The House Appropriations Committee held hearings last Thursday that addressed, inter alia, the proposed budget for the U.S. Commercial Service. I have been around government budgets enough to know that just looking at the dollars does not give you the whole story. So I sat up and took notice when headcount numbers for the last dozen years were presented on the number of Commercial Service people in foreign assignments. Budget people and politicians do all sorts of magic with dollars, but they can’t hide trends in having bodies on the ground. That picture, my friends, is not pretty.

The truth is that the trade promotion personnel of the United States continue to get cut. Costs are rising faster than budgets. That means there has been a reduction in the number of people doing the work in America’s embassies and consulates. No matter how you dress it up, there are fewer folks out there to help American exporters. CS received a budget of a little less than $280 million for FY2012, which compares favorably with recent years, though it wasn’t obtained without drama. Beneath the surface, more than 10% of that budget is grabbed off by Commerce’s International Trade Administration for “internal services”. Another very large share (I don’t have a current number) goes to the Department of State for rent at embassies and consulates, and for security services. Let’s look at the bodies to see what is really happening to U.S. trade promotion.

The Commercial Service had 1,278 people in foreign assignments in FY2000, a number that includes both American officers and locally-hired commercial personnel. Skipping over twelve years, the number was down to 907 by FY2011. That is a cut of 371 people, or 29%, that directly reduces the level of effort to help American companies and workers. You will hear that CS “does more with less” or is “working smarter“, but imagine what they could do if they still had those 371 people and they were “working smarter“, too. The fact is inescapable: personnel cuts hurt effort – and results.

CS says it has responded by shifting resources to higher priority markets, but it is mighty hard to see where. Here are the personnel numbers in graphic form for each of the world’s major regions:

The only thing that can be said is that some regions haven’t been cut as much as others. So far in the 21st century, Western Europe has been gutted 37.6% and the Western Hemisphere by a third. Africa, Near East & South Asia (ANESA) fared the best, cut by only 17.6%. The supposed markets of the present and the future in East Asia & the Pacific (EAP) and Eastern Europe have been slashed by 26.6% and 30.2% respectively. One wonders just where Washington’s oft-said commitment to exporting, along with trifling things like the National Export Initiative, might be hiding. They only seem to appear in speeches by political appointees and elected officials. They don’t make it through to the real world.

The numbers displayed here today don’t tell the whole story. The CS staff in Washington has also diminished, and the staff in domestic offices has all but disappeared. I just don’t have an equivalent time series to show you. If any of you out there has the information, I would love to see it.

I posted last week about how much different countries spend to promote $1,000 in exports, concluding that the U.S. taxpayer gets a good deal (and should invest more). Trade promotion budgets and activities are notoriously hard to compare, but we’ll take a stab at it. Actually, the stab was taken in 2010, but the results never received much coverage and are still largely current. My data comes from the National District Export Council, but is based primarily on information countries supplied to the Organization for Economic Cooperation & Development or, in the case of non-OECD members, from a study by the U.S. International Trade Commission. All of the countries below offer export promotion support, but the numbers and services are often commingled with attracting foreign investment. For comparative purposes, let’s begin with current numbers for the …

United States. The primary U.S. export promotion agency is the U.S. Commercial Service, housed in the U.S. Department of Commerce. You will find CS staff in American embassies and consulates in 74 countries and also in 108 domestic offices. The Commercial Service has 1,453 employees worldwide, about half of those foreign nationals (local employees at embassies). About 900 employees are overseas. The domestic offices are staffed by 238 employees (they once had 325), so these offices are pretty small. That leaves a bit more than 300 staff in Washington. The budget for FY2012 was just short of $270 million.

United Kingdom. UK Trade & Investment spent $507 million in 2009-2010, of which $386 million was on trade promotion (the rest was investment promotion). They had 2,400 employees spread through 165 offices in 98 countries, and twelve offices in the United Kingdom. A substantially bigger global operation than the United States musters.

Canada. The Trade Commission Service had a budget of $196 million in 2008-2009 and a staff of about 900. They were distributed among 150 offices around the world and 18 domestic offices in Canada. For a far smaller economy, Canada compares very favorably with U.S. spending.

China. It is tough to compare China’s promotion efforts with others because it is split among at least three organizations and covered with secrecy. Their total budget is unknown, but in 2010 it appears that they collectively had more than 3,900 employees in more than 200 offices worldwide. So, more than twice the U.S. effort would be a good guess.

