PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

2018 Policy Agenda for Entrepreneurs and Small Business – Issue 6: Growth via Global Trade and Strengthening IP

By at 30 January, 2018, 12:44 pm

By Karen Kerrigan

Entrepreneurs have entered 2018 with solid optimism and a strengthening economy.  Indeed, the keys to small business growth and healthy entrepreneurship hinge on strong and sustainable economic growth and the continuance of policies that lift government imposed barriers, encourage capital formation and investment. To that end, entrepreneurs are hopeful that President Trump and Congress will prioritize their agenda and provide them with every opportunity to succeed in 2018.

When entrepreneurs and small businesses are successful, they create the quality jobs and innovative breakthroughs that are needed for a dynamic economy that benefits everyone.

The big tax relief package that just kicked in will certainly power economic growth this year. Regulatory actions taken by the President and his Administration have already paid dividends for the economy by boosting business optimism, which has fueled more investment and positive economic activity.

The Agenda: Still, there is more to be done to make the U.S. more globally competitive for all U.S. businesses and to revitalize the ecosystem for entrepreneurial activity.  Transforming the outdated regulatory system, improving capital access, lowering health coverage costs and increasing choice and competition, global market access and intellectual property protection, additional tax code fixes, affordable energy, and ensuring all communities across America have access to quality broadband are some of the key areas for action.

Regarding surface transportation infrastructure (and other priorities for the Trump Administration and Congress) the voice of small businesses will be vital to ensuring that new initiatives and changes in these areas are beneficial to our sector.

In this blog post, I review the areas SBE Council will focus on to foster small business growth opportunities through trade and strengthening intellectual property (IP) protection.

You can review the details of other key issues in SBE Council’s 2018 Policy Agenda here:

Regulatory System Transformation and Reform

Access to Capital

Tax System Modernization

Broadband Access and Deployment

Health Care Affordability and Innovation

 

Global Trade is All About Small Business

Ninety-five percent of global consumers live outside of the United States, and given the vast growth in wealth creation across the world, more entrepreneurs and small businesses are eyeing global markets for growth opportunities and expansion.  America’s small businesses already play a significant role in the global marketplace.

In fact, a large variety of small to mid-size businesses dominate the American export scene.  According to the U.S. Census Bureau, of all U.S. businesses that export 96.2 percent have less than 250 employees, 92.2 percent have fewer than 100 employees, and 87 percent have less than 50 employees. Just over three-quarters of U.S. companies that export – 76.6 percent – have less than 20 employees.  U.S. global trade is all about small business.

Opening global markets for our entrepreneurs must be a top priority for the Administration. Trade agreements, and getting more of them in the pipeline, will lift U.S. economic growth and wages and improve the lives of many across the world.

As President Trump noted in his speech at the World Economic Forum on January 26, 2018:

“America first does not mean America Alone. When the United States grows, so does the world.  American prosperity has created countless jobs all around the globe, and the drive for excellence, creativity, and innovation in the U.S. has led to important discoveries that help people everywhere live more prosperous and far healthier lives.”

Trade allows all of this positive activity to happen. When America leads on trade, America – and the world – both win.

Modernizing NAFTA

The North American Free Trade Agreement (NAFTA) has been a solid pact for small businesses.  The U.S. is currently renegotiating NAFTA with our partners Canada and Mexico, which have a very positive outcome for small businesses. Certainly, elements of the agreement need updating but the principles behind it are sound. America’s entrepreneurs have greatly benefitted from NAFTA and most of the businesses that trade with Canada and Mexico are small businesses.

NAFTA renegotiation must focus on ways to bolster growth enhancing provisions, namely: lowering costs for businesses and consumers, expanding market access, strengthening intellectual property (IP) protections, and allowing data flow. Securing updates and changes in these areas would be big wins for America’s entrepreneurs and our workforce.

Read SBE Council’s testimony before the USTR: Modernization of the NAFTA Agreement, June 2017.

SBE Council continues to support renegotiation of NAFTA’s key elements that build upon its principles, which expand opportunities across borders and protect American IP. Pulling out of NAFTA would undermine America’s economic resurgence of the past year. It would also sour the outlook for future agreements with potential partners across the globe.

Key Data: U.S. goods exports to Mexico grew by 452.2 percent from 1993 to 2016. That was more than double the growth in U.S. exports to the world. And U.S. small businesses have enjoyed this growth. With Canada, 83.9 percent of U.S. exporters have fewer than 100 workers, and among U.S. importers, 64.4 percent also have less than 100 employees. As for trade with Mexico, 81.7 percent of exporters have less than 100 workers, and 74.3 percent of importers have less than 100 employees.

There has been tremendous growth in the number of U.S. businesses involved with trade under NAFTA. For example, from 1992 to 2015, there was an 81.4 percent increase in the number of U.S. exporters to Canada and a dramatic 365.5 percent increase in those exporting to Mexico. Most of these are small businesses.

