Politics of Exports

61ae8-exim-bank1Yesterday’s WSJ article titled“Exporters Fear Credit Crunch” (reprinted here in a previous post) once again highlighted the debate on Ex-Im’s reauthorization and listed the pro and con issues from both sides of the political isle. As half of my immediate family is involved in financing international trade, the topic of the Bank’s reauthorization is ever present around our dinner table. Yesterday, we once again raised the question of why would a respected member of the US Congress so blatantly oppose  a proven export finance tool, which contributes real money to the US Treasury and supports countless jobs?

The answer is – because he can and because Ex-Im is an easy target for partisan politics. Export Import Bank of The United States (US Ex-Im, Ex-im) is one of the smallest agencies of the US Government, but one which has disproportionately high visibility. Certainly restructuring half a floor at the Department of Commerce (which probably employes about the same number of folks as the entire Ex-Im Bank)  would not garner the Good Congressman from Texas the same publicity and power. By blocking the reauthorization, Congressman Hensarling and his allies are able to deliver effective blows to the Presidential Administration and to the Bank’s leadership. Yet the hardest blow their efforts deliver are to the US economy.

I generally believe in government minimizing its involvement in business regulation and personally try to stay out of politics.  Yet it is not always possible, as politics and business are often intertwined and business is negatively impacted by actions such as those of the Good Senator and his supporters.  My sympathies certainly do not lie with the current Administration, whose list of missteps, fumbles and incompetencies is quite long. I did applaud the President’s National Export Initiative until it sort of sputtered, along with subsequent reset attempts. Yet given the phenomenal importance of exports to our (or for that matter to any) economy, it is gross malpractice for any politician(elected, or otherwise) to undermine exports, reduce their economic effect and interfere with the lives of real people who make those exports happen.

Let’s put some things in perspective. USA exports roughly $2.3 Trillion of goods and services annually. Of that amount, US Ex-Im Bank finances about $25 Billion annually, only slightly more than one percent of the total. Seemingly doing away with the Bank will not be a huge loss to the American economy.  Since some of the exporters dropped by Ex-Im would find financing in the private sector, net-net US will probably lose less than one percent of its exports. Not a big deal? Consider that just slightly under $5 billion of the exports financed by the US Ex-Im are financing small businesses just like companies mentioned in the WSJ article. Those companies represent tens of thousands of jobs, which would be lost, or not gained if Ex-Im were to close.

They call Ex-Im “the Bank of Boeing”.  TRUE.  That company is the biggest recipient of Ex-Im financing, but how many small businesses in its supply chain benefit from the aircrafts sold on the world markets, how many jobs are created in post sales service and support – hundreds of thousands. Politically, US image benefits when Boeing Airplanes and other American brands are seen around the world. Ex-Im is a large contributor to that global image building process.  If we close Ex-Im, European credit agencies financing Airbus planes will get an advantage and more Airbus planes will be sold in the world giving a financial and political edge to our European allies. “Better than going to China or Russia” some may say, but “better” is not enough to put food on the dinner table for a family of four in South Carolina, whose breadwinner has been laid off due to loss of international orders.

My experience working with Ex-Im Bank goes back over a decade, I have seen a lot of things at this Agency, which could use improvement and even structural change. Yet in the realm of Federal Government Agencies, Ex-Im is pound for pound among the most effective. Its 400 employees returned over $600 million into the US treasury, That is over $ 1.5 million PER employee, and is equivalent to productivity of many solidly performing companies of the private sector, and that is in the world where deficit, consumption and spending rule. Yet, Congressman Hensarling wants to close this small and profitable Agency down, WHY?  As part of reauthorization compromise, some in Congress want to saddle Ex-Im with new reserve requirements to cushion possible future defaults. Yet, high default rates have not been a problem at Ex-Im, whose rate of default is comparable with that of large commercial lenders taking similar risk. If anything, the bank has been too conservative in its underwriting. Problem with personnel turnover, yes, problem with defaults, not at all. I could and will make a case that because of the uncertainty in reauthorization Ex-Im has lost some of its best people over the last year. More senior people with decades of experience left in the last 12 months than in the previous five years combined.

It is ironic that the labor unions – one of the groups that benefited greatly from Ex-Im’s financing have also been behind the effort to dismantle Ex-Im. When Delta Airlines, bloated with uncompetitive and overpriced labor force, tried to block foreign sales of US made airplanes financed by Ex-Im, the Airline resorted to using political pressure to try and wreck exportamericanflagEagle financing and destroy jobs of people at companies that could compete and deliver economic gain to the US. The absurdity of the situation cannot be understated. It is another example of politics undermining exports.

