: A campaign to promote entrepreneurship across Europe 

and to inform entrepreneurs about support available for them at the 

European, national, and local level. It allows SMEs to discover an array 

of information, advice, support, and ideas to help them develop their 

activities. The event is coordinated by the EC, but most of the events 

and activities are organized by business organizations, support 

providers, regional and local authorities, and others in the participating 

countries. 

EU Finance Day for SMEs: A series of one-day events held in the EU 

country capitals to spread information about EU financial instruments 

available to SMEs. Events are organized by the EC and the national 

financial intermediaries that implement these instruments locally. The 

goal is to raise awareness about different sources of finance and provide 

a forum for sharing good practices in helping innovative SMEs get easier 

access to finance. 

EC legislation and EC departments supporting SME exporting activities 

Small Business Act for Europe 

(SBA for Europe) 

Adopted in June 2008 SBA for Europe is a set of principles intended to 

guide the conception and implementation of SME policies both at EU 

and national level. SBA for Europe is designed to promote the 

development of a level playing field for SMEs throughout the EU and 

improve the administrative and legal environment to allow these 

enterprises to realize their full potential to create jobs and economic 

growth. Key priorities include reducing the administrative burden for 

SMEs; improving access to finance; improving access to markets; and 

promoting entrepreneurship. The SBA for Europe is discussed in greater 

detail in chapter 2.f

Note: This table is not a comprehensive catalog of EU programs supporting SME exporting activities. For a more 

complete listing, see EC, Directorate-General for Enterprise and Industry, European Union Support Programmes for 

SMEs, November 2008. Information for this table was obtained from this source unless otherwise cited. 

a

 EC, Directorate General for Enterprise and Industry, European Union Support Programmes for SMEs, 

November 2008. b EIF, Competitiveness and Innovation Framework Programme 2007–13, (accessed May 27, 2010). c

 EIB, “Intermediated Loans,” (accessed May 27, 2010). d

 EC, “Competitiveness and Innovation Framework Programme (CIP),” (accessed May 26, 2010) e

 EC, “Enterprise Europe Network,” (accessed May 27, 2010) 

f

 EC, Directorate General for Enterprise and Industry, “Small and Medium-sized Enterprises (SMEs),” (accessed 

May 27, 2010). 
C-10 

SMEs in the United States and European Union: Data and 

Methodology 

This appendix describes data and methods underlying the tables 2.2 through 2.6 in 

chapter 2. 

Table 2.2: Estimated Exports and Sales for Manufacturing Firms, 

by Firm Size, 2005 

The OECD Trade by Enterprise Characteristics (TEC) database was used to estimate U.S. 

SME exports and extra-EU exports by SMEs based in countries in the EU, using a 

comparable definition for “SME” (see table 2.1).1

 The data were divided by firm size 

class and are available for 2005, the most recent year for which data are available. The 

TEC database includes data only for the EU-17 countries.2

 Table 2.2 shows only firms in 

manufacturing industries. 

U.S. data on sales by firm size for 2002 were obtained from the U.S. Small Business 

Administration. These data were updated from 2002 to 2005 using U.S. Census data3

 on 

aggregate manufacturing shipments and payroll data by firm size. USITC staff also used 

the payroll data to adjust the firm size definitions in the United States to match the EU 

definition of SMEs.4

 These size adjustments were used to impute U.S. sales for firms 

with fewer than 250 employees from exports for firms with 100–500 employees. The 

category of firms with 200–299 employees was divided evenly between SMEs and large 

firms to estimate payrolls for companies with fewer than 250 employees. Then sales data 

for each size class were assigned to the employment data according to the cumulative 

percentage of payrolls within a certain size class. 

EU turnover (sales) data for SMEs were obtained from Eurostat.5

 Data were available by 

country and size class for all countries in the EU-256

 except Malta (i.e., the EU-24 

countries). This analysis used 2005 data for sales by firm size and country. However, 

because the TEC database only provided export data for the EU-17 countries, two linear 

regressions were used to estimate export data for the seven EU countries outside of the 

reported EU-17. The first equation related SME exports to SME sales by country; the 

second related large company exports to large company sales by country. Both 

regressions had values of R2

 above 0.95. The regression coefficients were applied to the 

observed Eurostat sales data to estimate SME and large company exports for the seven 

 1

 The OECD TEC data are from a special pre-release version provided courtesy of OECD to USITC in 

April 2010. To enable OECD-wide comparability, OECD reclassified EU data to UN classifications using 

standard tables as agreed upon by the OECD-Eurostat Steering Group on TEC. 2

 The EU-17 countries in the TEC database are Austria, Cyprus, Czech Republic, Denmark, Estonia, 

Finland, France, Hungary, Italy, Latvia, Lithuania, Luxembourg, Poland, Portugal, Slovak Republic, 

Slovenia, and Sweden. 3

 Available at http://www.census.gov/manufacturing/m3/historical_data/histshts/naics/naicsvsp.xls. 4

 These data divide the firms with employment of between 100 and 499 workers into the following 

categories 100–149; 150–199; 200–299; 300–399; 400–499. 5

 Eurostat is the statistical office of the European Union. 

6

 The EU-25 countries are all of the EU member countries as of 2005. They were Austria, Belgium, 

Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, 

Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, 

Sweden, and the United Kingdom. Bulgaria and Romania are not included, as they acceded to the European 

Union in 2007 as the 26th and 27th EU members. 
C-11 

remaining countries.7

 Estimates for these seven countries were added to the EU-17 

observations to calculate EU-24 exports by size class. Ranges for the export estimates 

were derived from 95 percent confidence intervals, assuming each estimate is an 

independent random variable with a normal standard error distribution. Ranges for the 

totals of SME and large company exports assumed that the estimates for individual 

countries were independent of each other; therefore the total variance equals the sum of 

the individual variances.8

 In the final step, EU exports were converted from euros into 

dollars. Ranges for EU-24 totals correspond to EU-17 totals plus 95 percent confidence 

intervals around the export estimates for the remaining seven countries. 

Approximately 6 percent of EU merchandise exports in 2005 could not be assigned to an 

employment size class of firm.9

 Such unmatched data are likely to be disproportionately 

from SMEs, which implies that the exports-to-sales ratio reported for EU SMEs in table 

2.2 is likely biased downwards. 

U.S. exports are compared to EU exports outside of the European Union. This 

corresponds both to the idea that the United States and European Union are integrated 

markets, and to the way in which the EU reports its own data—Eurostat uses the term 

“exports” to refer specifically to extra-EU exports, while exports within the European 

Union are known as “dispatches” and captured by a separate data reporting system. 

Table 2.3: Estimated Share of Exports by Firm Size and Major 

Industry, 2005 and Table 2.4:Estimated Exports by Firm Size and 

Major Industry, 2005 

Exports by EU-17 manufacturing firms were calculated as described for table 2.2. 

Exports by wholesalers were calculated using the same method, but limited to the exports 

of firms with NACE10 industrial activity 51, “Wholesale trade and commission trade.” 

Exports by other firms were calculated as exports by all firms minus exports by 

manufacturing firms minus exports by wholesalers. The ratios of manufactured goods 

exports to all goods exports were calculated from the Global Trade Atlas database for 

2005. 

 7

 The regression was performed on a single cross-section (N = 15). Luxembourg and Cyprus were 

outliers and thus excluded from the EU-17 sample. The dependent variable was export value, and the 

independent variable was sales of manufacturers. The equation was run separately for SMEs and large firms. 

For SMEs, the beta coefficient was 0.087 with standard error 0.005, which translates into a 95 percent 

confidence interval around the coefficient of 0.076–0.098. For large firms, the beta coefficient was 0.108 

with standard error 0.006, which translates into a 95 percent confidence interval of 0.095–0.122. 8

 Arias, “Variance of the Sum of Two Independent Random Variables,” 1995. 9

 USITC, Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports, figure E.1, 

2010. 10 NACE is the acronym (Nomenclature des Activités économiques dans les Communautés Européennes, 

or General Industrial Classification Economic Activities in the European Communities) used to designate the 

various statistical classifications of economic activities developed since 1970 by the European Union. For 

further information, see EC, “NACE Backgrounds,” 

http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/NACE_backgrounds (accessed May 18, 

2010). 
C-12 

Table 2.5: Employment Growth, by Firm Size, United States and 

European Union, 2002–2006

EU employment data were obtained from the Eurostat Structural Business Statistics 

database. They are classified according to NACE Rev. 1.1, where manufacturing 

corresponds to NACE D and wholesale trade corresponds to NACE G51. The 

employment data presented are for the EU-27 except where noted, and do not include 

firms without employees. The figures for percent change in employment from 2002 to 

2006 do not include countries for which employment data were missing in 2002 or 2006. 

U.S. employment data were obtained from the SBA Office of Advocacy, based on data 

provided by the U.S. Census Bureau, Statistics of U.S. Businesses. The data are classified 

according to the North American Industry Classification System (NAICS) and do not 

include farms or firms without employees. Data on manufacturing employment are for 

NAICS 31–33, while data on wholesale trade employment correspond to NAICS 42. 

Since data were not available specifically for exporting firms, these employment 

comparisons were done for all manufacturers and wholesalers in a given size class, 

whether or not they export. 

USITC staff adjusted the firm size definitions for U.S. data to provide estimated totals 

corresponding to the EU definition of SMEs. Employment data with finer size divisions 

for firms with 100–500 employees were used to impute U.S. employment for firms with 

fewer than 250 employees and for firms with greater than 250 employees, as described 

above. The category of firms with employment between 200 and 299 employees was 

divided evenly between SMEs and large firms. 

Table 2.6: Estimated Exports for Manufacturing Sectors, by Firm 

Size, United States and the European Union, 2005 

Table 2.6 was prepared in the same way as table 2.2. Exports were limited to those by 

manufacturing firms. 

Table 2.7: Relative Productivity by Firm Size, United States and 

European Union (European Union = 1), 2002 

Productivity was calculated for the United States and EU as sales per worker within a 

broad sector and firm size class. EU data on employment and turnover (sales) were 

obtained from the Eurostat Structural Business Statistics database. U.S. data on 

employment and receipts (sales) were obtained from the SBA Office of Advocacy. For a 

more detailed explanation of the data used, see the discussion on table 2.5 above. As in 

table 2.5, USITC staff adjusted the firm size definitions for U.S. data to provide estimated 

totals corresponding to the EU definition of SMEs. Values for U.S. employment and 

receipts were imputed for firms with fewer than 250 employees and for firms with greater 

than 250 employees. Again, since data were not available specifically for exporting firms, 

these employment comparisons were done for all manufacturers and wholesalers in a 

given size class, regardless of whether or not they export. 

Labor productivity figures for the EU are based on the EU-27 and were adjusted to 

dollars using the nominal exchange rate in 2002 of 1.06 euros per dollar and using a 

calculated purchasing power parity (PPP) exchange rate to take account of price level 
C-13 

differences in each of the EU-27 countries. The PPP exchange rate was calculated as the 

ratio of GDP (current US$) to GDP in PPP terms (current international $) for each of the 

EU-27 countries using data from the World Bank’s World Development Indicators. The 

resulting exchange rate and PPP-adjusted productivity figures for the European Union 

were then weighted by each country’s share of total sales in its firm type and broad 

sector. Table 2.7 presents an index of productivity by broad sector and firm size where 

the EU = 1. 

SME Exporters in Italy’s Footwear and Leather Industry 

Italy very likely has the most SME extra-EU exports among European Union members11 

—a total of $83 billion in 2005, of which nearly $64 billion were by manufacturing 

firms.12 SMEs accounted for about 34 percent of EU exports in 2005 (table 2.2), but they 

accounted for nearly 52 percent of Italy’s exports for that year. 

Many observers have noted the presence of regional clusters of firms in specific Italian 

industries dominated by SMEs. In Italy’s northeast and central region, growth of 

manufacturing employment was particularly high from the 1950s through the 1980s, and 

was led by SMEs.13 Industries in these regions are characterized by geographically 

focused industrial districts featuring clusters or agglomerations of small firms, as are 

other SME-dominated manufacturing industries. The performance characteristics of these 

clusters have drawn considerable attention among economists and policymakers, who 

have often seen them as success stories and have sought to draw general lessons for 

economic development from them.14

The productivity advantages of industrial clusters have been recognized since at least the 

1890s. In the British context, economist Alfred Marshall identified knowledge spillovers, 

pools of industry-specific skilled labor, and the presence of specialized equipment makers 

as key factors.15 For Italy, industrial districts have been said to feature spatial and sectoral 

concentration of enterprises; sociocultural ties among local economic agents, creating a 

common code of behavior; intense vertical and horizontal linkages, based both on market 

and nonmarket exchanges of goods, services, information, and people; and a network of 

public and private local institutions supporting the enterprises in the district.16 These 

networks of firms are characterized by a high level of technological exchanges between 

suppliers and final manufacturers, as well as flexibility in satisfying orders of various 

sizes and responding to shifts in consumer demand. Clusters thus generate sources of 

comparative advantage at the regional level, sometimes described as “collective 

efficiency.”17

 11 The EU-17 countries in the TEC database are Austria, Cyprus, Czech Republic, Denmark, Estonia, 

Finland, France, Hungary, Italy, Latvia, Lithuania Luxembourg, Poland, Portugal, Slovakia, Slovenia, and 

Sweden. 12 Italy’s SME exports are the largest of any of the countries for which data were reported in the OECD 

TEC database of EU-17 countries for 2005. Germany is the largest economy excluded from the TEC 

database. The Commission’s point estimate for exports by Germany’s SME manufacturers is $48 billion, 

approximately three-quarters of that of Italy. 13 Boehma, “Culture of Trust and Regional Development,” 1999. 14 Bianchi, Miller, and Bertini, “The Italian SME Experience and Possible Lessons for Emerging 

Countries,” 1997; Harvie, “SME Clustering and Its Contribution to Regional Development and 

Competitiveness,” 2007. 15 Marshall, Principles of Political Economy, 1919, book 4, Chapter 10. 16 Rabellotti, “Is There an ‘Industrial District’ Model? Footwear Districts in Italy and Mexico 

Compared,” 1995. 17 Schmitz, “Collective Efficiency: Growth Path for Small-Scale Industry,” 1995. 
C-14 

The footwear industry is an important part of Italy’s leather and leather products 

industry.18 Italy’s SME exports worldwide by firms in this industry were $7.5 billion in 

