Trade, and exports more specifically, contributes to the U.S. economy in a variety of ways. Trade generally enables the United States to achieve a higher standard of living through exporting goods and services that are produced domestically relatively efficiently, and importing goods and services that are produced domestically relatively inefficiently. An indication of this is that firms engaged in the international marketplace tend to exhibit higher rates of productivity growth and pay higher wages and benefits to their workers than domestically oriented firms of the same size. In addition, the benefits of exports accrue to many U.S. states. For example, in 2008, according to Commerce, Oregon’s exports totaled $19.4 billion, with computers, electronics and agricultural products accounting for more than half of that amount. According to the Idaho Department of Commerce, in 2008, Idaho exported $5.01 billion worth of goods, with exports of high-tech products including semiconductors, computers, and capital equipment accounting for 63 percent, or $3.2 billion, of the total. Agricultural and food exports from Idaho totaled approximately $676 million, about 14 percent of its total exports. Exports can also serve as a countercyclical force for the U.S. economy, stimulating the U.S. economy when demand from abroad is greater than domestic demand. For several years, the United States increasingly imported more than it exported and served as an engine of growth for other nations. In contrast, when the U.S. economy slowed in 2007 through the first two quarters of 2009, the economic downturn was somewhat mitigated by an improving trade balance. For example, with continued global demand for U.S. goods and services, increases in net exports accounted for over half of U.S. economic growth in 2007 and 2008. Several rationales exist for the use of government export promotion programs to support exporting firms and sectors. 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. Examples of export promotion addressing market failures and achieving broader trade policy objectives include: Foreign market information: Some firms may not export because they lack information about export markets, but U.S. officials abroad may have access to commercially valuable information about foreign markets that the private sector may not otherwise be able to access. Advocacy: Government representation on behalf of a firm competing for a potential export sale may influence procurement decisions, particularly in helping establish a firm’s credibility in foreign markets. Export finance assistance: Government finance can fill gaps created when the private sector is reluctant to finance certain exports, particularly for small and medium sized enterprises (SMEs). Not withstanding these rationales, measuring the effectiveness of export promotion activities is inherently difficult. For example, quantifying the growth in exports is complicated by the fact that other factors, such as government policies and firm-specific conditions, also determine growth. Nevertheless, according to the World Bank, the number of national export promotion agencies worldwide has tripled over the past two decades. Export promotion efforts in the United States are guided by the National Export Strategy and are pursued by a wide variety of agencies and through a wide range of activities. According to the strategy, 20 export promotion agencies are part of the Trade Promotion Coordinating Committee (TPCC), of which 9 of the agencies have budgets for programs or activities related to export promotion, with Commerce, the Department of Agriculture (Agriculture), and the Department of State (State) actively engaged in export promotion overseas. To support U.S. businesses in- country, as well as gather data and information about local markets, Agriculture has 101 offices in 81 countries and Commerce has 126 offices in more than 80 countries. State personnel provide in-country services at approximately 100 embassies overseas where either Commerce or Agriculture lacks a presence. In both 2007 and 2008, the budget for U.S. trade promotion activities was about $1.3 billion. In 2009, TPCC agencies requested $1.2 billion in funding, with Agriculture, Commerce and State accounting for 91 percent of the total trade promotion budget authority. The wide range of activities that are considered export promotion include: providing basic export counseling; assisting with collecting and providing data on foreign markets; advising firms on how to best market their products overseas; providing loans, insurance, and guarantee programs; advocating on behalf of domestic firms; and monitoring trade agreements. While GAO has not recently performed an in-depth comparison of U.S. and foreign export promotion activities, the findings and recommendations in our past reviews of U.S. agencies are consistent with several expert studies looking at export promotion practices in other countries. Specifically, GAO has identified elements of U.S. export promotion activities that warrant attention: (1) coordination; (2) targeted services for small and medium enterprises and other priorities; (3) performance monitoring; and (4) partnerships and methodologies for setting user fees. The expert studies we reviewed echo the importance