U.S. Global Leadership on Trade

SBE Council has long been a champion of trade agreements, trade promotion authority for the President (across all Administrations), and the tools provided by the International Trade Administration and U.S. Commercial Services that play an important role in helping small businesses understand global markets and how to go global.

Moving forward on NAFTA and getting the ball rolling on other trade agreements would send a positive signal to the world and U.S. financial markets and businesses, which are already buoyed by sound domestic policies that have been enacted to enable investment and growth.

At the World Economic Forum, President Trump hinted that he could reconsider the Trans Pacific Partnership (TPP) if the U.S. got a “substantially better deal.”  But the other 11 countries have moved forward, and it looks as though they will sign the deal in March of this year. (See how the TPP would have benefitted U.S. small businesses here.)

Trade and expanding global markets is critical to U.S. economic growth and leadership.  It is very important to small business growth and provides small firms the opportunity to more quickly scale by serving niche markets in various parts of the world.  The platform-based economy has grown rapidly. Entrepreneurs are using global e-commerce platforms to extend their reach throughout the world. Lowering tariffs and other barriers to trade would allow small businesses to access more markets, and be more competitive in the global marketplace.

SBE Council will continue to advocate for trade agreement engagement – that is, more agreements both bilateral and multilateral – and against efforts to put quotas or tariffs on products imported by American businesses. These actions will raise small business costs, and hurt their competitiveness and survival both at home and abroad.   

Protecting America’s Intellectual Property (IP)

Dynamic entrepreneurship relies on strong IP protections at home and in international markets. A strong IP framework encourages startups, allowing entrepreneurs and small businesses to attract financial capital. It pushes innovation forward, providing entrepreneurs with confidence to capitalize on opportunities in domestic and international markets.  This productive activity serves as the engine for economic growth, job creation and a better world for everyone.

IP-intensive industries – from software to entertainment to pharmaceuticals – are overwhelmingly populated by small businesses. For example, among pharmaceutical and medicine manufacturers, 57 percent of employer firms have less than 20 workers, 79 percent less than 100 employees, and 91 percent less than 500 workers. If we want robust entrepreneurship and innovation in industries like pharmaceuticals and so many others, then IP rights and protections are essential.

President Trump has recognized the importance of American innovation and IP. He has taken steps to protect our creative assets and has acknowledged their value to the U.S. economy.  In August 2017, President Trump issued an Executive Order directing the United States Trade Representative (USTR) to consider whether to investigate China’s laws, policies, or actions that may be harming or undermining American intellectual property (IP), innovation or technology.  He has consistently noted the importance of protecting American IP in various declarations and public speeches, therefore building on initiatives and legislation over the past several years that have made progress on this critical issue.

The state of American and global IP is getting better, but there is more work to be done.  With regard to this critical issue for America’s entrepreneurs SBE Council will focus on:

-Strengthening IP through trade agreements with an immediate focus on NAFTA.

-Working with our allies in the business community and Congress to modernize the U.S. Copyright Office.

-Supporting government initiatives and legislation to prevent and detect IP theft (For example, see background on the STOP Act below.)

-Educating small businesses, the media, members of Congress and elected officials at all levels of government about the value of IP to America’s growth, innovation and economy and why it is vital that we protect it.

Closing Vulnerabilities in the International Mail System: Stopping IP Theft and Deadly Drugs at the Border

Last year, 318 million international packages entered the U.S. with no advanced electronic data (AED) on shipper and recipient name, address, or contents. This tool is used by federal law enforcement agencies to target packages containing illegal items. Unfortunately drug traffickers exploit this vulnerability to ship drugs like fentanyl into our country.  A January 24, 2018 bipartisan report by Senate Permanent Subcommittee on Investigations revealed the extent of this problem and the scourge it has inflicted across America.

The vast majority of these shipments come from China, and according to the Senate subcommittee report:

“China is capable of providing AED on its packages and currently only does so for about half of the packages it ships to the United States. The AED that the Postal Service does receive from foreign postal operators is of low quality, sometimes indecipherable, and potentially useless.”

SBE Council supports S. 372 and H.R. 1057, the Synthetic Trafficking and Overdose Protection Act (STOP Act), which would require the postmaster general to implement current law within the United States Postal Service and require private shippers from all countries to utilize AED.

Small business competitiveness is also undermined when this postal-system loophole is exploited to ship counterfeit goods into the United States. With the rise of e-commerce, it is easier than ever to get goods from China, India and other foreign countries. America’s small businesses are not afraid of competition, it just needs to be fair and legal.  Foreign posts must abide by our security rules when shipping packages into the United States. America’s livelihood and the health of our citizens depend on it.

To learn more about IP and small business, see SBE Council’s book (online for FREE): Unleashing Small Business Through IP.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

News and Media Releases