By Wade Merritt, Vice President of the Maine International Trade Center,
President of the State International Development Organizations
The United Kingdom Minister for Trade recently proclaimed, “We’re going to save the world through exports!”
It may be a bold statement, but it is a sentiment and enthusiasm we should all share—the more export-ready our businesses are, the greater our share of a competitive global marketplace. Britain, like the rest of the trading world, is looking to recreate Germany’s export success.
Known as Mittelstand, medium-sized exporting companies are the backbone of the German economy. As we see increasing strength in the global economy, German companies are ideally placed to take advantage. The country currently enjoys record-high employment, a claim any American state would wear with pride.
Germany’s network of overseas representatives are deeply integrated with industry groups and government, which supports a shared understanding of the importance of small and medium-sized business exports. This shared mentality results in a coherent exporting strategy that has positioned Germany as a leading exporter for decades. In the United States, the recognition that sustained economic health is linked to global competitiveness exists; the next step is making small business international exports the core of states job creation strategies.
In their state of the state addresses this year, governors across the country focused on job creation, touting new foreign investment, new jobs and strategies to continue to create jobs. Governors highlighted the opportunity provided by increased engagement in foreign markets, demonstrating the significance of building a higher understanding of the world—a key demand of being globally competitive.
Given this increased focus on international markets, how is the United States faring?
In 2010, President Barack Obama launched the National Export Initiative with the aim of doubling exports by 2015. International exports have risen, however, the country is currently more than $200 billion below target. Oklahoma Gov. Mary Fallin recently pointed out that there are 30 million small and medium-sized businesses in the United States employing about half the private sector workforce, and only 10 percent of those businesses currently export. State trade offices say this is because small businesses aren’t as inclined to think internationally. But when they do, the return on investment is hugely impressive!
Exporting is an area where states have demonstrated great resourcefulness. Using federal matching grant funds made available through the State Trade and Export Promotion, known as STEP, program, some of the most impressive returns were seen by states that are not overall top exporting states.
Authorized by the Small Business Jobs Act of 2010, the STEP program is a three-year pilot program aimed at increasing the volume of international exports. In the first two years of STEP, the average grant award was about $600,000—ranging from $42,686 in Wyoming to more than $2.5 million in California in the first year, and from $32,127 in Wyoming to $2.35 million in Pennsylvania in the second year. On average, states saw a 20-to-1 return on investment.
In New Hampshire, one business saw its share of revenue from outside the United States grow by 10 percent after a STEP grant helped offset the cost of attending international trade conferences usually out of the reach of small businesses.
After receiving assistance to participate in a trade mission to Australia, one Pennsylvania company’s sales to that country rose 226 percent.
Looking at the success stories present in every state, it is hard to argue against the value of the STEP program.
In the current climate, however, states will have to do more with less in the third year of the STEP program.
The Consolidated Appropriations Act of 2014, a $1.1 trillion bill to fund the federal government to which Congress recently agreed, included $8 million in funding for a third year of the STEP program.
This is less than a third of funding appropriated in previous years. Despite the reduction, STEP’s inclusion in the federal spending bill is a victory for state international trade offices. Considering the program was not included in the president’s budget request last year, the program was saved by leaders in Congress who saw the value of STEP in their own states. Nineteen governors wrote to Congressional leaders detailing the success of STEP in their states.
The future of STEP is unclear. As a three-year pilot program, it is scheduled to expire this year, and whether it will be reauthorized by Congress remains uncertain, however measurable its success thus far.
Whether STEP is renewed, federal and state leaders will need to continue to think globally when creating an environment for small businesses to thrive. Continued cooperation is vital to ensure that American small businesses receive the technical assistance that our British or German competitors receive to be export ready and sustain their market presence.
In a country still recovering from a deep economic recession, it is the only smart way to move forward.