Can Small Business Export?
Yes. The U.S. International Trade Commission has a new report about the export performance of small and medium-sized U.S. businesses. The report examines exports by SMEs (i.e., firms having fewer than 500 employees) between 1997 and 2007. So, what’s the verdict?
SMEs accounted for about 30% of U.S. merchandise exports in 2007 (that’s roughly $306 billion), a comeback from a low of about 26% in 2003. And they weren’t selling the t-shirts and kitsch that many people associate with small business. The bulk of SME exports were computers and other high tech equipment (roughly $47 billion), machinery (about $37 billion), chemicals ($35 billion) and transportation equipment ($29 billion). Pretty substantial stuff.
Where was it going? Canada and Mexico (about $45 billion and $35 billion, respectively) were the top destinations, naturally, given proximity and NAFTA. Next up were the big Asian markets, led by China ($22 billion) and Japan ($18 billion). Germany was the largest European market, buying about $12 billion from America’s SMEs.
Ambassador Bridge: Taking Small Exporters to Canada
That’s the overall picture on the merchandise side, but we need to get into the details. SME exports of the big ticket items (high tech, chemicals and machinery) overwhelmingly went to Canada and Mexico, and then often to only a single customer. Given that, it isn’t surprising that most of the growth in SME exports came from new entrants, firms that had never exported before, but starting out with a single customer, usually in Canada or Mexico. This may tell us how important NAFTA is to small business development in the United States, something that populist politicians need to know before they re-open trade agreements.
Intriguingly, buyers in Hong Kong, Switzerland and Israel seem the most relaxed about dealing with smaller suppliers, since these were the markets for which SMEs recorded the highest percentage of U.S. exports.
Exports of services by small companies show a different pattern. Their largest markets are Canada (no surprise) and the United Kingdom. The ITC speculates that sales to overseas affiliates of larger U.S. companies may play a role, hinting that SMEs may be piggy-backing on existing domestic business with these companies. Services exports are concentrated on professional services, such as architecture and engineering services.
