The U.S. Commercial Service, within Commerce’s International Trade Administration (ITA), plays a leading role in the federal government’s efforts to encourage and promote U.S. nonagricultural exports. CS was founded in 1980, as overseas commercial work was transferred from the Department of State (State) to CS. The purpose of CS’s export promotion programs is stated through statutory authority. CS’s mission is to maximize U.S. competitiveness, and enable economic growth for U.S. industries, and enhance job creation by helping U.S. firms take advantage of opportunities abroad through a global network of international trade professionals. CS operates 108 domestic offices at U.S. Export Assistance Centers (USEAC), and maintains 124 international offices in 75 countries that represent the significant export markets for U.S. goods and services. CS trade specialists at these offices are tasked with assisting U.S. firms and representing U.S. commercial interests abroad. In those countries where CS does not have a presence, State represents U.S. commercial interests and assists U.S. exporters. State and CS are in the process of negotiating a memorandum of understanding to formalize this arrangement. Currently, State can offer certain export promotion services, but does not use CS product and customer service standards or CS pricing policies. The general goal of CS is to use its network of professionals and export promotion services to broaden and deepen the U.S. exporter base and help U.S. firms make sales in international markets. CS reports that it helps thousands of firms make export sales each year. Furthermore, according to CS, the majority of these sales are by SMEs. Its services include providing market research and supporting trade events. The Gold Key Service, which helps firms identify international business partners, is one of its most popular services. CS provides these services to a variety of customers. While private U.S. firms (particularly SMEs) are CS’s main customers, CS also delivers services to other customers, including state and local governments. Many U.S. states maintain state trade offices that provide varying levels of export assistance, usually focusing on increasing exports from firms located in their states. Most are managed by state economic development agencies and funded by states’ operating budgets. Many state trade offices maintain both domestic and overseas offices to deliver services. In addition, many states’ trade offices partner with CS to ensure client firms have access to services the state cannot offer, particularly in those foreign markets where the states lack offices. CS is authorized to charge a user fee for its export promotion services, and CS has adjusted its user fee structure in recent years. Prior to fiscal year 2005, CS did not have an agencywide user fee schedule for its export promotion programs, as each overseas post decided what user fees firms were charged for the export promotion services the posts delivered. As part of its user fee review in fiscal year 2005, CS sought to determine the user fees it would have to charge to recover the full costs of its services. CS determined its user fees would have to rise significantly to recover full costs, causing concern among firms, business leaders, and CS staff. However, CS did not implement a 2005 user fee schedule that recovered full costs but adopted an agencywide user fee schedule with user fees for most services set to recover a portion of program costs. CS and the majority of states provide many of the same types of export promotion services, such as export training, trade missions, and market research. Firms can choose to go to CS, states’ trade offices, or other providers to get these services. However, states have limited budgets and staff to assist their firms. Partly as a result of this limited capacity, most states reported that CS’s services are important to their export promotion capabilities and have partnered with CS’s offices. Both CS and most states’ trade offices focus their export promotion efforts on SMEs. CS and the majority of states’ trade offices provide services for free but charge fees for certain services. In addition, to facilitate access to CS’s programs, about a third of the states responding to our survey indicated that they provide grants or payments to firms from their states to defray the costs of CS’s fee services. CS offers a range of standardized and customized services to help firms to export. The standardized CS services, including Gold Key Service, International Partner Search, and International Company Profile, are prepared and delivered to firms in approximately the same manner around the world. These services offer firms assistance to identify and meet potential overseas buyers and distributors, and to perform due diligence on prospective foreign buyers. The customized services, including Customized Market Research, QuickTake, seminars/webinars, and trade promotion events and trade missions, are tailored to fit the specific needs of an individual firm in a specific export market and vary based on the scope of work. The majority of the states’ trade offices that responded to our survey provide many of the same types of export promotion services as CS to assist firms interested in exporting. According to CS officials, no state provides services that compare with the depth and extent of CS’s export promotion services. According to SIDO, states’ comparative advantage is their local presence and their ability to specialize in the major industries in their states and on the export markets those industries typically target. Services that most states provide and that are similar to CS include training programs and seminars, as well as assistance in participating in trade shows and missions. Other services states often cited include market research, agent and distributor searches, and foreign company background checks. According to CS officials, CS provides its services to a national client base and provides services in numerous markets where states have little or no presence. For example, CS officials explained that while many states provide “market research” services, these services may cover fewer markets and provide less detail than the market research CS provides. In addition, CS said that its missions target an industry segment more broadly and deeply than is possible for any state. Further, CS provides some services for which there are no state counterparts, such as government-to-government advocacy. Table 1 shows the major export promotion services offered by states’ trade offices and CS. States’ trade offices have small staffs and budgets relative to CS. Consistent with its role as a federal entity promoting U.S. interests abroad, CS has a national and worldwide presence while states have a local presence and operate in fewer countries. CS has 493 domestic and 991 overseas staff who are currently engaged in export promotion activities in 47 states plus Puerto Rico and 75 countries. (See app. II for CS’s domestic and international locations.) The 45 states’ trade offices responding to our survey have a combined total of 275 domestic staff and 214 overseas staff. According to SIDO, states’ trade offices have 245 offices in 34 countries. Half the states responding to our survey have five or fewer full-time domestic staff and two or fewer full-time overseas staff. Table 2 shows the differences among the states in terms of the resources they devote to export promotion activities. Both CS and the states’ trade offices have been experiencing reductions in their staffing levels. Based on CS’s data, it has experienced a 5 percent reduction in domestic staff and 3.5 percent reduction in overseas staff from fiscal year 2007 to 2008. Thirty-two states’ trade offices, or almost 73 percent of those that had a basis to judge, said that their overall staffing level has decreased or stayed the same over the past 5 years. While reliable trade promotion budget data are not available for the 50 states’ trade offices, sources estimate that the combined annual trade budget of the 50 states is significantly lower than CS’s annual budget, perhaps less than half. CS’s total budget for export promotion was about $235 million in fiscal year 2008 and is projected at $237.7 million for fiscal year 2009 (less than 1 percent increase in nominal terms.) Information about states’ export promotion budgets is difficult to obtain and may not be fully reliable. States’ commerce departments or economic development agencies usually run states’ trade promotion programs and foreign investment recruitment programs, and some states do not disaggregate the budget data between the two functions. CSG estimates that the 50 states spend a combined total of about $100 million each year helping state businesses create jobs at home by selling products abroad. SIDO estimates that states’ budget for both trade and foreign investment recruitment was about $103 million in 2008. Current state trade budget data are only available for 27 states through SIDO’s survey. Based on these data, the average state export promotion budget was $1.4 million in 2008, and the median was $775,000, ranging from Pennsylvania at about $10 million to Vermont at about $170,000. (Also see table 2.) In responding to our survey, some states’ trade offices made a variety of observations regarding leveraging resources between the states and CS and the limited resources available for export promotion programs. For example, one state said that budget cuts have resulted in its decision not to duplicate services offered by CS. Another state that has recently discontinued its export promotion programs expressed interest in having the USEAC colocate within its economic development agency while another state said colocation costs incurred by individual states could be offset by discounted fees for CS services. With regard to CS’s overseas offices, some states and SIDO noted that CS is closing offices in developed countries (and shifting resources to developing countries), and this leaves established global markets for SMEs without CS presence in some cases. SIDO is concerned about what they believe are the small number of CS resources available for export promotion programs. SIDO believes that U.S. firms are at a competitive disadvantage compared with firms in other competitor countries with larger government export promotion budgets and has called for a 50 percent increase in CS’s budget.