Steel tariffs. Pressure on China to abide by World Trade Organization rules on opening its economy. Provisions in U.S. legislation prompting the defense industry to buy American. All examples of recent federal government actions to help American companies compete internationally. And, all share another characteristic: They primarily benefit large exporters-big steel companies, multinationals with large operations in China, large defense contractors.

In fact, trade experts say, historically the federal government has focused on promoting exports from the largest American firms. No surprise, then, that small and medium-sized enterprises often shy away from seeking government help.

But the truth is such companies are a lot more important than might first seem. According to a Department of Commerce profile of exporting companies, 97 percent of American exporters were small or medium-sized companies in 2001. To set that figure in context, most of these exporters did very little business abroad (they accounted for less than 30 percent of America's total export value, and most traded with only one foreign country). Meanwhile, the Internet has made it much easier for small exporters to interact with the government, find suppliers overseas, and maintain daily communication with foreign offices. The fact of the matter is that small and medium-sized companies are engaged in international commerce at an ever-growing rate. The net impact is that government-both federal and state-is increasingly offering support to smaller companies as they become more active politically and more important to world trade.

Over the past five years, the Clinton and Bush administrations have prodded several important federal agencies, including the Small Business Administration, the U.S. Trade Representative, the Overseas Private Investment Corporation (OPIC), and the Department of Commerce, to focus more on small exporters' needs-which means providing new programs offering advice, financing, and other assistance to small firms. Still, despite these improvements, government assistance to small exporters remains "a mixed picture," according to James Morrison, president of the Small Business Exporters Association, a trade group. Too often, well-meaning government initiatives still do not have the funding to make a difference, and the multitude of government agencies dealing with trade continue to confuse and hinder small exporters.

Services to emerging traders

Though the Small Business Administration has always devoted some resources to helping finance small exporters, other agencies historically focused on large companies. OPIC, an agency that helps American companies make investments in the developing world, "used to give lip service to small business, but its orientation was big business," says Morrison. Now "OPIC is really changing. They've put small businesspeople in top offices [within the agency] and now has more of a small business orientation... They've done more for SMEs (Small and Medium-sized Enterprises ) than anyone in the past 18 months."

Last year, OPIC opened an entire department within the agency devoted to helping small and medium-sized firms invest in developing countries. Now, Morrison says, OPIC "has put 40 percent of its resources into the small and medium-sized enterprise department." What's more, OPIC last fall launched a program to provide cheap political risk insurance to small exporters. "Small businesses investing overseas need protection against risks that they can't control, such as expropriation and political violence," said Peter Watson, OPIC president.

Other agencies have followed OPIC's lead. The Export-Import Bank, which provides credit and financing for exporters and also historically favored larger companies, has vowed to devote 20 percent of its financing to small and medium-sized world traders. The Bank hasn't yet met that 20 percent standard, Morrison says, but it is drawing close.

With the federal government setting the example, state business agencies have, in the past five years, increased their assistance to small exporters. In Georgia, the state's economic development officials have expanded their export assistance programs from Atlanta to smaller cities across the state. In Maryland, the state government has created an export promotion program targeted only at companies with annual revenues of less than $15 million. Laurel Delaney, founder of Globe Trade, a small export consultancy, says, "State trade officials are often more receptive, because they're dealing on a smaller level."

And, SBA has expanded some of its efforts to help world traders. The Small Business Administration recently launched a new program entitled Export Express that helps small exporters get loans by guaranteeing their credit lines, up to $250,000. For slightly larger traders, the Administration also offers its Export Working Capital Program, which provides incentives for private lenders to finance small exporters, by guaranteeing the loans up to $1 million. All of these financing and programs help enormously. As the National Small Business Association, a trade group, notes, obtaining financing is often the hardest part of an export deal for small traders, particularly for companies with little history of obtaining capital.