Of course, there are certainly positive effects of politics on exports. Chief among them are various trade partnerships and free trade agreements. When they work, these agreements are magical and provide fantastic economic benefits to US producers and exporters. Yet those agreements take years to negotiate and ratify, causing lost revenue and loss of competitive position in many markets where other countries outmaneuver US and pass their own agreements quicker. Thus rather than destroying a good and solidly performing Export Credit Agency, which benefits many thousands of people throughout the US, Congressman Hensarling and his colleagues should focus on making sure PTTs are negotiated and ratified faster, so US can produce and export more.

Exporters Fear Credit Crunch

Ex-Im Bank’s Future Is Concern as Congress Allows Temporary Reprieve

Jennifer and Mark Dettman of Shank’s Veterinary Equipment, which relies on Export-Import Bank credit.
Jennifer and Mark Dettman of Shank’s Veterinary Equipment, which relies on Export-Import Bank credit. DANIEL ACKER

A decision by Congress to extend the Export-Import Bank only temporarily is raising concern among business owners who say they rely on the credit agency to lower the risks of exporting.

Congress extended the agency’s charter through the middle of next year as part of a compromise between supporters of the agency and those who want to eliminate it. Generally, lawmakers reauthorize the export-credit agency for multiple years at a time.

At Shank’s Veterinary Equipment Inc. in Milledgeville, Ill., Jennifer Dettman, the secretary and treasurer, said she relies on the Export-Import Bank to offer open credit for 60 days. Exports comprise about 30% of the company’s over $900,000 in yearly sales.

Shank’s, which has seven employees, manufactures surgery tables for large animals, and sells its equipment to universities, zoos and private clinics in countries such as Mexico and India. It started using the bank’s credit-insurance policy in 2011.

A welder works on a large tabletop at Shank's Veterinary Equipment in Milledgeville, Ill.EN
A welder works on a large tabletop at Shank’s Veterinary Equipment in Milledgeville, Ill. DANIEL ACKER

When a customer orders a Shank’s table, typically priced at $20,000 to $30,000, the business spends roughly two months manufacturing it. The Ex-Im Bank will insure the order for a fee equal to 0.5% of the shipment value—a fee that Shank’s generally passes on to its customers. If the customer defaults, then after 90 days Shank’s can submit a claim to the bank, which covers 95% of Shank’s loss.

“It minimizes the risk for us,” said Ms. Dettman, describing it as “pretty good coverage.”

She concedes there may be similar insurance coverage available in the private marketplace, but isn’t sure whether those policies will cost more. “I would have to start all over again,” she added.

Similar conversations are happening at other businesses. Ralph Imholte, the president and CEO of Bepex International LLC in Minneapolis, said the bank’s working-capital guarantee program has helped expand his company’s exports to more than 50% of the company’s $25 million in annual sales. Mr. Imholte said he is “very worried” about the bank’s future, because “without that guarantee, it would limit the size of the projects we could undertake and limit our growth potential.” Bepex provides equipment and assistance to food and chemical businesses.

“Many small businesses and many jobs are dependent on the bank’s programs. It’s an area that needs less political fighting and more policy discussion,” Mr. Imholte said.

Those concerns haven’t swayed House Financial Services Chairman Jeb Hensarling (R., Texas), who has led the charge to close the Ex-Im Bank. Congress creates uncertainty any time it considers changing the law, he said, and there are more substantive things lawmakers could do to help businesses.

“The best way to help our small businesses and exporters right now would be through a fairer tax code, relief from Washington’s regulatory red-tape burden and lower energy costs—not political favoritism placed on an unsustainable taxpayer balance sheet,” Mr. Hensarling said.

The push from some conservative Republicans to close the bank is part of a broader political debate about the role that government should play in the economy. Critics say the agency represents a form of corporate welfare that interferes with private markets. They also question its role in helping small businesses, arguing that major firms such asBoeing Co. and General Electric Co. receive a significant amount of its financing. Only 19% of the agency’s direct support to firms in the 2013 fiscal year, measured by dollar volume, went to small businesses, for instance.

Supporters note that major U.S. trading partners similarly seek to aid their exporters, and contend that the agency fills a need not met by private insurers and banks. They also point out that the agency helps reduce the federal government’s deficit. The agency said earlier this month it had sent $675 million to the Treasury Department in fiscal 2014. The extension passed by Congress lasts through June 30.