2005, making it Italy’s third largest exporting sector for manufacturers, after machinery 

and equipment and chemicals. SMEs accounted for 74 percent of the exports of Italy’s 

leather and leather products firms in 2005. The division of labor in Italy’s footwear 

industry has featured firms producing finished shoes subcontracting labor-intensive 

operations– producing bottoms, sewing, and, less often, cutting– to local SMEs, gaining 

advantages of cost reduction, increased flexibility, more certain costs, and greater 

specialization. As in other Italian industrial districts, specialized skills have been passed 

from parents to children, providing a process of districtwide skill accumulation, which 

accumulates in people rather than in firms.19

As Italian shoes faced increasing competition from producers in Asia and South America 

in the 1980s, the districts adapted to emphasize export marketing and quality. Italy 

increasingly specialized in women’s shoes for the luxury market in the EU.20 The extent 

of this specialization has varied across districts. For example, Brenta specializes in topend women’s shoes, while Barletta, in the south of Italy, focuses on cheaper shoes with 

rubber and plastic parts that compete more directly with Asian producers.21 Associated 

with these shifts is an increasing internationalization of the processing trade in shoe 

components. Italian makers increasingly source leather uppers from Romania and 

elsewhere in Eastern Europe and the former Soviet Union, as well as Tunisia.22 At the 

same time, Italian exports of shoe components to shoemaking districts in Spain have 

faced increased competition from components originating in India, Portugal, Romania, 

China, and Mexico.23

The role of local or national government as a supporting institution for Italian industrial 

clusters has been much discussed. The belief that supportive local or regional institutions 

are important for the clusters is often expressed, and there are some examples of Italian 

formal initiatives in support of SMEs and industrial districts.24 In the case of footwear, 

however, the role of local government institutions has been described as minimal, with 

local entrepreneurial associations playing a more important role.25 The high degree of 

social capital in face-to-face SME networks in a district may also substitute to some 

extent for the formal coordinating and conflict resolution functions of governments.26

 18 The leather and leather products industry as defined by Eurostat’s NACE classification system, also 

includes tanning and dressing of leather; manufacture of luggage, handbags, and the like; and saddlery. 19 Rabellotti, “Is There An ‘Industrial District’ Model? Footwear Districts in Italy and Mexico 

Compared,” 1995, 34–35. 20 Lorentzen, “Footloose Shoes? International Competition and Industrial Districts in the Italian Footwear 

Industry,” 2003. 21 Amighini and Roberta Rabellotti, “How Do Italian Footwear Districts Face Globalization?”, 2006 22 Lorentzen, “Footloose Shoes? International Competition and Industrial Districts in the Italian Footwear 

Industry,” 29, 2003; Amighini and Rabellotti, “How Do Italian Footwear Districts Face Globalization?” 

2006, 492–493. 23 Belso-Martinez, “Differences in Survival Strategies Among Footwear Industrial Districts: The Role of 

International Outsourcing,” 2006. 24 Bianchi, Miller, and Bertini, “The Italian SME Experience and Some Lessons for Emerging 

Countries,” 1997, discusses Italian financial incentives for SMEs in the 1980s and 1990s. Harvie’s, “SME 

Clustering and Networking and Its Contribution to Regional Development and Competitiveness” reviews a 

number of studies providing mixed evidence on the effectiveness of government support for SME clusters. 25 Rabellotti, “Is There an Industrial District Model? Footwear Districts in Italy and Mexico Compared,” 

2005, 36; Rabellotti, “The Internal Heterogeneity of Industrial Districts in Italy, Brazil, and Mexico,” 1999. 26 Ron A. Boehma, “Culture of Trust and Regional Development: An Empirical Analysis of the Third 

Italy,” 1999. 
C-15 

The SME-based cluster model of Italian industrial development has undergone significant 

stresses since 2001. Italian manufacturing experienced zero or declining labor 

productivity during 1995–2003.27 The market environment has changed: secondgeneration family members often leave their home districts and the family industry; 

numerically- controlled machine tools may provide some of the flexibility formerly 

arising from social networks, and are expensive for SMEs to install; formal relationships 

of subcontracting are replacing face-to-face relationships, and local political homogeneity 

is breaking down, which makes it more difficult to establish flexible labor relations based 

on trust.28 Besides the increasingly global trade relationships described above, strategies 

of adaptation pursued by districts have included shifting their industry of specialization, 

often into mechanical products; quality upgrading; incorporation of immigrant and 

immigrant-owned firms into the districts, including ethnically Chinese firms in Italy; and 

the increasing importance of medium-sized firms, often organized in business groups.29

 27 Daveri and Jona-Lasinio, “Italy’s Decline: Getting the Facts Right, ” 2005. 28 Bianchi, “Requiem for the Third Italy? Rise and Fall of a Too-Successful Concept,” 1998. 

Traditionally, industrial districts tended to be either heavily “red” (Communist) or “white” (Christian 

Democratic), but they are now more heterogeneous. 29 Rabellotti, Carabelli, and Hirsch, “Italian Industrial Districts on the Move: Where Are They Going?” 

1999.
C-16 

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Organization for Economic Co-operation and Development (OECD). Trade by Enterprise Characteristics 

Database (TEC), pre-release for USITC, 2010. 

Rabellotti, Roberta. “The Internal Heterogeneity of Industrial Districts in Italy, Brazil, and Mexico,” 

Regional Studies 33, no. 2 (1999): 97–108. 
C-17 

Rabellotti, Roberta. “Is There an ‘Industrial District’ Model? Footwear Districts in Italy and Mexico 

Compared,” World Development. 23, no.1 (1995): 29–41. 

Rabellotti, Roberta, Anna Carabelli and Giovanna Hirsch. “Italian Industrial Districts on the Move: 

Where Are They Going?”, European Planning Studies 17, no. 1 (2009): 19–41. 

Schmitz, Hubert. “Collective Efficiency: Growth Path for Small-Scale Industry,” Journal of Development 

Studies 31, no. 4 (1995): 529–566. 

The Economic Times, “UNIDO’s Cluster Model gives Indian SMEs an Italian Makeover,” October 23, 

2009. 

U.S. Department of Commerce. Bureau of the Census. Foreign Trade Division. Exporter Database. 

U.S. Small Business Administration. Office of Advocacy. Statistics of U.S. Businesses (based on data 

provided by the U.S. Department of Commerce Bureau of the Census). 

World Integrated Trade Solution (WITS), COMTRADE Database (accessed various dates). 

World Bank. World Development Indicators (WDI). http://data.worldbank.org/data-catalog/worlddevelopment-indicators (accessed various dates). 

APPENDIX D 

Additional Information on Chapter 5: U.S. 

FTAs and Selected Other Trading 

Arrangements

D-3

U.S. FTAs and Selected Other Trading Agreements 

The United States has entered into 11 free trade agreements (FTAs)1 with 17 countries (table 

D.1). In general, U.S. FTAs provide comprehensive coverage addressing goods, services, 

and investment. The focuses of different FTA provisions can be broadly divided into three 

categories: market access for goods and services, trade facilitation, and the regulatory 

environment.2

The market access chapters of FTAs normally include commitments on national treatment, 

tariff reductions, services sector liberalization, and nontariff measure reductions. With 

respect to goods trade, parties agree to reduce or eliminate their customs duties and to refrain 

from increasing or imposing new duties, or adopting or maintaining import- or export-related 

restrictions relating to bilateral trade. 

For services trade, provisions normally guarantee national and MFN treatment for providers 

of the covered services. Trade facilitation provisions of FTAs are designed to ease the 

movement of goods and provision of services by reducing transaction costs and increasing 

transparency through specific improvements in customs administration, sanitary and 

phytosanitary (SPS) measures, technical barriers to trade (TBT), and the rules governing 

electronic commerce. 

The regulatory environment provisions of FTAs cover a broad range of topics, including 

investment, intellectual property rights (IPR), transparency, and dispute settlement. 

Regulatory environment provisions support a trading atmosphere that is more conducive to 

exporting by both large firms and SMEs. For example, with respect to IPR, FTAs detail 

provisions governing the protection and enforcement of major forms of intellectual property, 

which benefit U.S. companies and industries that rely on intellectual property by reducing 

their losses from infringement and by increasing export and foreign sales opportunities for 

their products. 

In addition to FTAs, the United States has negotiated a number of other trading 

arrangements, including World Trade Organization (WTO) agreements, mutual recognition 

agreements (MRAs), bilateral investment treaties (BITs), and trade and investment 

framework agreements (TIFAs). These trading arrangements are briefly described in box D.1. 

The U.S. Chamber of Commerce has produced several reports on the export opportunities 

and the benefits to U.S. firms of FTAs and other trading arrangements. Table D.2. presents 

selected industry views collected and reported by the U.S. Chamber of Commerce 

 1

 This section provides a general overview of FTA objectives and provisions, and is not intended to give a 

comprehensive account of all U.S. FTAs. Each FTA is different and may not include all of the summarized 

chapters or provisions. The overview is not intended to represent a specific interpretation of any specific FTA. 2

 For Commission assessments of economic effects of FTAs on the U.S. economy as a whole and on U.S. 

industries and consumers, see USITC, U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected 

Sectoral Effects, 2007; U.S.-Panama Trade Promotion Agreement: Potential Economy-wide and Selected 

Sectoral Effects, 2007; U.S.-Colombia Trade Promotion Agreement: Potential Economy-wide and Selected 

Sectoral Effects, 2006; U.S.-Peru Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, 

2006; U.S.-Oman Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, 2006; U.S.-

Bahrain Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, 2004; U.S.-Central 

America-Dominican Republic Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, 

2004; U.S.-Morocco Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, 2004; U.S.-

Australia Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, 2004. 
D-4

TABLE D.1 U.S. Free Trade Agreements 

Agreement Partner(s) 

Year of 

implementation 

Complete duty 

phase-out 

U.S.-Israel Free Trade Agreement Israel 1985 1/1/1995 

North American Free Trade Agreement Canada, Mexico 1994 1/1/2008 

U.S.-Jordan Free Trade Agreement Jordan 2001 1/1/2019 

U.S.-Singapore Free Trade Agreement Singapore 2004 1/1/2013 

U.S.-Chile Free Trade Agreement Chile 2004 1/1/2015 

U.S.-Australia Free Trade Agreement Australia 2005 1/1/2022 

U.S.-Morocco Free Trade Agreement Morocco 2006 1/1/2023 

U.S.-Dominican Republic-Central America Free 

 Trade Agreement 

Dominican Republic, El 

Salvador, Guatemala, 

Honduras, Nicaragua, 

Costa Rica 

2006a 1/1/2025 

U.S.-Bahrain Free Trade Agreement Bahrain 2006 1/1/2015 

U.S.-Oman Free Trade Agreement Oman 2009 1/1/2018 

U.S.-Peru Trade Promotion Agreement Peru 2009 1/1/2025 

 

U.S.-Colombia Trade Promotion Agreement Colombia Pending n/a 

U.S.-Panama Trade Promotion Agreement Panama Pending n/a 

U.S.-Korea Free Trade Agreement South Korea Pending n/a 

Sources: USTR, “Trade Agreements: Free Trade Agreements,” (accessed January 5, 2010); Customs and Border 

Patrol, “Side-by-Side Comparison of Free Trade Agreements and Selected Preferential Trade Legislation 

Programs,” (accessed January 5, 2010).

a The agreement entered into force in 2006 for El Salvador, Guatemala, Honduras, and Nicaragua; in 2007 for 

the Dominican Republic; and in 2009 for Costa Rica. 

BOX D.1 Other trading arrangements: WTO, MRAs, BITs, and TIFAs

WTO: The United States is one of 153 members of the WTO. The WTO’s main function is to clarify trade rules, 

provide a forum for trade negotiations, and settle trade-related disputes among members. 

MRA: The United States is party to approximately 10 MRAs.a These agreements strive to eliminate the technical 

barriers to trade between countries by accepting and recognizing the results of evaluations by conformity assessment 

bodies of partner countries. “These MRAs are government-to-government agreements that help to facilitate trade by 

promoting acceptance of the results of each party’s conformity assessment procedures, reducing the time it takes a 

product to be placed on the market, reducing the costs associated with placing a product on the market, and 

increasing transparency of technical regulations, laws, policies, and procedures.”b 

BITs: The United States has BITs with approximately 40 countries. The U.S. BIT program aims to protect private 

investment, to develop market-oriented policies in partner countries, and promote U.S. exports. The basic goals are: 

(1) to protect investment abroad in countries where investor rights are not already protected through existing 

agreements; (2) to encourage the adoption of market-oriented domestic policies; and (3) to support the development 

of international law standards consistent with these objectives.c 

TIFAs: The United States has TIFA agreements with approximately 85 countries. TIFAs “provide strategic 

frameworks and principles for continuing dialogue on trade and investment issues between the U.S. and other parties 

to the TIFA.”d

 TIFAs generally serve as a forum for the United States and partner governments to discuss issues of 

mutual interest in order to improve cooperation and enhance opportunities for trade and investment. 

Nonreciprocal trade agreements under which the United States grants preferential market access to imports of other 

countries—such as the Africa Growth and Opportunity Act, the Andean Trade Preference Act, and the Caribbean 

Basin Economic Recovery Act—are not discussed in this report because they are not directed at U.S. exporting 

activities. 

_______________

a

 USDOC, International Trade Administration, Trade Compliance Center (accessed January 5, 2010). b

 National Institute of Standards and Technology, “Mutual Recognition Agreements (MRAs)” (accessed February 

12, 2010). c

 USTR, “Bilateral Investment Treaties” (accessed January 15, 2010). 

d

 USTR, “Trade & Investment Framework Agreements” (accessed January 15, 2010).
D-5

TradeRoots program.3 The citations in the table were categorized by Commission staff to 

identify SME views on trade opportunities and benefits for the indicated FTAs or markets. 

While some of the quotes are a few years old, they show the ways U.S. firms were 

anticipating the benefits of proposed FTAs, many of which have been implemented.

 3

 According to the U.S. Chamber of Commerce, the TradeRoots program is a “national trade education 

program dedicated to raising grassroots support and public awareness about the importance of international trade 

to local communities.” U.S. Chamber of Commerce, “TradeRoots: About Us,” http://ec2-184-73-242-

60.compute-1.amazonaws.com/?page_id=2 (accessed June 2, 2010). 
D-6

TABLE D.2: U.S. SME-identified export opportunities and benefitsa

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Peru Colombia 

A&K Railroad 

Materials (Houston, TX; Salt Lake City, UT; 350) 

Transportation (rails and track materials for railroad, mine, & crane applications) 

Tariff reduction Increase competitiveness 

Increase sales 

[Peru] “Sometimes we lose business to companies from other countries that pay zero duty. For example, Canada has trade agreements with Peru that make Canadian products less expensive. Passage of a free trade agreement with Peru will make us more competitive and allow us to sell more U.S. products.” [Colombia] “Passage of a free trade agreement with Colombia will make us more competitive and allow us to sell more U.S. products.” 