In addition to offering financing, government agencies have bolstered their efforts to provide information about foreign business climates to small American companies. Often, this information is distributed over the Internet. One of the federal government's trade Websites, www.export.gov, has begun producing a monthly email publication compiling export information on a range of important foreign markets and offering links to local information about these markets. Delaney says that Export.gov and another federal government site, www.buyusa.com, also contain sizable directories of overseas joint venture partners and buyers. "You'd be surprised by what [information] small businesses can get for free on the Internet...These two sites are the most comprehensive," she says.

This value of such information on foreign partners, business climates, regulations, and customs is impossible to overstate. As Delaney says, doing your research about an overseas business climate, customs, and language ahead of time can be the most important factor in success. As she notes, "An engineering display at a Moscow exhibition produced as many snickers among the Russians as praise. American company executives were not happy to learn that a translator had rendered in Russian a sign identifying 'completion equipment' as 'equipment for orgasms.'"

Meanwhile, the SBA has added sections on international business to conferences and expositions on entrepreneurship and has launched a service in which small traders can get free initial consultations with trade attorneys. The Department of Commerce, working in conjunction with several other federal government agencies, now publishes a yearly Export Programs Guide, a comprehensive book that includes information on all federal programs designed to assist U.S. exporters. The Guide can be ordered online-it comes out every spring. It also can be obtained for free at U.S. Export Assistance Centers, a network of federal government-sponsored centers in many U.S. cities that serve as clearinghouses for information on exporting.

Though the Internet is a valuable conduit for export information, the Department of Commerce has in recent years supplemented the Internet information by increasing its number of export information officers, both in the U.S. and at U.S. embassies abroad. Commerce officials posted at embassies overseas usually are extremely accessible to small companies, Delaney says. Furthermore, Commerce has developed a service it calls Gold Key. Under Gold Key, for a few hundred dollars (the fee varies from country to country), Commercial Service officials posted at foreign embassies will provide a matchmaking service, introducing American exporters to local companies that might buy their goods or partner with them in joint ventures. In some cases, these Commercial Service officials will even help American companies screen job candidates for their businesses abroad. "These Commerce people like the idea of working with small companies, because the SMEs show a lot of gratitude" that Commerce may not get from bigger companies, Morrison says. "The Commercial Service offices all over the world are very comprehensive," Delaney agrees. "They provide tons of research about each foreign country."

Commerce Secretary Donald Evans also has made a point of inviting small and medium-sized companies on trade missions abroad, one of the best ways for companies to make contact with potential joint venture partners overseas. With Evans more open to SMEs, small exporters have learned to contact the Office of Business Liaison, the Commerce department responsible for trade missions, to get on these trips. And, Delaney says, Commerce has also gotten more involved with small business-oriented NGOs, working with them to develop these missions. As with export financing, more states also have become involved in these missions. In Hawaii, for example, the state department of economic development has worked with the Commerce Department to send Hawaiian tourism companies to China to train Chinese counterparts, and potentially develop business links in the People's Republic.

Not only microeconomic but also macroeconomic policy has been altered somewhat to help smaller exporters. Trade experts say the office of United States Trade Representative Robert Zoellick, which represents America in global and bilateral trade talks, has begun to push foreign countries to reduce trade barriers that matter more to small exporters-on-the-ground barriers like restrictions on imports and red tape at ports.

The Treasury Department has begun to look more closely at how its actions impact small and medium-sized exporters. At a breakfast with Washington media outlets, including World Trade, Treasury Secretary John Snow told reporters that one of his biggest global trade concerns was the "global growth deficit"-that Japan, Europe, and developing nations were not growing fast enough to remain strong consumers of American exports. Snow said that Treasury would do everything possible to spark growth in these laggard nations.

More remains to be done

But though the government has reached out to some small traders, it has hardly fixed all its problems. For one, it still needs to devote more funds to helping small exporters. Some small exporters complain that, though the Export-Import Bank and OPIC have expanded their outreach, they still don't have enough small business financing specialists. Meanwhile, Congress has refused to authorize the $3.1 million needed to hire more export finance specialists to staff the network of export assistance centers set up by the federal government in many cities.