Japan. The Japan External Trade Organization has been known to assist imports as well as exports, so a direct comparison is problematic. JETRO had a budget of $255 million in FY2006 and 1,580 employees in FY2010. Of those, 780 were overseas in 71 offices in 54 foreign markets. JETRO has 36 domestic offices with a domestic staff of 800, so their offices are just a tad better staffed than those of the U.S. Commercial Service.

Italy. The Institute for Foreign Commerce had an FY2010 budget of $225 million. They fielded 690 employees in 117 offices in 87 countries, as well as in 17 offices in Italy.

Germany. This may be the toughest comparison of all, as I pointed out in my earlier post. That’s because German companies are legally required to join and pay dues to chambers of commerce, and much of that money goes into trade promotion. As it is conducted by “private” Wirtschaftskammern, the bulk of German export promotion spending isn’t included in their official statistics. That said, the Ministry of Economics & Technology had a 2010 budget of $134.8 million for export promotion, financing the work of about 2,700 employees. You will find Wirtschaftskammern pumping exports in 120 offices in 80 countries, often assisted by Foreign Office staff in 145 markets. [I know the German operation in Singapore well, a fantastic facility that provides office space, incredible services and even light manufacturing and repair facilities for German companies selling in S.E. Asia.]

France. The French had an export promotion budget of $160 million in 2010 and fielded about 1,500 employees in 64 offices in 44 countries. Somewhat restrained compared with the others.

Spain. The Spanish export promotion budget was unclear in 2010 and is probably changing, given Spain’s economic circumstances. They had about 1,500 employees in 80 countries.

Brazil. I am a bit uncertain about Brazil’s data since they show an incredible spend per employee. What I have seen shows about 250 employees in 2010, with a budget of more than $137 million. Brazil, rather than simply placing small staffs in a large number of embassies, seems to focus on fewer purpose-built business centers in Miami, Dubai, Warsaw, Beijing, Havana, Moscow and – surprisingly – Angola.

Draw your own conclusions. In my view, the United States is being outspent by almost everybody.

I posted early in the month about Canada’s Trade Commissioner Service, our northern neighbor’s analog to the U.S. Commercial Service. They provide similar services to help their respective exporters and they often get involved with attracting foreign investors to their economies. They also cover roughly the same number of markets worldwide and employ similar numbers of people. That’s remarkable when you consider that, by almost any measure, the United States economy is many times bigger than the Canadian economy. That means that Canada puts in a far greater level of effort per export transaction to support its companies in overseas markets.

Reliable numbers are tough to come by. Those I present here are pieced together from the National District Export Council, the U.S. Department of Commerce and the U.S. International Trade Commission, but I believe they are based ultimately on statistics countries report to the Organization for Economic Cooperation & Development. Due to subsidies and associated secrecy, support for agricultural exports is almost impossible to compare (and I don’t think data on export support for services has ever been collected), but here is a comparison of spending per thousand dollars of exports of non-agricultural hard goods:

The United States comes out as the low spender of the countries for which we have data. I know, it looks like Germany is the lowest, but the Germans (and the Austrians) use a financial system that can’t be compared to the others. Their exporters must by law be members of chambers of commerce (Wirtschaftskammern) which take their mandatory dues and apply a large portion to supporting exports. As a result, “official” export assistance is rather slight, but a great deal of money is spent.

The United States only spends 21 cents per $1,000 in exports, while our Canadian friends spend 33 cents of tax money to achieve the same sales. Both are far more efficient than, say, the mighty British export machine backed by 75 cents per $1,000. Of course, unlike the United States, the Brits have a program that subsidizes travel to foreign markets for new exporters. The Germans help roughly 40% of their firms to participate in trade shows outside Germany. France provides up to $3750 to small/medium-sized exporters to participate in trade missions or trade fairs. Both the Netherlands and Australia have official grant programs to help new exporters with market development costs. I hear the Dutch have made grants of up to $110,000 to a single company! That’s picking winners.

The U.S. Commercial Service carefully collects “success stories” to measure its effectiveness. These stories are useful to resource allocation decisions, but also highly effective in talking to members of Congress about budget. They can be distilled into a single number: every dollar spent in the budget of the U.S. Commercial Service results in $215 in increased U.S. exports. $215/$1. I’ll take that kind of return any day. Good investment.

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The House Appropriations Committee has hearings scheduled for today that will, inter alia, look at the President’s proposed budget for the Commercial Service. I will likely have some reporting about it next week.