General 

Accelerated 

Technology (Mobile 

AL; 180) 

Embedded systems software 

General Expand business 

Increase market share 

“Being able to sell our technologies overseas is an important part of our growth, success, and market share.” 

NAFTA DR-CAFTA Singapore Israel 

Accu Tech Plastics 

(Eau Claire, WI; 31) 

Manufacturing Trade facilitation Expand business 

Increase regional opportunities 

“Free trade agreements are also an important component of the company’s success, as doing business in countries like Costa Rica, the Dominican Republic, Israel, and Singapore has been more efficient because of them. Co-Owner Ron Pribyl says ‘NAFTA has helped our business because when Mexico succeeds, we succeed. Opening doors in the Western Hemisphere has helped our bottom line and continues to encourage us to grow.’” 

General Chile 

Alabama Instrument 

and Radio (Fairhope, 

AL; 55) 

Aircraft components 

Refurbishment 

General Reduce costs 

Expand business 

Chile is another target, especially since passage of the U.S.-Chile Free Trade Agreement. Says Guzman, “Our owner is a visionary who believes in taking the company to the next level. The only way we can achieve our goals is to pursue international business. ... “These agreements would definitely help our business. Anything that cuts the costs for our foreign airline customers helps them and helps us as well.” 

CAFTA-DR 

All American 

Containers (Miami, FL; 92) 

Containers (bottles, 

jars & dispensers) 

General Increase export sales 

Increase market share Open business opportunities 

[P]assage of a free trade agreement with Central America and the Dominican Republic will increase sales and market penetration. “A free trade agreement with this region will spur investment, economic growth, and trade, which, in turn, will bring more jobs. It will smooth the bumps in the road that restrict the flow of goods, thereby creating tremendous business opportunities.” 

CAFTA-DR 

ALPS ETC (New 

York, NY; 34) 

Wholesale distributor (buttons & buckles) 

Reduce trade barriers Increase competitiveness 

Increase export sales Increase employment 

“Passage of a free trade agreement with Central America and the Dominican Republic will allow us to be more competitive in our pricing for our customers. That will result in considerable increased revenues and expansion of our employee base in New York. Continuing trade restrictions will diminish our competitive position against products arriving from outside the United States.” 

NAFTA/ Mexico Peru CAFTA-DR 

American Overseas 

Trading Corp (New Orleans, LA; 10–125) 

Medical supplies (hearing aids & accessories) 

Tariff reduction Increase market share 

Increase competitiveness Improve business 

“Our market share in other countries, such as Mexico after NAFTA, has grown. Passage of free trade agreement with Peru [and Central 

America and the Dominican Republic] will allow us to provide vital 

hearing aids and accessories at more reasonable cost and enable us to increase our staff in the United States to meet sales demand.” 

CAFTA-DR 

American Textile 

Company (Duquesne, PA; 10–100) 

Textiles (bedding) Eliminate trade 

barriers 

Increase competitiveness Reduce costs Increase export sales Increase job security 

“A free trade agreement with Central America and the Dominican Republic will make our products more price competitive in the marketplace. It will also improve speed to market for products, resulting in cost savings and increased sales. Any increase in sales and profitability will translate into greater job security for our employee base in Pennsylvania.” 

See footnote at end of table. 
D-7

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

General 

Applied Energy 

Recovery Systems (Norcross, GA; 15) 

Heat pump water Heater technology 

Eliminate trade barriers 

Increase export sales Increase employment 

“Eliminating international trade barriers is important to our company because with fair and open trading, AERS can save energy and money for our global customers and create jobs here in the United States.” 

NAFTA CAFTA Colombia 

ATD-American 

(Philadelphia, PA; 163) 

Textile manufacturing General General “We believe a free trade agreement with Colombia would be as 

large a benefit to us as have NAFTA and CAFTA have had for both our furniture and textile businesses.” 

Chile 

Atec Systems 

(Orlando, FL; 35) 

Food (purchasing & logistics management services) 

Tariff reduction Increase competitiveness 

Expand business Increase employment 

“Given our global advantage in food production and printing, the removal of trade barriers could have an exponential impact by paving the way for greater efficiencies in our company, our clients’ companies, our suppliers’ companies, and for the end consumer.” 

CAFTA-DR 

Atlantis International 

(Metairie, LA; 6) 

Wholesale distributor (petrochemicals) 

General Increase competitiveness 

Increase export sales Increase employment 

“We are having a difficult time competing against countries that can offer better prices because of trade agreements already in place. A free trade agreement with Central America and the Dominican Republic will level the playing field against this competition, increase our export sales, and allow us to add more jobs in Louisiana.” 

General 

Automation and 

Control Technology (Dublin, OH; 26) 

Manufacturing Trade facilitation Reduce costs 

Increase competitiveness 

“Automation and Control Technology must be able to sell overseas in order to maintain a solid revenue stream. Free trade agreements are important because they tend to reduce the cost of doing business, resulting in a better price position to compete with foreign companies.” 

CAFTA-DR BearCom Group 

(Garland, TX; 425) 

Wireless communications (twoway radio equipment) 

Trade facilitation Increase export sales 

Increase profits 

[P]assage of a free trade agreement with Central America and the Dominican Republic will enable the company to ship more equipment throughout the region with fewer restrictions. “Eliminating trade obstacles in the region will allow us to be a much more agile company. We can provide better service, grow our sales, and increase profitability.” 

Peru Berner International 

(New Castle, PA; 60) 

Manufacturing (air curtains & fabric duct) 

Eliminate trade barriers Increase market access 

Increase export sales Increase competitiveness Increase market share Increase profits Increase employment 

“Passage of a free trade agreement will put U.S. manufacturers on a more level playing field, allowing us to market our products at more competitive prices and gain market share. In addition to providing new technologies and quality products to customers in the region, growing the international market in a profitable manner will mean Berner can hire more employees and create jobs in Western Pennsylvania.” 

Australia Bio-Form Nutritionals 

USA (Point Pleasant, NJ; 7) 

Vitamin and nutritional supplements 

Tariff reduction Increase competitiveness 

(wrt Australian companies) Increase export sales 

“Passage of a free trade agreement with Australia will allow us to be more price competitive and will result in a definitive rise in sales. Our workers will benefit as a result.” 

CAFTA-DR BKI (Simpsonville, 

SC; 103) 

Manufacturing (food service equipment) 

Tariff reduction Increase competitiveness 

Increase profits 

[Cafta] “A free trade agreement with Central America and the Dominican Republic will have a positive impact because we will be better able to compete with manufacturers from other countries. Lower duties will make our equipment more affordable, thus 

increasing commerce in the region and profitability overall.” [SC] “It is of great value for BKI, a U.S. manufacturer, to have our products distributed in Costa Rica. With the recent passage of CAFTA, we are now better able to compete with manufacturers from other countries. Lower duties make our equipment more affordable, thus increasing commerce in the region and profitability overall.” 

See footnote at end of table 
D-8

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

CAFTA-DR Bolivar Trading Inc. 

(Miami, FL; 22) 

Distribution (service station equipment & convenience store fittings) 

Tariff reduction Open business 

opportunities Increase export sales Increase employment 

“Certainly a free trade agreement with the region will increase our sales. As of today, most of our products are subject to tariffs as high as 20%. Reducing these tariffs will not only make our projects more profitable, it will open the door to new endeavors that we are not currently able to undertake and allow us to create more jobs in the United States.” 

Peru Colombia 

Boon Edam Tomsed (Lillington, NC; 120) 

Manufacturing (revolving doors, turnstiles, portals, & high-security vehicle barriers) 

Tariff reduction Customs facilitation 

Increase competitiveness Increase sales Increase regional opportunities 

“In order to compete on a level playing field with other regional manufacturers and to meet market demands in Peru [and Colombia], we need an agreement that eliminates the duties and enables us to deliver our products quickly and trouble free.” 

General Bottoms Associates 

(Barnesville, GA; 10) 

Knit sewing IPR protection General 

A more equitable international trading environment will further 

support Bottoms Associates’ future export efforts. “With so many companies taking advantage of manufacturing opportunities in Asian countries, it is essential that those countries open their trade barriers to accept U.S. products. It is equally important that those countries protect U.S. products from piracy and illegal use.” 

Chile Bridges Electric 

(Heber Springs, AR; 70) 

Manufacturing (overhead highvoltage switches) 

Tariff reduction Reduce trade barriers 

Expand business ”Trade barriers are the biggest deterrent to doing business in Latin 

America. ... If trade barriers are not removed, we would be forced to 

abandon our efforts in Latin America and miss a good opportunity to increase our business and add jobs in our facility in Arkansas.“ 

NAFTA General 

Briggs Plumbing (Charleston, SC; 65) 

Plumbing & building products 

Tariff reduction Increase export sales 

Increase employment 

“Canada is a growth market for us, and while NAFTA helps with the export of U.S.-made goods, we face tariffs for some of our products made in South America. With an Americas-wide free trade agreement, we will be much more competitive throughout North 

America and that will result in additional management positions in 

the United States.” 

CAFTA-DR Brightstar Corporation 

(Miami, FL; 350) 

Telecommunications/ service provider (Wireless phones & accessories, data & broadband products, & solutions & value added services) 

Trade facilitation Open business 

opportunities Faster delivery Increase export sales Increase market share Increase employment 

[A] free trade agreement with Central America and the Dominican Republic will significantly improve opportunities to increase success 

and customer satisfaction. “Eliminating foreign trade barriers will dramatically cut the lead time for delivering products from the United 

States,... allowing us to give our clients better, faster service. Brightstar looks forward to a trade agreement with Central America and the Dominican Republic. We believe that it will have a positive impact on our share of business in the region, and more U.S. jobs will be created as a result.” 

Peru Bronz-Glow 

Technologies (St. 

Augustine, FL; 23) 

Manufacturing (corrosion control coatings) 

General Increase export sales 

Expand business Increase employment 

“Last year our sales to this region were in the range of 1%, but we predict our growth to be in the 5%–7% range. That growth will mean adding jobs at our Florida headquarters.” 

Peru Cannondale Bicycle 

Corporation (Bethel, CT; 450) 

Manufacturing (highend bicycles and related clothing and accessories) 

Eliminate trade barriers Tariff reduction 

Increase competitiveness Increase export sales Increase employment 

“The elimination of trade barriers will allow us to market our products at more competitive prices. Given an even playing field where our products can be sold at reduced tariff rates, I am confident our sales will soar. That translates into more jobs at our factory in Pennsylvania.” 

See footnote at end of table 
D-9

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Mexico/ NAFTA Chile 

Capital Services (Albany, NY: 14) 

Construction products manufacturing (industrial expansion 

joints) 

Reduce trade barriers Increase competitiveness 

(wrt Brazilian & French companies) Increase regional opportunities Increase employment 

”Corresponding with the signing of NAFTA, our sales to Mexico have rapidly increased, and our ties in Latin America are growing. ... We see a lot of big government construction and development 

projects on the horizon in Latin America. More business implies more employment in our company. With an FTA and a stronger presence in Latin America, we could see employment in our company increase 30% by the end of the year.” 

NAFTA CAFTA-DR 

Capital Services (Schenectady, NY; 22) 

Construction products manufacturing (industrial expansion 

joints) 

Trade facilitation Increase export sales 

Increase employment 

“There is so much bureaucracy involved with transportation projects that anything to streamline the formula will be welcome. ... With the passage of a free trade agreement with Central America and the Dominican Republic, our sales will increase and we will add new 

jobs. Given the number of possible construction and development 

projects in the region, we anticipate employment opportunities growing by as much as 30% in a short time.” 

CAFTA-DR Carrington 

Laboratories (Irving, TX; 130) 

Biopharmaceuticals Eliminate trade 

barriers Trade facilitation 

Faster product delivery Expand business Increase employment 

“A free trade agreement with Central America and the Dominican Republic will eliminate some six to eight border crossings for Carrington Laboratories in the region, which will enable a more seamless transfer of our raw materials in the region. The current process adds approximately two days to our overall distribution system. The successful passage of the free trade agreement will allow a 30%-35% time-savings. ... Eliminating foreign trade barriers in the region will provide opportunities for further growth, allowing us to create more jobs in the United States to meet demand for our products.” 

Peru CBH International 

(Suwanee, GA; 13) 

Export management Eliminate trade 

barriers Customs facilitation 

Increase competitiveness Increase export sales Expand business 

“Eliminating trade barriers will allow us to offer more competitive pricing, and our customers will be able to buy more products. That translates into more business for us and for the manufacturers we represent from our Georgia headquarters.” 

CAFTA-DR Central American 

Merchandising Corporation (Miami, FL; 4) 

Laboratory equipment (centrifuges, microscopes, spectrophotometers, & other laboratory equipment & supplies) 

Eliminate trade barriers 

Increase competitiveness Increase export sales Increase employment 

[C]urrent trade barriers make it difficult for the company to compete with other suppliers in the region. ... “The passage of a free trade agreement with Central America and the Dominican Republic would have a profound impact on our business. Eliminating trade barriers will allow small businesses like CAM-CORP to be more competitive and to sell more products. Increased sales will mean more jobs at our Miami headquarters.” 

Chile Clark Material 

Handling Co. (Lexington, KY; 100) 

Material handling business (industrial forklift trucks) 

Tariff reduction Increase competitiveness 

(wrt Japanese companies) Increase market share Expand business Increase employment 

“We are in a situation where there is strong potential for growth; however, with continuing trade restrictions and Japanese competition, we will remain stagnant.” 

NAFTA Clean Air America 

(Rome, GA; 48) 

Air filtration Trade facilitation Increase export sales 

Increase business stability Increase job security 

“NAFTA made it easier for us to export to Mexico and encouraged us to continue our efforts to expand sales there.” ...Clean Air 

America’s international sales have been essential for the company 

during economic downturns in the United States. 

See footnote at end of table 
D-10

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

CAFTA Coker International 

(Anderson, SC; 34) 

Used textile machinery 

Trade facilitation Open business 

opportunities Increase export sales 

“Central America is still developing its manufacturing potential, and if it’s subject to fewer trade regulations, it will allow more trade opportunities for many U.S. companies such as Coker.” With the implementation of DR-CAFTA, Coker International will be able to supply new textile companies with the equipment they need as well as whatever support they need. 

