National Small Business Week: 4 Big Points on Trade and Small Business

By SBE Council at 4 May, 2015, 11:44 am

International trade is a hot topic on Capitol Hill right now, and it very much is a big issue for the small business community warranting attention during National Small Business Week.

President Barack Obama wants trade promotion authority (TPA) passed by Congress, so that he can push ahead with two major trade accords being negotiated, that is, the Trans-Pacific Partnership (TPP), a proposed agreement with 11 Asia-Pacific countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), and the Transatlantic Trade and Investment Partnership (TTIP) with the European Union.

In Congress, a bipartisan group of leaders – Senate Finance Committee Chairman Orrin Hatch (R-UT), Senate Finance Committee Ranking Member Ron Wyden (D-OR), and House Ways and Means Chairman Paul Ryan (R-WI) – has introduced the “Bipartisan Congressional Trade Priorities and Accountability Act of 2015” (TPA-2015). TPA-2015 would restore trade promotion authority to the president; provide a streamlined up-and-down congressional vote on trade agreements; give Congress the ability to set negotiating priorities and consultation requirements; and boost confidence among our trading partners that the U.S. will not renege on the trade accord being negotiated and signed. (See SBE Council’s support letter for TPA-2015 here.)

The importance of advancing free trade for the overall economy and for small business are intertwined given the significant role that small business plays in international trade. Four big points on trade and small business must be kept in mind.

Trade and Small Business #1: Exporters are Mostly Small and Midsize Businesses

As noted in a November 2014 study (“U.S. Trading Companies 2012”) from the International Trade Administration (ITA), “A record of nearly 305,000 U.S. companies exported goods in 2012, of which the majority (297,995) were small or medium-sized enterprises (SMEs) with fewer than 500 employees.” Therefore, 97.7 percent of goods exporters were SMEs with less than 500 workers.

Trade and Small Business #2: U.S. Firms in the Importing Business are Mostly Small and Midsize Businesses

Again, according to ITA numbers, 95 percent of firms that both export and import goods were SMEs in 2012, and 97 percent of identified importers also were SMEs.

Trade and Small Business #3: Trade is Vital to the Economy, Growth and Workers

A deep recession and poor recovery have been caused by constraints on and obstacles to entrepreneurship and small business, and have hurt the well being of the overall small business community. Understanding the importance of trade to the economy makes clear that expanding opportunities in international markets through trade accords are positives for small businesses and their workers. Trade is a bigger part of our economy than in the past, accounts for significant shares of economic growth, and results in higher pay for workers. In 1960, for example, exports accounted for 5.1% of U.S. GDP, and total trade (exports plus imports) equaled 9.5% of GDP. Over a half-century later, in 2014, exports accounted for 13.4% of GDP, and total trade came in at 29.9% of GDP. In addition, real export growth accounted for 23.4% of real GDP growth from 2000 to 2014, and real total trade equaled 46.1% of GDP growth during that period. For good measure, as the ITA has reported, export-related jobs pay more average, such as 18% more on average in manufacturing.

Trade and Small Business #4: Trade with TPP and TTIP Nations is All About Small Business

The ITA reports that in 2012, 171,000 of the 177,000 firms – or 97% – exporting to TPP nations were SMEs, and 93,000 of the 97,000 firms – or 96% – exporting to the TTIP nations were SMEs.

Reducing trade barriers expands opportunities for U.S. small businesses – a critical reality about our economy that needs to be highlighted during National Small Business Week.

Raymond J. Keating, Chief Economist