America's political leaders have recognized the importance of U.S. exports to the economy and just recently approved three free trade agreements, but a new survey shows more needs to be done to educate small-and mid-sized businesses (SMBs) on the potential of engaging in global trade.
The UPS "Perceptions of Global Trade" survey of more than 1,000 SMBs, conducted for global logistics company UPS (NYSE:UPS), found that 24 percent of the nation's small and medium-sized businesses currently are engaged in global commerce.
Those SMBs who don't export any of their products say the dour economic news of recent years has discouraged them, "but that's exactly why SMBs should be expanding to international markets," observed Dan Brutto, president of UPS International.
"With 95 percent of the world's consumers located beyond U.S. borders, it's clear that the path to economic growth is through opening new markets for U.S. businesses," Brutto continued. "This survey tells me that all of us in a leadership position need to step up our efforts to support and educate small-business owners in particular on the potential of markets outside the United States."
As part of that support, the U.S. National Export Initiative aims to boost exports from $1.57 trillion in 2009 to $3.14 trillion by 2015 by eliminating trade barriers and increasing access to export financing, among other measures. A large bipartisan majority in Congress just approved three new free trade agreements with South Korea, Colombia and Panama. President Obama signed the new accords on Oct. 21.
Brighter outlook among exporters
The SMBs who already export report plenty of upside. Of the exporters surveyed, 64 percent saw a financial return within two years and 34 percent saw a financial return in less than six months. Almost half (49 percent) of respondents said they expect to double their businesses' exports by 2015 and 66 percent say that up to 25 percent of their annual revenue comes directly from exporting.
SMBs engaged in global business reported the most success exporting to Canada, Mexico, the UK and Australia, countries with which the U.S. either has free trade agreements or bilateral trade relations. In contrast, nearly two-thirds (62 percent) of SMB exporters say they have not had success exporting to the BRIC countries (Brazil, Russia, India, China) in the past 10 years. There are no U.S. free trade agreements with these nations.
"While it might seem counterintuitive for small businesses to expand internationally with the economic challenges in the U.S., now is the time for calculated risk. By connecting with companies that have already been successful exporting, companies new to the process can realize the benefits of engaging in global trade a lot faster," said Laurel Delaney, owner of small-business consulting firm Global TradeSource, Ltd. "The simplest way for SMBs to find a successful exporting lead is good old-fashioned word-of-mouth coupled with a great company website."
The survey also revealed other steps to help SMBs take the exporting plunge and included changing government policies, such as offering tax incentives, and boosting sales opportunities. Such changes would appear to be of particular interest to medium-sized business (those with 100-499 employees), which the survey found were generally more likely to export.
"Global commerce flows along the path of least resistance, so it's incumbent upon government and business to work together to remove trade barriers and help businesses grow beyond our borders, resulting in economic growth in return," Brutto concluded. "Businesses that export are 20 percent more productive and produce 20 percent greater job growth than non-exporters. And companies like UPS now are in a position to make the process of selling outside the U.S. easier."
About the Survey
Conducted by TNS, an online survey of 1,082 U.S. small-and medium-sized businesses took place from Aug. 11 to Aug. 19, 2011. The goal of the research was to measure current perceptions of global trade, identify export barriers and uncover potential strategies to overcome these barriers to help small and medium-sized companies become more engaged in global trade.
In accordance with U.S. Census figures, small businesses were defined as having between 1 and 99 employees and medium businesses were those with 100 to 499 employees. For full survey results, log onto www.pressroom.ups.com.