Chile Columbus Show Case 

Company (Columbus, OH; 212) 

Manufacturing (store fixtures) 

General Increase competitiveness 

(wrt European companies) Increase export sales Increase business stability 

“Exporting diversifies and helps mitigate the risk of cyclical retail buying patterns. It also greatly expands our sales. ... “Our main competitors are in Europe. In the future, we know our industry will be very price sensitive in Latin America. Any trade status advantage a country has over us could be a limiting factor in our growth. We need to be on a level playing field to compete.” 

General Compass International 

(Gilbert, SC; 3) 

Export management Tariff reduction 

Trade facilitation 

Increase profits [I]nternational trade could be even more profitable, especially for 

small businesses, if there was greater uniformity in the standards that products must conform to when they are sold overseas. “Tariffs are a burden, but standards can be even more of a burden in some countries, and U.S. products already have to meet very high standards to be sold domestically. ...We’d really like to see more 

reciprocity between the United States and other countries in that respect, and I hope that’s something that gets taken into account as we negotiate future trade agreements.” 

Chile Control Chief 

Corporation (Bradford, PA, 37) 

Manufacturing (radio remote controls for mining) 

Tariff reduction Increase competitiveness 

(wrt European, Canadian, & Asian companies) Increase market share Increase regional opportunities Increase employment 

[T]rade with Chile is impaired when Control Chief receives “price complaints because of the duty added on to its product. An FTA would eliminate this issue and allow us to compete with European, Canadian, and Asian companies that offer a less expensive product line due to trade agreements they have with Chile. ... With an FTA in place, we expect 15% of our total sales to come from Latin America. We need to do all we can to implement an even playing field. Growth in this area would translate into a lot of benefits at the local level, both in Chile and in Pennsylvania. It would require us to increase employment to meet the demands of sales as well as service operations.” 

Australia Correct Craft 

(Orlando, FL; 305) 

Boat manufacturer (inboard & v-drive powered recreational ski & wakeboard boats) 

Eliminate trade barriers 

Increase competitiveness (wrt Australian companies) Increase export sales 

“Much of our competition in Australia is with local manufacturers. Eliminating trade barriers will make us more competitive in the marketplace.” 

Peru Creative Equipment 

(Buckner, KY; 8) 

Textile machinery (measuring, inspecting, and cutting equipment for fabric) 

Reduce trade barriers Expand business 

Reduce costs Increase employment 

“Any reduction in trade barriers will provide us with greater opportunities by reducing the cost of our technology in a market 

hungry for it. Passage of a free trade agreement with Peru will potentially increase our business by 5%–10%, allowing us to create new jobs here in Kentucky.” 

See footnote at end of table 
D-11

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Chile Cytozyme 

Laboratories (Salt Lake City, UT; 28) 

Manufacturing (animal feed supplements, agricultural biotech products, and waste treatment solutions) 

Tariff reduction Increase competitiveness 

Increase employment 

The reduction of import tariffs and duties imposed on U.S. manufactured products through a free trade agreement would enable greater competitive advantages for Cytozyme and would benefit the American people. “Increased foreign business would translate into more jobs for U.S. citizens. Continuing trade restrictions would diminish our comparative position against products arriving from outside the United States.” 

China (WTO) 

DH Pacific (Columbus, OH; 2) 

Consulting General Improve business 

environment 

Decker says that his clients' sales stand to grow considerably when China implements the terms of the U.S.-China WTO agreement. "The agreement minimizes the risk of doing business in China and reduces the uncertainties of working together with joint venture partners.” 

NAFTA CAFTA Australia 

Chile 

Diamond V Mills, Inc. (Cedar Rapids, IA; 120) 

Agriculture 

manufacturing 

Reduce trade barriers Trade facilitation 

Reduce costs Increase competitiveness 

“Trade agreements have lowered the cost of doing business internationally for Diamond V by lowering trade barriers. This helps keep its products competitive in foreign markets. The company is distributing and selling products in more than 40 countries around the world and expects its international sales to grow. ‘NAFTA, for example, has allowed our products to move freely and easily across the U.S.-Canada border, and the free trade agreements we have with Australia, Chile, and the CAFTA countries continue to be important markets for us to grow.’” 

Australia Digital Juice (Ocala, 

FL; 25) 

Video animation (video animation tools and stock images) 

Tariff reduction Increase export sales 

Increase competitiveness (wrt Japan & East Asian companies) 

“We have to price our products low in order to remain competitive. Reducing or eliminating duties will allow us to garner additional sales while adding to our bottom-line income.” 

China (WTO) 

Digital Storage (Lewis Center, OH; 85) 

Computer services Tariff reduction Increase competitiveness "If a prospective Chinese partner company is not large enough to 

have its own distribution network, we can't do business with them. 

And high tariffs on our products limit out competitiveness." ...Winning significant tariff reductions and the right to distribute its products throughout the China marketplace are major reasons Digital Storage believes the U.S.-China WTO agreement is critical to its future success in China. 

NAFTA Dixie Tool Company 

(Brownsville, TX; 11) 

Distributor (Industrial machinery and supplies) 

General Open business 

opportunities Increase regional opportunities 

“NAFTA really opened the door for Dixie Tools to become a dominant force in hemispheric trade. Sixty-five percent of our revenue is generated from selling to the maquiladoras in Mexico. [T]he main reason for Dixie Tool's success in the global market is that his company filled a void in its industry. "We wouldn't have this additional business without NAFTA. Dixie Tool's success is real evidence that trade works for American business and its employees.” 

Australia DSI Fluids (Tyler, TX; 

11) 

Manufacturing (biodegradable lubricants & industrial chemicals) 

Tariff reduction Reduce trade barriers 

Lowered customer costs Increase export sales Increase competitiveness (wrt Asian & European companies) 

“When the United States enters into agreements that reduce trade barriers, this lowers our customers’ net costs to purchase our products. This translates into greater sales for DSI. That money comes straight to Tyler, Texas, and pays for our employees’ salaries. Our local economy enjoys an injection of capital that otherwise would have gone elsewhere.” 

See footnote at end of table 
D-12

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Chile Dynabrade, Inc. 

(Clarence, NY; 150) 

Manufacturing (stationary machinery & power tools) 

Tariff reduction Increase competitiveness 

(wrt Pacific Rim companies) Increase export sales Increase profits Increase employment stability 

“The single most difficult hurdle we face with the development of Chile is the final cost of our product. ... A free trade deal would also allow us to compete with companies from the Pacific Rim, whose labor markets are decidedly less expensive. Any increase in sales and profitability would translate into higher job security for our employee base.“ 

CAFTA-DR Econocaribe 

Consolidators (Miami, FL; 250) 

Transportation (ocean & air cargo transportation services) 

General Expand business “Increasing free trade between the United States and Nicaragua will 

mean tremendous benefits for people in both markets. As international trade increases, there will be greater demands for international transportation, and the need for our services will grow.” 

Peru Colombia 

EL Industries International (Barrington, IL; 3–470) 

Distributor (environmental equipment for the liquid & solid waste industries) 

Eliminate trade barriers 

Increase competitiveness (wrt European companies) Increase export sales Increase employment 

[Peru] “Passage of a free trade agreement with Peru will allow us to increase sales. Increased exports mean more jobs for us in Illinois and for the many U.S. manufacturers we represent.” [Colombia] “Passage of a free trade agreement with Colombia will allow us to maintain and probably increase sales. Increased exports mean more jobs for us and the factories we represent in Florida, Wisconsin, and Illinois.” 

NAFTA Elk River, Inc. 

(Cullman, AL; 75) 

Safety equipment Trade facilitation Increase export sales Clemmons maintains that NAFTA has been a boon to his Canadian 

trade,... “When you eliminate trade barriers, you make it easier for consumers, for business partners, for everyone.” 

Australia Elliott Industries 

(Bossier City, LA; 24) 

Manufacturing (electrical equipment) 

General Market diversification 

Increase competitiveness Expand business 

“We are seeking a diversified market to help our company grow. Our 

progress has been slower than we would like. Passage of a free trade agreement with Australia will allow us to compete price-wise 

with manufacturers in other countries and to expand our business.” 

CAFTA-DR Environ Products 

(Smithfield, NC; 100) 

Manufacturing (petroleum equipment) 

Trade facilitation Eliminate trade barriers 

Reduce costs “In order for us to grow our business, we need to have access to 

these markets. A free trade agreement with this region will eliminate existing barriers, lower costs, and make the process easier for us.” 

CAFTA Environmental Fabrics 

(Gaston, SC; 50) 

Geosynthetic products General Increase competitiveness 

Increase export sales 

Exports currently account for about 15% of total sales. But that percentage could go up as a result of recent trade agreements like CAFTA, which, says Dennis Shanklin, one of the company’s founders, “make us more competitive in more markets.” 

General Equity Technologies 

(Mobile, AL; 56) 

Business equipment remarketing 

Eliminate trade barriers 

Reduce costs Increase employment 

With the growing emphasis on international trade, Equity Technologies is keenly interested in seeing barriers to free trade eliminated. According to Stanley, “This would help many of these nations get good equipment at a lower cost. What’s more, it creates 

jobs here in Mobile.” 

Australia Erie Foods 

International (Erie, IL; 100) 

Food products (specialty protein ingredients for nutraceutical products, infant formulas, & nutritional bars and drinks) 

General Improve business 

relationship 

“We see no reason to maintain foreign trade barriers, as both of our countries collectively can benefit from finding the best and most efficient ways to work together. In most cases, trade barriers artificially restrict pro-active and creative problem solving. We believe that reducing and eliminating foreign trade barriers will allow the best in both countries to come forward.” 

See footnote at end of table 
D-13

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (Product) Opportunity Benefit Source quote 

NAFTA Fehr Foods (Abilene, 

TX; 200) 

Manufacturing (food) Trade facilitation Increase export sales 

Increase market share 

Although Fehr has been active in the global marketplace for several 

years, sales due to exports have increased dramatically in the past 18 months. Fehr believes this increase is the direct result of NAFTA. "It is simply easier to get our products into foreign markets than it was five years ago," Fehr says. "Once the doors are open, we can increase our sales and capture more of the market." 

Chile FFE Minerals 

(Bethlehem, PA; 93) 

Manufacturing (mining process equipment) 

Tariff reduction Trade facilitation Customs facilitation 

Increase competitiveness Increase export sales Expand business Increase employment 

“Eliminating duties and other import fees would make us more competitive, thus increasing our sales to Latin America. With 

modification to the U.S.–Chile trade restrictions, we could compete 

fairly with other nations. ... With increased opportunities, we could expand our company, which means increasing the number of employees.” 

Peru Colombia 

Filtration Technology Company (Houston, TX; 20) 

Manufacturing (filtration systems & filter cartridges) 

Eliminate trade barriers Customs facilitation 

Reduce costs Increase competitiveness Increase export sales Increase regional opportunities 

 “Eliminating trade barriers and reducing the additional steps necessary to export to Peru will result in lower costs to the end users, making our product pricing more competitive and increasing sales.” 

CAFTA Flex-C-Ment (Greer, 

SC; 7) 

Decorative concrete General Increase regional 

opportunities 

Garrick anticipates that CAFTA’s passage will facilitate a Latin 

American presence as well. “We’re not down there yet,” he says, 

“but architects and engineers from Latin America are seeing our products at a trade show in Istanbul.” 

NAFTA CAFTA 

Floralife (Walterboro, SC; 65) 

Chemicals for floral industry 

Trade facilitation Open business 

opportunities Increase export sales 

“NAFTA has been good for us, and now CAFTA will help too. ... We’d really like to see a trade agreement covering all of South 

America, because those countries can be very difficult to trade with.” 

NAFTA Fortis Plastics, LLC 

(Brownsville, TX; 100) 

Plastics Tariff reduction 

Trade facilitation 

Reduce costs “Free trade agreement, such as NAFTA, benefits my company twice 

over. The plastic injection models are not only traded into Mexico to be manufactured, but they reenter the U.S. in the final stage of production as well. This scenario would simply not be feasible without the free trade atmosphere created by NAFTA). Acts that expand NAFTA or create new free trade agreements will cut costs along the supply chain that will eventually save us from additional expenses in Brownsville. Any extensive tariff between the U.S. and Mexico would doubly affect this across the border trade at the cost of profits for Unique Molded Plastics and jobs for the people of Brownsville.” 

General Frit Industries (Ozark, 

AL; 35) 

Chemical compounds for fertilizer industry 

Reduce trade barriers Increase competitiveness 

Larger market Increase business stability 

“Removal of trade barriers makes us more competitive by lowering the effective cost of Frit’s products to its international customers. 

And that helps everyone.” 

Chile GAI Consultants 

(Monroeville, PA; 461) 

Engineering consultants (environmental engineering services) 

Reduce trade barriers Dispute resolution 

Improve business opportunities Increase employment 

“Some of the projects we have taken on include dispute resolutions 

in the mining industry and development of hazardous waste 

management programs. ... A reduction in trade barriers would help in our teaming with larger firms doing business in the region, and furthermore, increased international trade would translate into more opportunities for employment.” 

See footnote at end of table 
D-14

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

General Gainco (Gainesville, 

GA; 43) 

Automated weighing 

solutions 

General Increase competitiveness 

(wrt European companies) Increase productivity Expand business 

Chiarella notes that better trading terms for the United States will give his company a more advantageous edge against some of its European competitors who already have well-established trade agreements in Latin America. “It creates a win-win situation,” he explains. “It enables Gainco to increase its competitiveness, productivity, and volume, while allowing our end users a lower initial investment.” 

Peru Colombia 

Givens International Drilling Supplies (Corydon, KY; 9) 

Manufacturing (drilling equipment & supplies) 

Tariff reduction Expand business 

Open sales opportunities Increase competitiveness Increase regional opportunities 

“Eliminating duties will make us more competitive. All our employees’ jobs are dependent upon international trade, and anything that can be done to reduce trade barriers will help our Kentucky-based operations grow.” 

Chile Global Caribbean 

(Miami, FL; 10) 

Hospitality (amenities & in-bond merchandise) 

General Increase competitiveness 

Increase export sales 

”An FTA would allow us to export more with less restrictions, increase the potential for more clients, offer more opportunities to our employees, and generate more money, which would positively 

affect our community.“ 

Singapore Australia, 

Chile 

Grace Management Group (Spartanburg, SC; 200) 

Consumer home fragrance products 

Tariff reduction Reduce trade barriers 

Open business opportunities Increase competitiveness 

Import duties, for example, cut into Grace Management’s ability to price its products competitively. ... “The recent FTAs with Chile, 

Australia, and Singapore have all made our products more 

competitive. ...In fact, without the U.S.-Chile FTA, I would not be in the position I am in now to have favorable discussions with a wholesale distributor in Chile who will soon begin to offer our products.” 