The White House's 2004 budget eliminates altogether several programs that had helped small and medium-sized entrepreneurs. The budget would repeal a law called the Byrd Amendment, which required the federal government to compensate American companies whose business was damaged by foreign competitors who benefited from unfair subsidies. Most of the Byrd compensation went to smaller firms. And the 2004 budget does not seriously increase funding for the SBA's 7(a) loan program, which has helped many small and medium-sized manufacturers upgrade their operations to make them competitive internationally. In fact, notes Joel Marks, executive director of the American Small Business Alliance, a trade group, the White House even has proposed eliminating 7(a), a program that has been enormously popular with smaller companies.

Red tape remains a major problem as well. "The biggest complaint small business owners have is trying to figure out what's required, in terms of paperwork, from the federal government," says Bruce Phillips, senior economist at the National Federation of Independent Businesses. "Often, if you're exporting, you might have to read twenty pages to learn about the regulations on exporting," he says. Regulations enacted since 9/11, including the USA Patriot Act, have only increased red tape, especially in sensitive industries whose exports are now monitored more closely. Now, "people perceive that there's a tremendous number of regulations involved," Phillips says.

Indeed, Morrison says, the federal government still has too fragmented an approach to trade, with responsibilities for helping exporters diffused among 19 agencies. "Federal government people should be cross-trained, so they know what's available to small businesses in many different government agencies," he says. Small companies "want one person to help them. They don't want to go from one agency to another." By contrast, he says, in the United Kingdom, there is one central agency that coordinates export policy for small companies. Britain's system of export promotion "has a set of clear goals ... [and] it's coordinated, and the people you deal with know all the aspects of the federal government. It works."

Sidebar: Turning the Gold Key

Of all government programs designed to help small- and medium-sized exporters, the Commerce Department's Gold Key program is probably the most popular. Carlos Poza, Deputy Director for the U.S. Commercial Service, and a veteran of four Commerce postings abroad, calls it "by far our most effective program."

Gold Key, designed to introduce American entrepreneurs interested in investing in a foreign country to a range of important contacts there, is most commonly used in Latin America and Europe, but is increasingly being employed in Asia. Fees for services range from $300 to $800 a day, depending on the country (fees for a second day of consulting, if required, are less than for the first).

In-country Gold Key staffers (who could be a Commerce official posted at the embassy or a private contractor) receive the business plans and goals of the chief executive of the SME, and then, based on those plans, set up at least four meetings for the visiting businessperson with local suppliers and potential joint venture partners. The Gold Key staffers can arrange transportation to the meetings, interpreter services and even customized marketing plans.

"The general program is pretty standardized," Poza says. "We look through our files, out industry databases, or contacts, and then make calls to find out who might be interested in the products or services provided by the U.S. company."

Gold Key is probably the best introduction an SME can have to a foreign market. "Over 90 percent of our clients are small- and medium-sized. If they're not really confident, large exporters, they want to see an American and hear [about the local market] from an American," Poza says. "Private consulting companies are too expensive for them ... And if a person is brought in by the embassy [to meet with them], they are less likely to cheat that U.S. company ... [because] the embassy will follow up on problems."

"The key issue to making Gold Key work is communication-the U.S. businessperson has to share with us their business plan and their strategy for the market. They have to show us what they want to do," Poza says. Then, "we can match them up with the right suppliers or markets." Indeed, Poza says, the Commerce Department is now working closely with the National Association of Manufacturers and other leading trade groups to inform more SMEs about Gold Key, and to prepare them to use the program.

In Fiscal Year 2003, Gold Key Matching Services (GKMS) made 'introductions' for some 1100 U.S. firms, many of whom contract for service in several countries as they swing through a region where they seek to expand their exports.

The range of these companies and contacts goes from a specialty firm whose introductions to Brazilian entrepreneurs led to $100,000 in annual sales, to a Connecticut bicycle maker introduced in Columbia, to an earthmoving and road making equipment manufacturer introduced in Ghana.

To contact Gold Key: 1-800-USA-TRADE (872-8723), www.esport.gov/cs.

Links

• Gold Key