For now, supporters are pushing for a longer-term reauthorization. Two key members of the House Financial Services Committee last week unveiled bipartisan legislation that would extend the bank’s charter for five years while bolstering risk and fraud protections. The measure, from Reps. Maxine Waters (D., Calif.) and Gary Miller (R., Calif.), would, among other things, require the bank to allocate 50% of its net earnings each year to create a reserve fund to cover potential losses.

Congress needs to provide more certainty to firms, said Mr. Miller. “It is in our national interest to help American companies secure sales around the world by making sure they aren’t undercut by aggressive foreign-export credit agencies,” he said.

Mr. Hensarling quickly dismissed the measure, saying “I look forward to the bank’s expiration.”

Small businesses, meanwhile, don’t know if they can rely on the bank for assistance over the long term.

Mrs. Dettman, who said she consults local export-assistance programs for guidance, also is unsure whether a regular bank would be willing to work with Shank’s, which makes just a dozen or so foreign shipments a year.

“We’re really limited in terms of who will work with us,” she said.

Write to Michael Crittenden at Michael.Crittenden@wsj.com and Adam Janofsky atAdam. Janofsky@wsj.com

Foreign Direct Investment in the U.S.

Originally posted on Emerging Markets' Business: The Keys To America!™:

For the last decade, foreign direct investment (FDI) remained a consistent source of economic fuel for the U.S. With assets in manufacturing, advanced industries, and research and development—foreign-owned companies employ more than 5.6 million workers throughout the nation. But new research from the Brookings Institution shows that the U.S. might be losing ground to emerging economies. READ MORE

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Showdown Is Nearing On Export-Import Bank

61ae8-exim-bank1The political brawl over the future of the Export-Import Bank, set to come to a head next month, represents two battles over economic policy—one global and the other domestic.

The Obama administration says the 80-year-old agency helps U.S. companies compete in a cutthroat trade race against other major economies as they step up export financing.

Republican opponents of the bank see it as a prime example of federal government overreach and are pushing to let its charter expire in a bid to draw private-sector capital to the arena.

It is hard to predict which side will prevail, but the battle is clouded by immense uncertainty over what the business world would look like without some form of government-backed trade finance.

“Logically, with more-open trade, and with more reliance on private finance, there should be a diminishing role for export-credit agencies,” said Eswar Prasad, a trade-policy professor at Cornell University. But with some countries’ reliance on exports to drive growth, he said, “the importance of such agencies has if anything increased.”

Veronique de Rugy, a senior research fellow and Ex-Im critic at the Mercatus Center at George Mason University, said getting rid of the bank might affect the price of credit in some deals, but that would be a small price for a fairer marketplace. The fact that companies “enjoy being able to borrow money at a much cheaper prices doesn’t mean that they cannot do it otherwise,” she said.

The agency’s mission is simple—to support U.S. exports—but how it advances that is increasingly complicated and combative. The agency helps large and small businesses sell products overseas through a combination of guarantees, credit insurance and loans, occasionally with direct White House involvement. But it also wades into thorny domestic issues, such as controversial new limits on greenhouse-gas emissions for fossil-fuel projects it funds overseas.

One result: The agency is positioned squarely in the middle of some of the world’s largest trade fights between nations eager to gain an advantage for their exporters. This includes battles with Europe over aircraft sales and fights over who wins huge Asian infrastructure jobs.

Ex-Im’s trade support is packaged in numerous ways, in part to compete with export subsidies offered in 60 other countries. In the past two years, Ex-Im’s biggest beneficiary, Boeing Co. BA -0.24% , has won contracts over European competitor Airbus in part because of the agency’s agreement to guarantee financing in 30 countries, from Morocco to Mexico. In 2013, close to 25% of Ex-Im’s guarantees went to Boeing. Similar figures for Airbus weren’t available, but the company disclosed in 2011 that 26% of its deliveries that year were backed by the export-credit agencies in the U.K., France and Germany.

Export-credit agencies helped Boeing and Airbus navigate the financial crisis, and government support for airline makers became so pronounced in recent years that countries agreed to ratchet back assistance in 2011. Last year, under new rules brokered by the Organization for Economic Cooperation and Development, export-credit agencies began to charge higher financing fees to airlines in wealthier countries that had better credit and less need for government support. Still, Ex-Im backed Boeing sales to 24 countries in 2013, down only slightly from 2012.

If the Ex-Im Bank stopped guaranteeing the financing for purchases of Boeing’s planes, what would happen?

“The big risk is that Airbus sweeps the checkerboard,” said Howard Pack, professor emeritus of business economics and public policy at the University of Pennsylvania.

