PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Trade Matters to Small Business: The Latest Data

By at 5 August, 2021, 10:57 am

 

by Raymond J. Keating –

Why does international trade matter to small business?

In terms of quick answers, export markets present opportunities for U.S. entrepreneurs, businesses and workers, while practically all imports are inputs to U.S. domestic businesses, from retail to manufacturing.

Most Firms Engaged in Global Trade are Small Businesses

Most exporting firms are small businesses, with 91.4 percent of identified exporters having fewer than 100 employees, according to latest report from the U.S. Census Bureau.

Likewise, 91.3 percent of identified importing businesses have fewer than 100 employees.

Trade also matters to U.S. economic growth. Consider that, for example, the growth in real exports plus imports, i.e., total trade, from 1980 to 2019 equaled 39 percent of real GDP growth over that period.

The State of Trade and the Latest Data

Unfortunately, real U.S. exports declined in 2019 and 2020, while imports fell in 2020. Those were the first declines since exports decreased in 2009, and imports dropped in 2008 and 2009.

During the first two quarters of this year, real exports have been mixed, declining in the first quarter and growing in the second, while imports have experienced growth in each quarter.

The latest U.S. Bureau of Economic Analysis monthly report on international trade shows that June 2021 exports (seasonally adjusted) increased slightly versus the previous month, but also remained below its recent high hit back in May 2019. Meanwhile, import growth, again, has been stronger, which is a positive sign regarding an improving domestic economy.

The U.S. needs to reclaim the global leadership role in advancing free trade. That position was abandoned by President Obama, whose administration largely remained on the sidelines until the very end of its two terms, followed by the protectionist Trump administration, and now a Biden administration that has done nothing to repair the damage done by these two predecessors on trade.

As already noted, expanding trade is vital for small businesses and for economic growth. That means policymakers need to be working to reduce governmental barriers to trade, such as tariffs and quotas. Yes, tax and regulatory relief works in international markets, just as they do at home.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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