NAFTA Hankins Lumber 

Company (Grenada, MS; 200) 

Lumber General Open business 

opportunities 

“NAFTA is the reason Hankins Lumber now sells to Mexico. ‘I have been on three trade missions to Mexico thanks to the Mississippi 

Development Authority and NAFTA. Without this agreement, the doors would not have opened, and we would not be exporting to Mexico.’” 

Peru Colombia Central America 

Havel’s (Cincinnati, OH; 15) 

Medical supplies (surgical blades, suture needles, & dental products) 

Eliminate trade barriers 

Open sales opportunities Increase export sales Increase competitiveness Increase employment 

“Eliminating trade barriers will allow us to offer competitively priced products and will open up more business opportunities for us. More business means more jobs here in Ohio.” 

CAFTA IDEA LLC (North 

Charleston, SC; 25) 

Third-party logistics service provider 

General General “The market in Central America has stagnated somewhat, because 

it’s losing jobs to China too. If we don’t do something, all the manufacturing jobs in the hemisphere will move to Asia. That’s why he strongly supported CAFTA,...” 

General Industrial Test 

Systems (Rock Hill, SC; 30) 

Water quality testing products 

Tariff reduction Customs facilitation 

Increase export sales Expand business 

“Exports create a large percentage of our growth each year and currently comprise almost a third of our total business.” ...

Citing free trade agreements as one of the key factors that have helped Industrial Test Systems succeed in many foreign markets, she says that tariffs have a real impact on the company’s ability to compete in some markets. 

Singapore Innovative Gas 

Systems (Malvern, PA; 28) 

Heavy manufacturing (nitrogen membranes) 

Tariff reduction Increase export sales “A free trade agreement with Singapore would undoubtedly expand 

our sales to that region. Many decision makers are located in Singapore therefore eliminating trade barriers would remove one less hurdle in our continued relationship with Singapore.” 

See footnote at end of table 
D-15

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

CAFTA-DR Intectra (Mountain 

View, CA; 7) 

Electronics (electronic components & specialized technology services) 

Trade facilitation Increase competitiveness 

(wrt European & Asian companies) Faster product delivery Increase employment 

“Anything that facilitates growth in American exports will allow us to become more competitive. Right now, we find ourselves competing with European and Asian companies. The two biggest issues are price and the ability to provide the equipment in a timely manner. Passage of a free trade agreement with Central America and the Dominican Republic will remove barriers, allowing our products to 

be more competitive, thus increasing our sales, which will mean more jobs at our California headquarters.” 

CAFTA Intedge Industries 

(Woodruff, SC; 28) 

Food service equipment 

General Open business 

opportunities 

“Once we get into a market, we are very viable. But the cost of getting in is often too high.” ...CAFTA’s passage is facilitating Intedge’s entry into Costa Rica, which Beltram says is a very promising market because it has a growing hotel and food service market. “I’m in favor of all trade agreements,” Beltram adds. “They definitely open marketplaces.” 

General Integrity Media 

(Mobile, AL; 150) 

Music publishing Tariff reduction Market entry flexibility “The high duties add a considerable amount to what is basically a 

simple item. But in cases where demand on some products is too low to justify licensing a foreign subsidiary to produce them, Integrity has no choice but to export.” O’Connor feels that more free trade agreements would help eliminate those tariffs. 

CAFTA-DR International Export 

Sales (St. Rose, LA; 4) 

Export trading company (supermarket equipment & light industrial refrigeration equipment) 

Eliminate trade barriers 

Increase export sales Increase employment 

“Passage of a free trade agreement with Central America and the Dominican Republic will allow us to increase sales to the region. Increased sales mean more jobs in Louisiana to meet customer demands.” 

Peru Interphase 

Technologies (Soquel, CA; 15) 

Manufacturing (marine electronics) 

Tariff reduction Eliminate trade barriers 

Open sales opportunities Increase competitiveness 

“We know that there is a strong potential market for our products and have heard from customers that they are frustrated by current tariffs and restrictions. Passage of a free trade agreement will eliminate enormous hurdles currently in place, open up new opportunities, and allow us to competitively market our products.” 

Australia IP Financials (New 

York, NY; 1) 

Financial services (management consulting & financial advisory services) 

Eliminate trade barriers 

Open sales opportunities Expand business 

“A free trade agreement will provide new avenues for growth. It will not only increase the export of goods but also will result in an increased need for business advisory services. That translates to growth in my business as well as for the start-ups and other customers I serve.” 

General Irrigation Components 

International (Daphne, 

AL; 8) 

Irrigation system components 

IPR protection Tariff reduction 

Increase competitiveness While free trade agreements cannot protect against currency 

fluctuations, he recognizes how they lower tariffs and provide patent protections. “Free trade agreements certainly help level the playing field.” 

Chile CAFTA-DR 

Irwin Brown Company (New Orleans, LA; 17/22) 

Customs brokers/ international freight forwarders 

General Trade facilitation 

Improve business environment Expand business Faster product delivery 

[Chile] “Free trade agreements and globalization are the best defenses against the myopic world view of terrorists. With global economic betterment occasioned by open trading agreements, many in third-world countries are lifted up from grinding poverty, otherwise fertile ground for terrorist recruitment.“ [CAFTA-DR] “With fewer trade barriers and quicker turnaround times, we can continue to expand our business, resulting in additional job creation in Louisiana.” 

See footnote at end of table 
D-16

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

General NAFTA 

Jaderloon Company (Irmo, SC; 39) 

Greenhouses & nursery carts 

Eliminate trade barriers 

Expand business Larger market 

[T]rade agreements and government financing assistance would 

allow it to expand overseas business even further. ... “The 

elimination of foreign trade barriers allows our company to continuously expand our market into countries and industries that were previously unavailable. That’s important for our continued growth.” 

General Kappler, Inc. 

(Guntersville, AL; 300) 

Safety clothing Tariff reduction Increase competitiveness 

Increase employment 

“Not having those import duties applied would make our products more competitive. We make a lot of our products right here in Guntersville, so more foreign business would create more jobs.” 

CAFTA-DR Kaygeeco, Inc 

(Rathdrum, ID; 15) 

manufacturing of private label cleaning compounds (pet shampoos & deodorizing products) 

General Open business 

opportunities Expand business Increase employment 

“Passage of a free trade agreement with Central America and the Dominican Republic will open doors to easier trade relations, allowing us to grow our business in the region, which will translate into additional jobs at our Idaho facility.” 

CAFTA-DR Lafise (Miami, FL; 22) Financial services Eliminate trade 

barriers 

Improve business environment Open business opportunities 

“By creating a more stable and secure environment in which to trade and invest, a free trade agreement with Central America and the Dominican Republic will stimulate financial growth in the region while passing on greater returns to American investors. The 

passage of this agreement will herald new business opportunities for LAFISE and other service companies.” 

General Langdale Industries 

(Valdosta, GA; 5) 

Forest products General Increase competitiveness 

Increase business stability 

“Exports help many U.S. forest product companies diversify their 

customer base and become less dependent on domestic consumption cycles,...” 

General Life Data Labs 

(Cherokee, AL; 14) 

Animal nutrition Reduce trade barriers 

Tariff reduction 

General But he acknowledges that reduced trade barriers have helped his 

business. “Some of the South American nations charged 100% 

tariffs. Getting rid of the tariffs certainly helped.” 

General M.A.S. Exports 

(Rincon, GA; 7) 

Automotive supplies Reduce trade barriers Increase competitiveness “Our company’s motto is ‘Where economy meets quality,’ and 

lowering trade barriers will further allow us to offer quality products at the right price on the international market.” 

Chile Madison Sales (New 

York, NY; 45) 

Export services (various manufactured products) 

Tariff reduction Increase export sales 

Increase employee wages 

[A]ny reduction in tariffs due to an FTA with Chile would allow him to reduce his prices and subsequently increase sales. “Increased sales 

mean bigger Christmas bonuses for my employees.” 

China (WTO) 

Magnetizer Group (Pipersville, PA; 250) 

Manufacturing IPR protection General "Our business is growing in China, but we do face certain 

challenges. Principal among them is our concern about protecting the patent and trademark for our products. With China's pending entry into the World Trade Organization, and the increased leverage we will have in addressing intellectual property protection issues that forum, we think permanent normal trade relations with China is definitely in the best interest of our company and its employees." 

Chile Marine Construction 

and Design Co. (Seattle, WA; 200) 

Construction and manufacturing (equipment for fishing vessel construction and hydraulic deck machinery) 

General Increase competitiveness 

(wrt European & S.E. Asian companies) 

A free trade agreement with the United States would, to some 

extent, help counter the cost advantages of our competitors.” Furthermore, Combs says, “The end result would not only benefit MARCO’s operations, but also it would benefit the hundreds of small businesses that supply our shipyards and industrial divisions with products from every corner of the United States.” 

See footnote at end of table 
D-17

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

General Micromeritics 

Instrument Corporation (Norcross, GA; 200) 

Analytical laboratory 

instruments 

Reduce trade barriers Increase export sales 

Reduce costs 

“We have seen that, as trade barriers are removed, the cost of getting our products into these Latin American markets is reduced, benefiting Micromeritics in increased sales, and benefiting our 

customers in reduced costs.” 

Chile Nadco, Inc. 

(Somersworth, NH; 30) 

Manufacturing (adhesive & label products) 

General Reduce costs 

Increase export sales Increase employment 

The company’s enhanced competitive presence would inevitably increase sales, which, for Doniger, means hiring new employees for the company in the United States. “Lower prices, domestically and internationally, would create a win-win situation for the economies involved in a free trade agreement.” 

Peru National Enzyme 

Company (Kansas City, MO; 150) 

Dietary supplements (digestive enzyme formulas) 

Customs facilitation Improve business 

environment Increase export sales 

“At the moment, it can take up to one month for the required preclearances and inspections of our products. Eliminating or 

reducing restrictions will help move the process along more quickly and smoothly. Passage of a free trade agreement will make it easier to do business in Peru, helping us increase sales volume.” 

CAFTA-DR Natural Fruit 

Corporation (Hialeah, FL; 32) 

Food manufacturer (frozen fruit bars & ice cream novelties) 

Trade facilitation Eliminate trade barriers 

Increase export sales Open business opportunities 

“This agreement will undoubtedly expand our sales in the region, opening new markets to our products and giving consumers the opportunity to enjoy the same quality goods that are enjoyed in the United States.” 

CAFTA-DR Nature Plus (Stratford, 

CT; 10) 

Manufacturing (environmentally safe liquid enzyme soil stabilizers for road construction) 

Reduce trade barriers Increase export sales “Exports to Central America already account for 10% of Nature Plus’ 

gross sales. Without doubt, passage of the free trade agreement with Central America and the Dominican Republic will allow us to double that figure.” 

CAFTA-DR Nature Tours (New 

Orleans, LA; 3) 

Travel and tourism (travel services) 

General Increase export sales “I cannot wait for the passage of a free trade agreement with Central 

America and the Dominican Republic. It will have a huge impact on 

our business, allowing us to hire more staff in order to serve more clients who want to visit the region’s excellent tourist destinations.” 

Chile OPICO (Mobile, AL; 

10) 

Agricultural 

implements & related equipment 

Eliminate trade barriers 

Increase competitiveness (wrt Canadian companies) 

Prior to the U.S.-Chile Free Trade Agreement, OPICO lost several good customers in Chile because Canada already had negotiated a free trade agreement there. Hartley hopes that the now-level playing field will allow her firm to recapture that lost business. “Those free trade agreements can do nothing but help us.” 

CAFTA-DR Optibrand (Fort 

Collins, CO; 14) 

Agriculture and food 

safety (animal identification system) 

Eliminate trade barriers 

Open business opportunities Increase employment 

“Eliminating trade barriers with the region will be an important step in opening up this growing market, allowing Optibrand to help improve food safety and livestock disease control and create new 

jobs for U.S. employees as business grows.” 

Chile Oregon Potato 

Company (Boardman, OR; 195) 

Food processing (potato products) 

General Increase competitiveness 

(wrt European companies) Open business opportunities Increase regional opportunities 

“Because Chile is an open trading country and part of the Mercosur, we see Chile as a vital entry point to a thriving South American market. We believe that sending our products to Chile gives us a trading advantage in exporting directly to the more restrictive countries. ... [T]he European Union has the greatest advantage in international trade. In many cases it has negotiated better free trade agreements than the United States and is the biggest threat in all the trade we do.” 

See footnote at end of table 
D-18

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

NAFTA Peru 

P&S Supply (Houston, TX; 6) 

Energy (pipes, valves, fittings, & other industrial materials for the mining, chemical, & petrochemical industries) 

General Opportunity to introduce 

new products and technologies 

“We have benefited a great deal from NAFTA, and a free trade agreement with Peru will have a similar positive impact on our business.” 

Chile Panalpino (Huntsville, 

AL; 60) 

Logistics services Reduce trade barriers Increase export sales For example, the U.S.-Chile Free Trade Agreement helps 

Alabamians to export finished automobiles from its growing auto 

industry to Chile, where a burgeoning economy has created more demand for cars. “It is a win-win for both nations.” 

NAFTA Paulson 

Manufacturing (Temecula, CA; 200) 

Manufacturing (integrated safety equipment) 

General Increase competitiveness “Paulson Manufacturing has been selling to Canada for more than 

20 years. After passage of NAFTA, the company’s products became more competitive in Canada and sales increased. Roy Paulson, CEO, knows that international trade means more that just profits.” 

Chile Phelps Industries 

(Little Rock, AR; 50) 

Manufacturing (unloading devices for material transport) 

Reduce trade barriers Customs facilitation 

Improve business environment 

“The more trade barriers we can bypass, the better. ... An FTA has the potential to expand market access and minimize the bureaucracy of work permits and trade documents.“ 

Australia Phoenix Process 

Equipment Company (Louisville, KY; 45) 

Manufacturing (environmental & process equipment) 

Tariff reduction Increase competitiveness 

(wrt European companies) Increase export sales Increase regional opportunities 

“Our primary competition in Australia is from the European Community, and eliminating the current import duties will bolster our competitive position. It will also allow us to penetrate new markets in other Pacific Rim countries. All PHOENIX employees’ jobs are 

enhanced and influenced by our ability to increase exports, including those to Australia.” 