of each of these activities for foreign export promotion. (See app. I for a listing of these studies.) Although we do not endorse any specific changes to U.S. export promotion programs implied by the studies, we provide this information to assist in Congressional oversight of U.S. export promotion programs and for a policy discussion about U.S. export promotion activities. GAO has begun a new body of work in this area based on renewed congressional interest. U.S. export promotion activities are coordinated by the TPCC. To address a longstanding congressional concern over a lack of effective coordination, GAO has reviewed the TPCC several times since its inception. In 2006, we testified that the TPCC had made progress over time in improving coordination, including interagency training and joint outreach. However, in both 2006 and 2009, we found the TPCC continued to face challenges in other areas of its coordination responsibilities. For example, in March 2009, we testified that the National Export Strategy continues to lack an overall review of agencies’ allocation of resources relative to government-wide export promotion priorities. Similarly, we testified in 2006 that, despite its mandate to propose a unified federal trade promotion budget, the TPCC continued to have little influence over agencies’ allocation of resources for trade promotion. Our observations about the importance of clearly coordinated responsibilities among export promotion agencies are consistent with findings in several expert studies that examined foreign export promotion practices. For example, the International Trade Center reported that most successful exporting countries have established a central or national export promotion agency that coordinates implementation of the national export strategy, leads in creation of a support network, and acts as a first stop for the business community. In a review of 104 countries, the World Bank study found that a single and strong export promotion agency is preferred to the sometimes observed proliferation of agencies within countries. Well-coordinated activities among a larger partnership of support agencies are emphasized in studies by the Australian Trade Authority (Austrade) and the Boston Consulting Group. Austrade, for example, stated that effectively coordinating export service providers is important for potential and new-to-export firms, since some – especially small and medium-sized enterprises – have encountered difficulties in identifying or accessing appropriate services for their needs. Examples of notable foreign coordination efforts that the reports cited include: Canada’s National Sector Teams and Regional Trade Networks that were created to enhance coordination and improve access to services for the business community; and The Philippine Export Act that gave an apex body, the Export Development Council, overall responsibility for formulating and coordinating the national export development effort. The council was chaired by the Secretary of the Department of Trade and Industry and had cabinet-level members from the eight ministries concerned with economic development. Providing services targeted to small businesses has been a high priority for U.S. export promotion activities. Commerce seeks to broaden and deepen the exporter base with the majority of exports supported by its Commercial Service deriving from SMEs while for the U.S. Export-Import Bank (Ex-Im), Congress requires that a certain percentage of financing be for small business. GAO has found limitations in both programs. In 2009, we recommended that Commerce take steps to improve its databases and procedures because they lacked reliable information about the size, location, and type of its customers. In 2006, we recommended, among other things, that Ex-Im more accurately determine the number of transactions that directly benefit small business and improve the system for estimating the value of direct small business support for those transactions where the exporter is not known at the time Ex-Im authorizes the transaction. As we testified in 2008, Ex-Im has taken several steps in response to those recommendations. Beyond SMEs, U.S. export promotion priorities are more broadly outlined in the National Export Strategy. However, as we testified in 2006, the focus of the national export strategies continues to change from year to year with little evaluation of previous efforts’ effectiveness. For example, the 2003 strategy prioritized on capacity building, Russia, and transportation security; the 2004 strategy highlighted China, free trade agreements, and coordination in crisis regions; and the 2005 strategy covered free trade agreements, China, and six “growth markets” (Japan, South Korea, India, Brazil, Russia, and the European Union). At the time of our 2006 testimony, some member agency officials commented on the ad hoc nature of the national export strategies. Our observations about the importance of targeting services, for example, to SMEs and other assistance priorities are reflected in expert studies on foreign export promotion. For example, most of the studies we reviewed recognized that SMEs have unique needs and that services should be tailored to account for common financing and informational constraints faced by smaller firms.