Chile Pier Beach 

International (Miami, FL; 66) 

Export services (electrical equipment) 

Tariff reduction Reduce trade barriers 

Increase competitiveness (wrt Mexican, Canadian & Mercosur companies) Increase export sales Increase employment 

”Until now, trade restrictions have limited our sales of various products like substation switches because products coming from other regions enjoy lower duties, so amended trade restrictions would obviously help us. In addition, a reduction in trade barriers would make the products of our U.S. suppliers more competitive against manufacturers from Mexico, Canada, and the Mercosur countries. This would enable us to increase our sales and corresponding local employment.“ 

Chile Plastic Enterprises 

Company (Lees Summit, MO; 166) 

Manufacturing (thinwalled injectionmolded plastic packaging) 

Reduce trade barriers Increase export sales 

Increase regional opportunities Increase employment 

”Exports to South America and Chile are important to our company as a means to support our customers’ entrance and expansion into the Latin American market. Improved access to this market for our customers would conceivably provide an additional 10% net revenue growth to our business. Reduction in trade barriers would make our products more accessible to new customers in the region, further expanding our customer base and revenue opportunities. This would provide greater job growth and increase sales necessary to support the growth of the company.” 

NAFTA Plitt Crane & Rigging 

(Brownsville, TX; 15) 

Mechanical services General Increase employment “NAFTA has provided a tremendous boost to Plitt Crane and 

Equipment and other small and medium-sized businesses in Texas' Rio Grande Valley. NAFTA works. It has created thousands of new 

jobs and opportunities. We need other trade deals like it.” 

See footnote at end of table 
D-19

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (Product) Opportunity Benefit Source quote 

General Prodew Inc. (Marietta, 

GA; 14) 

Misting & humidification systems 

Tariff reduction Customs facilitation Reduce trade barriers 

Open sales opportunities Improve business environment 

Merchant explains that decreasing duties and taxes, as well as streamlining the customs process, would make it cheaper and easier for his company to export its products abroad. “Customs delays, for instance, can significantly increase the cost of shipping, which discourages international buyers from purchasing American 

products.” 

CAFTA-DR Quality Analytical 

Laboratories (Panama City, FL; 20) 

Analytical and 

research laboratory (laboratory analytical & technical services) 

General Increase export sales 

Expand business Increase employment 

“Passage of a free trade agreement with Central America and the Dominican Republic will allow us to extend our services to a larger market base, improving compliance with environmental requirements in the region. It will also allow us to grow our business, adding jobs at our three laboratories in the United States.” 

General RCF Technologies 

(Vidalia, GA; 30) 

Aerospace products Eliminate trade 

barriers 

Increase employment When asked why eliminating foreign trade barriers is important to 

her company, Zimnavoda highlights the positive link between exporting and job retention and creation. “Keeping the United States competitive in foreign markets is critical to maintaining a viable and growing workforce in our country.” 

Australia Redin Corporation 

(Rockford, IL; 8) 

Manufacturing (gear deburring machinery & cutting tools) 

Eliminate trade barriers 

Increase export sales “Reducing or eliminating trade barriers will allow us to increase 

sales in the region and that can only benefit all parties.” 

Peru Regitar USA 

(Montgomery, AL; 30) 

Automotive parts 

(automotive electronic components) 

Eliminate trade barriers 

Expand business Increase competitiveness (wrt Asian companies) Increase export sales Increase employment 

“Eliminating existing trade barriers with Peru will allow U.S. companies to compete more effectively with products made in Asia. There is a demand for our product and the increase in sales will mean more jobs here in the United States.” 

General Regitar USA 

(Montgomery, AL; 30) 

Automotive 

electronics 

Tariff reduction Increase competitiveness 

(with respect to Chinese, Taiwanese, Korean companies) 

Despite his success, Dr. Tsai has felt the sting of foreign competition—made worse in many cases due to a lack of free trade agreements. “We face major competition from China, Taiwan, and Korea and have lost sales due to foreign tariffs. More free trade agreements would be a big help to us.” 

General Replica Plastics 

(Dothan, AL; 15) 

Replacement plastic auto body parts 

General Larger market Blackmon’s international trade continues to grow in importance 

because of what he describes as a diminishing domestic market. “Our overseas sales help keep the doors open. We could do even more, though, if there were more free trade agreements in place.” 

General Research 

Technologies (Greenville, SC; 12) 

Chemical manufacturing 

General Increase competitiveness “Free trade agreements make this company’s prospects as an 

exporter even more promising, not just because they create a more cost-competitive environment for American companies, but also 

because they make it easier for companies like ours to market consumer products effectively overseas.” 

NAFTA Riverside Pump 

Manufacturing (Cheraw, SC; 14) 

Engine-driven pumps Trade facilitation Increase competitiveness “Trade agreements help reduce that difference, making our products 

more marketable.” For example, Riverside recently supplied a 

number of pumps to a Canadian company doing water quality research in the Great Lakes. “That was a large order for us,” says Rountree, “and it would not have been possible if barriers had interfered.” 

See footnote at end of table 
D-20

TABLE D.2 U.S. SME-identified export opportunities and benefitsa―Continued

FTA or market 

Company (location; employees) 

Industry (Product) Opportunity Benefit Source quote 

Chile Ross Valve 

Manufacturing (Troy, NY; 60) 

Manufacturing (control valves) 

Reduce trade barriers Tariff reduction 

Increase competitiveness Increase employment 

According to Ross, competitive disadvantages caused by trade 

barriers are “tough because you’re competing with products that cost the same to manufacture but vary in price because of duties. The bottom line is that such barriers keep me from competing on an equal base. Inequalities could eventually lead to a closed shop in Chile and loss of U.S. jobs.” 

Peru Colombia 

Ross Valve Manufacturing Company (Troy, NY; 60) 

Manufacturing (automatic control valves for water systems) 

Tariff reduction Increase competitiveness 

Increase export sales Expand business Increase employment 

“Currently, there is a 15% tariff on our products. Reducing or eliminating those tariffs will allow us to offer more competitive prices 

and increase our sales. We are committed to this market because we know there is a demand for our products. Passage of a free 

trade agreement with Peru will allow us to grow our business and add jobs here in the United States.” 

CAFTA-DR Ryan Trading 

(Franklin, NJ; 90) 

Manufacturing (high speed metal machining) 

Trade facilitation Open business 

opportunities Increase competitiveness Increase export sales Increase business stability 

“Foreign trade barriers make the process more difficult and the products more expensive. A free trade agreement with the region will put our company in a more competitive position and could translate into a 20%–30% increase in our sales during the first three years alone.” 

Chile Safe Passage 

International (Albany, NY; 18) 

Technological training (airport security training courses) 

Tariff reduction Increase competitiveness 

(wrt Israeli & UK companies) Increase employment 

“Tariffs make courses artificially and unnecessarily expensive. In addition, the company faces two other competitors, one in Israel and the other in the United Kingdom, and it is unfortunate because we are losing out. ... An increase in international trade would allow us to fund more research and development programs, which would lead to better airline safety. It would also increase staff and create more 

job opportunities.” 

CAFTA-DR Samuel Aaron 

International (Long Island City, NY; 180) 

Manufacturing (fine 

jewelry) 

Reduce trade barriers Increase export sales “The reduction of trade barriers will enable our company to increase 

sales and to continue to reach our targeted growth goals in the region.” 

CAFTA SC Solar (Lancaster, 

SC; 4) 

Solar/electrical power, consulting 

Tariff reduction Reduce costs 

Expand business 

The recent passage of CAFTA should boost SC Solar’s growth even further. Without duties, the cost of the company’s goods are lowered by 20%–30%. ...“We’re going to be able to provide a lot of infrastructure needs, such as solar water pumping and remote power in Honduras and other Central American countries.” 

General Sentry Production 

Products (Lakewood, OH; 4) 

Manufacturing Tariff reduction Increase export sales “[T]rade agreements would only make our business better. We have 

had trouble, especially in some South American markets, where import duties really make our products expensive. We still sell products, but the customer can’t afford as many. By eliminating 

those duties, we know that our business would grow.” 

CAFTA-DR Setton International 

Foods (Terra Bella, CA; 250) 

Food products (pistachio nuts & nut products) 

Reduce trade barriers Increase export sales 

Increase employment 

“Passage of a free trade agreement with Central America and the Dominican Republic will mean increased sales. Increased sales mean more jobs at our New York and California facilities to meet demand.” 

CAFTA-DR Shore To Shore 

(Miamisburg, OH; 95) 

Printing and packaging (brand packaging) 

General Open business 

opportunities Increase export sales Increase employment 

[A] free trade agreement with Central America and the Dominican Republic will significantly improve sales opportunities in the region. 

“The passage of this agreement will result in a higher percentage of product demand, which means more U.S. jobs to meet customer needs.” 

See footnote at end of table 
D-21

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Australia Signature Brands 

(Ocala, FL; 250) 

Consumer packaged goods (dessert decorating products) 

Eliminate trade barriers 

Open sales opportunities Increase export sales Reduce costs 

“Eliminating trade barriers with Australia will allow us to export at lower costs, he adds, “which will allow us to introduce more new products and grow our business by increasing our product offerings.” 

Peru Colombia 

Singleton Scientific (Houston, TX; 6) 

Medical laboratory supplies (medical laboratory equipment & supplies) 

Eliminate trade barriers 

Increase regional opportunities Expand business Increase employment 

“Passage of a free trade agreement will be beneficial to all U.S. businesses, including mine. It will help me grow my business and create more jobs here in Texas.” 

Australia Sirsi Corporation 

(Huntsville, AL; 300) 

Software development & manufacturing (library automation computer software) 

General Increase competitiveness 

Increase regional opportunities 

“The United States cannot grow to its full economic potential unless trade barriers are reduced. Free trade agreements are vital for small and medium-size businesses to grow and create jobs in the United States.” 

CAFTA Softee Supreme 

Diaper Corporation (Decatur, GA; 55) 

Diapers Reduce trade barriers Increase competitiveness 

Increase export sales 

“Lifting trade barriers allows us to ship our goods to export markets at very competitive prices.” ... “In the case of the Central American Free Trade Agreement, I believe business in those countries will skyrocket once this trade agreement takes effect.” 

Chile Southeastern Metal 

Products (Charlotte, NC; 94) 

Manufacturing (metalstamped component parts) 

Reduce trade barriers Increase competitiveness 

Open sales opportunities Increase employment Increase employment stability 

A reduction in U.S. trade barriers is seen as a necessary means to 

make the company more competitive in the growing Latin American market. [S]uch a reduction would open the door to further sales in Latin America. “[T]his growth would not only secure current jobs in the company but also would increase employment.“ 

NAFTA Southern Turf 

Nurseries (Elbberta, 

AL; 50) 

Turf Eliminate trade 

barriers Trade facilitation 

Increase export sales Improve business environment 

“The passage of the North American Free Trade Agreement in 1993 was a boon to our business. Not only did it eliminate some barriers to trade, but it also dramatically reduced the amount of paperwork previously required in order to export.” He adds, “It certainly made export compliance easier.” 

Australia 

Peru Colombia 

Spokane Seed Company (Spokane, WA; 45) 

Agriculture (dried 

peas & lentils) 

Eliminate trade barriers 

Expand business “Overall, our relationships with [Australia, Peru, and Colombia] may 

be small, but the country provides a niche market that we have enjoyed for many years. As a company, we want to keep the trade lanes as open as possible so that business can continue to grow.” 

Australia Supertrak (Punta 

Gorda, FL; 18) 

Manufacturing (heavy equipment) 

Eliminate trade barriers 

Open business opportunities 

“Open doors signify a welcome environment for U.S. business. Passage of a free trade agreement with Australia will enhance our business opportunities significantly.” 

Chile Symetrics Industries 

(Melbourne, FL; 70) 

Defense technology (electronic and mechanical aircraft equipment) 

General Increase competitiveness 

(wrt European & Asian companies) Increase business stability Open business opportunities 

”Exports to Latin America would add significantly to the long-term 

stability of our company and could realistically contribute to our company’s growth of approximately 25% in employment.“ 

Chile Systems With 

Reliability (Ebensburg, PA; 32) 

Manufacturing (broadcast antennas & transmission systems) 

Tariff reduction Open sales opportunities 

Increase export sales Increase competitiveness (wrt Italian and Spanish companies) Expand business Increase employment 

“We would love to sell more antennas in Chile, but tariffs often put our products out of range. During a recent trip to Chile, many of my potential customers’ complaints were about having to purchase cheaper antennas from our competitors in Spain and Italy, despite the fact that they require frequent replacement. ... ”With an FTA implemented, along with an upgrading of local broadcasting systems, SWR’s sales in Chile would soar. The ripple effect of such sales would mean a lot to Ebensburg, Pennsylvania.“ 

See footnote at end of table 
D-22

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Chile Tang Energy Group 

(Dallas, TX; 6) 

Energy (financial services) 

Reduce trade barriers Expand business “As we lower trade barriers all around the world, we increase 

prosperity and choice.” 

Peru Tepito Electronics 

(Miami, FL; 20) 

Wholesale distributor (new & refurbished consumer electronics) 

General Expand business 

Increase export sales 

“We depend on this market for our success, and passage of a free trade agreement will make it easier for us to increase sales.” 

NAFTA Chile Australia 

The Electric Controller & Manufacturing Company (St. Matthews, SC; 45) 

Eelectrical controls for heavy-duty cranes 

General Increase competitiveness 

Increase export sales 

[A]ccording to Managing Partner Keith Hudgins, free trade agreements make a big difference in his company’s volume of international sales. ... It’s not surprising then that the three countries 

in which EC&M has the highest sales volume are Mexico, Canada, and Chile—all of which have free trade agreements with the United States. In fact, says Hudgins, “Our greatest single international success has been in Chile,... We also see a real opportunity in 

Australia,...” 

Chile General 

The Letco Companies (Decatur, AL; 50) 

Pharmaceuticals Trade facilitation Improve business 

environment 

Letson would like to expand his international business and has begun to investigate the growing Chilean market, where trade restrictions have been eased by the U.S.-Chile Free Trade 

Agreement. He supports U.S. efforts to open more free trade 

channels, saying that “these agreements remove the obstacles to free trade, and the more obstacles you remove, the easier it is to do business.” 

NAFTA The Skinner Company 

(Greenwood, SC; 7) 

Pipeline repair clamps Customs facilitation Improve business 

environment 

Free trade agreements like NAFTA have helped in that respect. “Simplified documentation requirements for shipping goods into Canada have made it very easy to trade in the Canadian market,” 

CAFTA-DR Thermoseal Glass 

Corporation (Gloucester City, NJ; 60) 

Manufacturing (insulating glass units) 

Eliminate trade barriers 

Open business opportunities Increase employment 

“Free trade increases opportunities and choices for our customers, their employees, and the final consumer. More opportunities and more choices mean more American jobs when barriers to competition are removed.” 

NAFTA TIA, Inc. (Brownsville, 

TX; 4) 

Wholesale industrial distribution 

Reduce trade barriers General “With 21 years of international experience, Guetzow attributes his 

company’s success in Mexico to the reduction of North American trade barriers, a close proximity to his customers, and a keen understanding of the Mexican culture.” 

Peru CAFTA-DR Colombia 

Titan Steel Corporation (Baltimore, MD; 120–200) 

Tin products manufacturing (tinplate, tin-free steel, & various flat-rolled steels) 

Tariff reduction Increase export sales 

Employment stability 

[Peru] “The end price for customers is always higher when they buy from us as a result of import tariffs leveled against our products. A 

reduction in trade barriers will increase our exports tremendously. ... 

Passage of a free trade agreement with Peru will easily triple the amount of business we do there. Increased sales will allow Titan Steel to keep plants running longer and maintain steady employment, which, in turn, will help stimulate the local economy.” [CAFA-DR] “A reduction in trade barriers could increase our exports by at least 10%. ... “Increased sales from a free trade agreement with this region will allow Titan Steel to keep U.S. plants running longer and maintain steady employment, which, in turn, would help stimulate the local economy.” [Colombia] “Passage of a free trade agreement with Colombia will easily triple the amount of business we do there. ...“Increased sales will allow Titan Steel to keep plants running longer and maintain steady employment, which, in turn, will help stimulate the local economy.” 

See footnote at end of table 
D-23

TABLE D.2 U.S. SME-identified export opportunities and benefitsa

―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Chile Titan Steel 

Corporation (Baltimore, MD; 80) 

Manufacturing (tin products) 

Tariff reduction Increase export sales 

Increase competitiveness Increase employment stability 

“We are having trouble competing because the end price to the customers is always higher when they buy from us as a result of the heavy import tariffs levied against our product. ... A reduction in trade barriers with Latin America would immediately increase our exports by at least 10%. ... However, increased sales from a free trade agreement with Chile would allow Titan Steel to keep plants running longer, create steady employment, and stimulate the local economy.” 

Chile Top Image Systems 

America (Carlsbad, 

CA; 12) 

Technical services (data collection products via electronic, paper, and invoice) 

Reduce trade barriers Expand business 

Increase export sales 

Shoshani recognizes that a reduction in trade barriers would significantly improve the company’s growth. A reduction in barriers would allow the company to increase trade and further work toward the mission of merging forms of data capture. 

CAFTA-DR Total Technical 

Services (Waltham, MA; 50) 

Temporary and permanent staffing services 

General Expand business “A free trade agreement with Central America and the Dominican 

Republic will undoubtedly expand our sales in the region,” says Kelvin Bernard, president and CEO. “With the reduction of trade barriers, more American companies will enter the Costa Rican market, and the need for our services [will increase].” 

Australia Trakker Technologies 

(Bozeman, MT; 22) 

Trade show technology (trade show lead capture technology) 

Eliminate trade barriers Tariff reduction 

Expand business Increase competitiveness Increase market share Increase regional opportunities 

“A free trade agreement with Australia and a reduction in current duties will help us stay price competitive. Increasing market share and acquiring new customers in the region are important to Trakker’s long-term growth.” 

Peru Mexico Colombia China (WTO) 

Tramco (Wichita, KS; 100) 

Manufacturing (conveyers) 

Tariff reduction Reduce costs 

Increase business opportunities 

“Higher duties result in added expenses and lost business. Anytime we can reduce duties we expand opportunities. Free trade is always beneficial.” 

Australia 

Peru Colombia 

Transcon Trading Company (Irmo, SC; 15) 

Export management (equine & small petrelated products) 

Customs facilitation Eliminate trade barriers 

Expand business Increase business opportunities 

“We have found that the current import regulations and paperwork 

take a long time to overcome. The end users in [Peru and Colombia] want high-quality U.S.-branded products. Eliminating existing trade barriers will allow us to meet those demands and grow our business.” “The import regulations in Australia are very strict, and we have not been able to sell products unless they are in the topical category. The end users in Australia are interested in high-quality U.S.-branded products. Eliminating existing trade barriers will allow us to 

meet these demands and grow our business as a result.” 

Chile Trilogy 

Communications (Pearl, MS; 270) 

Manufacturing (coaxial cables) 

Tariff reduction Increase competitiveness 

Increase employment Increase employee wages 

”In our industry, price is an important factor, and it is extremely difficult to compete with companies that have a zero percent import duty. ... Our success is reflected in the salaries of our employees, better working conditions, increased employment opportunities....” 

Chile T-Tech, Inc. (Atlanta, 

GA; 30) 

Manufacturing (quick circuit prototyping milling machines) 

General Increase export sales “With almost a third of our sales coming from the international 

market, our company strongly encourages a free trade agreement between the United States and Chile. ... We continue to strive for closer ties to the South American market. A U.S.–Chile trade agreement would strengthen these ties and allow us to increase our sales efforts in the region, thus resulting in an increase in better jobs here in our local community in Georgia.“ 

See footnote at end of table 
D-24

TABLE D.2 U.S. SME-identified export opportunities and benefitsa―Continued

FTA or market 

Company (location; employees) 

Industry (product) Opportunity Benefit Source quote 

Chile NAFTA 

U.S. Foods through Winnemucca Farms (Winnemucca, NV; 150) 

Food processing (dehydrated potatoes & snack ingredients) 

Tariff reduction Increase competitiveness 

Increase export sales Increase employment 

“The tariff and duties are more than 25%, and that is a major impediment to our success. ... “If the United States and Chile were to pass a free trade agreement, it would give our products and our customers’ products a competitive edge that would result in considerable increased revenues and possible expansion of our 

employee base.” 

Chile United Agricultural 

Services of America (Hudson, FL; 5) 

Agriculture 

(environmentally safe fertilizers) 

General Increase business stability 

Open business opportunities Increase export sales Increase employment 

”We get inquiries from Chile all the time, so we definitely know there is a market there. ... However, opening that door is not always easy for us. When Florida agriculture is down, the Brazil–Chile markets are able to level things out economically. Therefore, we fully support trade initiatives. ... By exploring the South American market, our company projects it would nearly double its sales. We rely heavily on exports, and Latin America contains a lot of prime agriculture. That would give us double purchasing, double job openings, and benefit our local economy.“ 

NAFTA Valley Ice & Fuel Co. 

(Brownsville, TX; 20) 

Supplies and services (fuels and services) 

General Increase regional 

opportunities 

“Mexico is by far our largest international market, and we hope to develop trade with other Latin American countries in the future. Valley Lubricants has been involved in international trade for more 

than 15 years, but our involvement has been steadily increasing over the last eight years, thanks to NAFTA.” 

Australia Video Products Group 

(Camarillo, CA; 29) 

Telecommunications manufacturing (advanced technology video equipment) 

General Increase competitiveness 

Increase export sales 

“Passage of a free trade agreement will help us increase sales because we will be in a better position to compete with telecommunications manufacturing companies from other countries.” 

General Videolarm Inc. 

(Decatur, GA; 50) 

Closed-circuit TV security 

Eliminate trade barriers Trade facilitation 

Increase export sales Pagano explains that the elimination of foreign trade barriers is 

important to his company because “the high cost of duties and trade regulations stifles our export efforts. If these barriers were relaxed, it would mean a surge in export business for my firm.” 

General Wagman Metal 

Products (York, PA; 50) 

Concrete construction tools manufacturing 

General Increase competitiveness “Free trade agreements make it much easier to compete 

internationally.” 

Chile Washington Chain & 

Supply (Seattle, WA; 26) 

Manufacturing and distribution (anchors, anchor chain, mooring systems, marine hardware, & release hooks) 

Tariff reduction Increase competitiveness 

(wrt Canadian companies) Open business opportunities Increase export sales Increase employment 

We have gotten a great deal of interest and inquiries from Chile, particularly in the past two years. However, many companies aren’t able to do business with us because of the difference in duties between countries.” As a result of these duties between the United States and Chile, the company is at a competitive disadvantage. ... “Our sales would immediately increase by 10%–15% and would only continue to climb. This increase would also translate into more jobs for us.” 

CAFTA-DR Wendell Textiles 

(Baltimore, MD; 80) 

Textiles (interfacing and interlinings) 

General Open business 

opportunities Increase competitiveness 

“A free trade agreement will provide us with more business opportunities while maintaining jobs in this part of the world. It is imperative to maintain as many jobs as possible in the United States. This can be achieved by expanding free trade, providing us 

a more equal playing field and allowing us to compete with manufacturers from other parts of the globe.” 

See footnote at end of table 
D-25

TABLE D.2 U.S. SME-identified export opportunities and benefitsa―Continued

FTA or market 

Company (location; employees) 

Industry (Product) Opportunity Benefit Source quote 

Peru Colombia 

York-Shipley Global Division of AESYS Technologies (York, PA; 100) 

manufacturing (firetube boilers and ancillary boiler room equipment) 

Tariff reduction Eliminate trade restrictions 

Increase market access “Local import tariff reduction, together with elimination of other trade 

restrictions, will directly reduce end-user costs for boilers and related equipment. This will afford increased opportunities to participate in markets where demand for Y-SG products is evident.” 

Chile ZF Mathers 

(Burlington, WA; 52) 

Manufacturing (marine propulsion control systems) 

Tariff reduction Increase competitiveness 

(wrt Canadian companies) 

“Our success has been based on selling a reliable product along with local support at a competitive price. However, we now have a competitor in Canada manufacturing products sold with zero duties in Chile. This has put us at an unfair disadvantage, and as a result, 

we would like to have more equal market conditions.” 

Sources: U.S. Chamber of Commerce—TradeRoots, “Faces of Trade: Small Business Success Stories with Peru,” 2006; U.S. Chamber of Commerce—TradeRoots, “Faces of Trade: Small Business Success Stories with Central America and the Dominican Republic,” 2004; U.S. Chamber of Commerce—TradeRoots, “Faces of Trade: Small Business Success Stories with Australia,” 2004; U.S. Chamber of Commerce—TradeRoots, “Faces of Trade: Small Business Success Stories with Chile,” 2002; U.S. Chamber of Commerce—TradeRoots, “Faces 

of Trade: Small Business Success Stories with Colombia,” n.d.; U.S. Chamber of Commerce—TradeRoots, “Faces of Trade: Small Business Success Stories with Alabama,” 2006; U.S. 

Chamber of Commerce—TradeRoots, “Faces of Trade: Small Business Success Stories with Georgia,” 2006; U.S. Chamber of Commerce—TradeRoots, “Faces of Trade: Small 

Business Success Stories with South Carolina,” 2007 (all above listed TradeRoots publications accessed February 16, 2010); U.S. Chamber of Commerce—TradeRoots, “NAFTA,” (accessed April 11, 2010). Notes: Not all companies profiled in the sources were included. For example, companies with more than 500 employees or without employment information were not included. Multiple profiles for the same company were consolidated into a single entry, which may result in an employment figure range. “wrt” = with respect to. 

aInformation in the “Company”; “Industry”; and “Source quote” columns is taken directly from the sources. Information in the “FTA or Market”; Opportunity”; and “Benefit” columns 

represent Commission staff interpretations and categorization of source information. 

APPENDIX E 

Overview of the Relevant 

Economic Literature

E-3 

Overview of the Relevant Economic 

Literature 

Introduction 

The Commission’s first report on SMEs in this series, published in January 

2010,1

 presented some discussion of the economic literature on trends by these 

firms in seeking out foreign markets; this review will try not to duplicate that 

discussion. The purpose of this review is to highlight some recent academic 

research on the determinants of these trends. Westhead et al. note that only 

recently have researchers begun to explore patterns of entry into foreign markets 

by SMEs. They point out that many SMEs have no desire to internationalize, 

though this may in part reflect a lack of resources; they also observe a mix of 

proactive and reactive SME exporters, the latter reflecting firms contacted 

directly for sales by foreign customers. Especially for these “reactive” firms, the 

most common mode of foreign entry by SMEs tends to be direct exporting.2

Susman and Stites examine these decisions on the mode of entry into foreign 

markets in more detail, with factors such as product complexity, intellectual 

property concerns, and service requirements playing key roles in determining the 

appropriate modal choice.3

Recent World Bank and OECD reports have discussed the barriers to exporting 

and other modes of international activities by SMEs. The World Bank studies 

have focused on financing constraints, while the OECD studies (based on surveys 

both of policy makers and SMEs themselves) are somewhat broader in their 

outlook, finding the most important barriers to “SME internationalization” to be: 

 inadequate working capital for export finance 

 difficulties identifying business opportunities abroad 

 limited information with which to locate and analyze foreign markets 

 inability to make contact with potential customers overseas.4

The discussion which follows examines these barriers in greater detail, focused, 

where possible, on U.S. and European SMEs. It then surveys studies 

documenting strategies that SMEs have used to overcome these barriers and 

patterns of exporting by both U.S. and EU firms. Finally, it gives a brief 

overview of the limited economic literature attempting to document benefits to 

SMEs from FTAs. 

 1

 USITC, Small and Medium-sized Enterprises: Overview of Participation in U.S. 

Exports, 2010. 2

 Westhead, Wright, and Ucbasaran, “Issues Surrounding the Internationalization of SMEs: 

Implications for Policy Makers and Researchers,” 2007. 3

 Susman and Stites, “SME Choice of Export Market and Entry Mode: Theory and Research,” 

2007. 4

 OECD, Top Barriers and Drivers to SME Internationalization, 2009. 
E-4 

Views on Exporting Constraints and Strategies for U.S. 

SMEs

Beck et al. focus on the issue of SME financing, relying on data from the World 

Business Environment Survey, a 1999 World Bank survey of approximately 

3,000 firms across 48 countries.5

 They find, as expected, that small firms rely 

more on informal sources of financing than on external (especially bank) finance, 

and that informal sources are far from perfect substitutes for formal ones. The 

result is that, especially in developing countries, small firms are constrained in 

their activities (both domestic and foreign), as limited access to bank finance is 

not offset by increased use of other channels (such as leasing arrangements and 

trade credit).6

 In a contemporaneous study, Rassenfosse discusses financing 

opportunities for high-tech SMEs, based on a survey undertaken by the European 

Patent Office. He finds that US SMEs are significantly more likely to obtain 

funding by licensing patents than those in the EU.7

A major focus of economists in recent years, following the work of Melitz,8

 has 

been on the role of size and economies of scale in distinguishing exporting firms, 

essentially noting that only the most productive firms (generally the largest) are 

able to overcome the fixed/sunk costs of entering foreign markets.9

 And 

certainly, the evidence is plain that SMEs play a disproportionately small role in 

exporting.10 However, two very recent studies cast some doubt on how clear the 

line is between exporters and non-exporters in terms of size. Ruhl and Willis, 

based on Colombian firm data, find that many new exporting firms start out quite 

small and gradually expand over several years (though many also exit the export 

market).11 Armenter and Koren observe that the distribution of export sales 

across U.S. firms does not quite match the Melitz model in that the share of SME 

exporters, while small, is still larger than would be predicted by that model.12

Both of these new works suggest that fixed costs of entering foreign markets—

while not to be ignored—are perhaps smaller than previously thought. 

 5

 Beck, Demirguc-Kunt, and Maksimovic, “Financing Patterns around the World: Are Small 

Firms Different?” 2008. 6 Berger and Udell (2006), however, offer a conceptual framework for analysis of SME 

financing issues which argues that the financial (regulatory) structure of a country is more 

important than the distribution of bank sizes in promoting availability of credit to SMEs. 7

 De Rassenfosse, “Patents as a Financing Mechanism for SMEs,” 2008. 8

 Melitz, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry 

Productivity,” 2003. 9

 A bit earlier, Bernard and Jensen tried to sort out the direction of causality in the firm 

size/productivity and export success relationship, finding that “good” firms export, not that 

exporting firms become “good.” Bernard and Jensen, “Exceptional Exporter Performance: Cause, 

Effect, or Both?” 1999. 10 Mittelstaedt et al., examining a large sample of firms in the Southeastern U.S., find some 

confirmation that a firm’s size has a positive impact on the propensity to export, but also report that 

firms located in more urbanized counties and where particular industries are more geographically 

concentrated seem more likely to export; these “external effects” are especially important for firms 

with under 100 employees. Mittelstaedt, Ward, and Nowlin, “Location, Industrial Concentration 

and the Propensity of Small U.S. Firms to Export,” 2006. 11 Ruhl and Willis, “New Exporter Dynamics,” 2008. 

12 Armenter and Koren, “Economies of Scale and the Size of Exporters,” 2009. 
E-5 

Freund and Pierola focus as well on sunk costs of export entry, but make a 

distinction between “entry into exporting, entry into new markets, and entry into 

new product lines.” Small firms can successfully enter existing foreign markets 

with products that are sold in the domestic market (as sunk costs are not too large 

for this category of internationalization) and targeting new export markets with 

these products is also feasible for SMEs. However, the sunk costs of exporting 

new (to the SMEs) products, especially into new foreign markets, can be 

substantial, suggesting an information assistance role for government policy in 

this area.13

In terms of what strategies and motivation have led SMEs to enter the global 

marketplace (a more general goal than direct exporting, including foreign 

investment as well as indirectly selling abroad through intermediaries), several 

recent papers shed some light. Javalgi et al. find an interesting result in noting 

that publicly owned (and traded) firms are more likely to export than are 

privately held firms; perhaps external stockholders push management to seek 

profitable opportunities abroad.14 Levy et al. examine “support structures” for 

SME exports in four countries—Colombia, Indonesia, Japan, and Korea—

finding that a mix of public and private financial, technical, and marketing 

support is needed.15

Palich and Bagby point out that one motivation often cited for SME 

internationalization is a limited home market, which is obviously more of a factor 

for European than for U.S. firms (though this suggests that extra-European 

exporting by EU SMEs may more closely resemble the U.S. experience).16

Hessels and Terjesen examine a sample of 871 Dutch SMEs to empirically 

explain two choices facing SME owner/managers: (1) to export or not, and (2) if 

exporting, the choice between direct contact with customers abroad and indirect 

exporting via an intermediary. They find that subjective perceptions by 

owners/managers of the international focus of their rivals, customers, and 

suppliers tend to explain the decision to export; more concrete constraints on 

access to knowledge, technology, and capital determine the mode of exporting.17

Examining a large dataset for Swiss firms, Hollenstein tries to explain factors 

leading to an international focus, and given this, the choice of mode. He finds, 

first of all, that firm size matters in internationalizing, but only up to a moderate 

size (200 employees). Even here, firm size plays a role only in the decision of 

how to establish a foreign presence (vs. exporting); small firms are more likely to 

establish this foreign presence via contractual relationships rather than through 

direct ownership/investment abroad. Innovation-related advantages (especially 

human capital and research and development (R&D) expenditures) turn out to be 

 13 Freund and Pierola, “Export Entrepreneurs: Evidence from Peru,” 2009. 

14 Javalgi et al., “Firm Characteristics and Export Propensity: A Comparison of Manufacturers 

and Manufacturing-based Service Providers,” 1998. 15 Levy, Berry, and Nugent, Fulfilling the Export Potential of Small and Medium Firms, 1999. 16 Palich and Bagby, “Trade Trends in Transatlantica: A Profile of SMEs in the United States 

and Europe,” 2007. 17 Hessels and Terjesen, “Resource dependency and institutional theory perspectives on direct 

and indirect export choices,” 2010. 
E-6 

the most important factors in explaining exporting activity (for all firm sizes).18

Hollenstein notes that some locational disadvantages of Switzerland (particularly 

high wages) seem to be particularly important factors for SMEs in deciding to 

establish a foreign presence.19

Orser et al., in a study of Canadian SMEs, find that small businesses 

reporting R&D investment were over two times as likely to export than those 

without R&D activities. They also report the interesting result that 

“immigrant entrepreneurs (new Canadians) were disproportionately 

exporters, even having controlled for sector, firm and other owner 

attributes.”20 The mechanism which leads to this result is not clear, but they 

point to possible cultural, geographic, and market knowledge factors, as well 

as the “push” towards internationalization due to reduced domestic economic 

opportunities. 

Li and Wilson analyze data on almost 15,000 firms, using the World Bank 

Enterprise Surveys of 14 Asian countries (conducted during 2002–2006). Sixty 

percent of these are SMEs with under 100 employees; 36 percent of the firms are 

exporters. Confirming data from the U.S. and EU, exporting firms are larger 

(measured by sales revenues) and more productive than purely domestic firms. 

The focus of the paper is on the role of “trade facilitation measures,” defined 

broadly to range from customs procedures to policy transparency (and lack of 

corruption), governance, and trade-related infrastructure (both physical—roads, 

rails, ports—and IT/communications-related). Statistical results clearly suggest 

that all possible reforms facilitating trade will both increase the probability of a 

firm exporting and increase the amount of its exports; increased trade 

transparency and IT services are seen as being especially effective in this regard. 

The authors note that SME exporting behavior is significantly more responsive to 

policy predictability than is the case for all firms.21

The academic literature pinpoints several specific strategies that successful SME 

exporters have employed: 

 Peng and Ilinitch stress the importance of using “export intermediaries”—

firms that provide “knowledge about foreign markets and export 

processes,” aid in negotiation, and help SMEs access the financial 

resources required in international transactions.22

 18 Roper and Love (2002), comparing determinants of exporting in the UK and Germany, find 

that more innovative firms are more likely to export, though the impact of co-location near other 

innovative firms varies between the two countries. 19 Hollenstein, “Determinants of International Activities: Are SMEs Different?” 2005. 

20 Orser et al., Canadian SME Exporters, 2008, 35. 21 Li and Wilson, “Trade Facilitation and Expanding the Benefits of Trade: Evidence from 

Firm Level Data,” 2009. 22 Peng and Ilinitch, “Export Intermediary Firms: A Note on Export Development Research,” 

1998. For example, CIT Group has an Export Working Capital Guarantee Program, which is aimed 

at SMEs that have exporting potential but lack ready access to financial resources for needed 

inventories and other expenses of selling abroad. 
E-7 

 Hart and Tzokas focus on the need for careful marketing research and 

demonstrate the value of such research for SME exporters.23

 Having surveyed 100 SMEs in the Australian wine industry, of which 50 

percent were exporters, Aylward finds that internal firm motivation and 

strategy towards exporting is more important than external (government 

support) programs; he also finds that successful SME exporters are 

concentrated within regional industry clusters of firms and tend to export 

via distributors and agents rather than exporting directly.24

 Lefebvre et al. consider the role of technology and R&D, finding that R&D 

investment must be supplemented by what they call “R&D-related 

capabilities,” including “investment in human capital in the form of highly 

qualified technical and scientific personnel” and “R&D collaboration with 

external partners.”25

 Knight points out that the underlying managerial/entrepreneurial 

orientation of the firm is crucial for export success.26

 Julien and Ramangalahy analyze the importance to SMEs in obtaining and 

efficiently processing export-related information.27

A Comparison of Exporting Activities of U.S. and EU 

SMEs 

Information about foreign markets, or the lack of this information, has also been 

found to limit SME exports. In 1998 Moini, based on a survey of small 

Wisconsin manufacturers, found a lack of knowledge about the availability of 

government export promotion programs (even among current exporters).28 More 

recently, this problem of information acquisition has been modeled more 

formally by economists. For example, Eaton et al. present a model to analyze 

small-scale exporting that views exporting behavior as a “search and learning” 

process in foreign markets.29 Resources are required to locate potential foreign 

buyers, and the information is “noisy”—that is, somewhat uncertain—as to the 

likelihood of success. 

Guay notes the considerable variation across U.S. states (focusing on the midAtlantic and Midwest states) in the export intensity of their SMEs; he also finds 

 23 Hart and Tzokas, “The Impact of Marketing Research Activity on SME Export Performance: 

Evidence from the UK,” 1999. 24 Aylward, “Global Pipelines: Profiling Successful SME Exporters within the Australian Wine 

Industry,” 2006. 25 Lefebvre, Lefebvre, and Bourgault, “R&D-Related Capabilities as Determinants of Export 

Performance,” 1998. 26 Knight, “Entrepreneurship and Strategy in the International SME,” 2001. 27 Julien and Ramangalahy, “Competitive Strategy and Performance of Exporting SMEs: An 

Empirical Investigation of the Impact of Their Export Information Search and Competencies,” 

2003. 28 Moini, “Small Firms Exporting: How Effective Are Government Export Assistance 

Programs?” 1998. 29 Eaton et al., “A Search and Learning Model of Export Dynamics,” 2009.
E-8 

variation in the nature of the state export promotion programs available.30

Wilkinson and Brouthers find some evidence supporting a positive role of U.S. 

state export promotion activities (specifically, trade shows) on SME 

performance.31

Mittelstaedt et al., examining a sample of small South Carolina manufacturers, 

find that internationalization activities by SMEs are generally confined to 

exporting (as opposed to foreign direct investment or other modes). Furthermore, 

among small firms, they conclude that a threshold size is clearly required for 

export success.32

Hessels notes the importance of innovation in explaining international 

involvement by Dutch SMEs, based on a sample of 1,800 firms. She finds as well 

that this international activity may then feed back into investment in further 

product innovations and distribution mechanisms.33

Brouthers and Nakos discuss the need for systematic selection of international 

markets vs. what they call an ad hoc approach, finding “that systematic 

international market selection is a significant determinant of export performance 

for a sample of Greek firms.34

Benefits to U.S. SMEs from Increased Export 

Opportunities from FTAs and Other Trading 

Arrangements 

Turning to studies of how FTAs have affected SME export performance, 

there has been surprisingly little prior research, and none directly on the 

issue of how US firms have benefited.35 Somewhat related, though, is the 

recent work of Albornoz et al., who note that firms find out how 

profitable exporting may be only after they actually start exporting to a 

particular foreign market. They suggest that trade liberalization (both 

multilateral and bilateral) has an externality-type effect: observing that 

exports to one market are profitable (thanks to liberalizing measures) will 

then increase the likelihood of serving other markets.36

Similarly, Alvarez, in an empirical analysis of exporting by Chilean 

manufacturers, finds that more productive and innovative firms are more likely to 

 30 Guay, “U.S. States and the Global Economy: Trends and Policies in the Mid-Atlantic and 

Midwest,” 2007. 31 Wilkinson and Brouthers, “Trade Promotion and SME Export Performance,” 2006. 32 Mittelstaedt, Harben, and Ward, “How Small Is Too Small? Firm Size as a Barrier to 

Exporting from the United States,” 2003. 33 Hessels, “Innovation and International Involvement of Dutch SMEs,” 2007. 34 Brouthers and Nakos, “The Role of Systematic International Market Selection on Small 

Firms’ Export Performance,” 2005. 35 However, USDOC data indicate that the share of SME exports going to Canada and Mexico 

rose significantly after NAFTA implementation (though it was still the case that over 70 percent of 

SME exports in 2003 were sent outside of NAFTA). 36 Albornoz et al., “Sequential Exporting,” 2009. 
E-9 

export, but that these factors cannot distinguish between “sporadic” or 

“permanent” exporting performance. Consistent with the work mentioned above 

on learning and export externalities, he finds that previous export experience and 

multinational spillovers increase the likelihood of a firm being a permanent 

exporter.37

In 1994 Julien et al. reported on a survey of small manufacturers in Quebec, 

Canada, on how they responded to the 1988 US-Canada FTA. The authors were 

surprised to learn that few of the firms were even aware of the agreement; 

however, more of them were taking steps to respond to globalization more 

generally.38 Battisti and Perry present the results of a small series of interviews 

with New Zealand SME owner-managers who were currently or potentially 

exporters; perhaps due to the passage of time from the previously mentioned 

study, there was considerable awareness and interest in FTAs (and a desire to see 

more of these concluded). However, few of the 51 interviewees planned to make 

changes in their export strategies because of them.39 Similarly, Isono finds that 

few Japanese firms take advantage of FTAs in East Asia, partly due to a lack of 

information but also partly because of a range of alternative tariff and technology 

provisions available to them.40

 37 Alvarez, “Explaining Export Success: Firm Characteristics and Spillover Effects,” 2007. 38 Julien, Joyal, and Deshaies, “SMEs and International Competition: Free Trade Agreement or 

Globalization?” 1994. 39 Battisti and Perry, “Creating Opportunity for Small-firm Exporters through Regional Free 

Trade Agreements: A Strategic Perspective from New Zealand,” 2008. 40 Isono, “Impediments to FTA Utilization and Industrial Clusters,” 2008. 
E-10 

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