It isn’t all about airplanes. In 2011, with the OECD’s permission, Ex-Im offered a cheap financing package to help American manufacturers sell 150 locomotives to Pakistan by agreeing to an uncustomary 12-year loan at a 3% interest rate. Pakistan accepted the U.S. bid over a competing China offer, delivering a big win for U.S. manufacturing. But now General Electric Co. GE -0.12% and Caterpillar Inc. CAT +0.39% are battling over which company ultimately wins the contract and gets the government support.

The agency also offered loans and insurance to back more than 3,000 other transactions last year, including things like popcorn and breathalyzers. Legacy Paddlesports, a small North Carolina company that sells kayaks, uses Ex-Im to guarantee payments from places like South Korea and Australia.

“It allows us to increase our sales overseas, and then in turn hire more people,” said Joe Mallory, controller at Legacy Paddlesports, whose company receives assurances from Ex-Im that it will backstop certain sales to foreign competitors. “It is a job creator as far as I am concerned. What they do with Boeing, I don’t really care.”

The agency’s longer-term political outlook will probably remain in doubt for some time.

With Congress split on how to proceed, Senate lawmakers are expected to try to attach a temporary extension of Ex-Im’s charter to a government funding bill, which must be passed by the end of September to avoid a partial government shutdown.

That would pose a test for House Republicans, many of whom have openly questioned whether Ex-Im should be reauthorized but aren’t eager for the second partial shutdown in as many years right before the midterm elections.

The likely scenario is that they agree to a short-term extension of Ex-Im’s mandate, possibly with some new restrictions on its involvement in trade deals. That would delay the bigger fight over the bank’s long-term future until the end of the year.

A Global Travel Guide to Dining Etiquette

If you are what you eat, you are also how you eat.

BY JEFF HADEN @JEFF_HADEN, INC.com

Let’s say you’re dining with clients in Portugal. Did you know it’s considered an insult to the chef if you ask for salt and pepper to season your food?

Me either.Or, say, you’re dining with clients in India. Did you know eating with your left hand is considered to be unclean?  Me either.

To make sure you adapt your manners to those of the country you travel to next, here’s a cool infographic from The Restaurant Choice. Check it out … and make sure that, when you’re in Thailand, you only use your fork to push food onto your spoon! VIEW THE INFOGRAPHIC

 

Three Myths about the Ex-Im Bank

by , Petersen Institute

61ae8-exim-bank1Congress has begun holding hearings on the reauthorization of the US Export-Import Bank, which provides financing assistance to help US exports. TheEx-Im Bank’s charter expires in September. Three myths are being perpetuated by the new House majority leader, Kevin McCarthy, and other conservatives who would like to see the Ex-Im Bank closed. Below these myths are considered in turn.

Myth #1 — The Ex-Im Bank is a drain on taxpayers.

No, it sends money to the US Treasury from the interest and fees it receives on loans, amounting to $2 billion over the last 5 years. The reality for taxpayers is that the Ex-Im Bank pays interest on the funds it borrows and returns a profit at the end of the day. The default rate is very low, generating very little risk for taxpayer money.

The Ex-Im Bank’s foes argue that private banks would charge exporters higher interest rates, and therefore exporters are getting subsidized loans, which is costly to taxpayers. However, as my colleague Gary Hufbauer shows, this so-called “fair value” measure uses private rates that are arguably far from comparable.

Myth #2 — The Ex-Im Bank is a form of crony capitalism.

Crony capitalism prevails when ties between government and business determine success. The Ex-Im Bank’s detractors argue that too much money goes to big exporters like Boeing and General Electric (GE). In reality, the Ex-Im Bank’s clients reflect the broader distribution of US exports, where large exporters account for the bulk of trade. Specifically, 90 percent of borrowers are small businesses, similar to the rate of small businesses in trade (85 percent of exporters have fewer than 100 workers, and 95 percent of exporters have fewer than 500 workers). While small businesses accounted for only 19 percent of the total amount authorized by the Ex-Im Bank last year, this is also similar to their share in trade. Firms with 100 or fewer employees account for just 15 percent of export values, on average, and firms with fewer than 500 employees account for 25 percent of exports. The skewed distribution of export financing simply reflects the skewed distribution of exporting.

True, four employees at the Bank are being investigated by the Justice Department for allegedly accepting gifts in exchange for loans or contracts (not with the big companies). The investigation shows that corruption is not tolerated in the institution, but it still smells bad and comes at an unfortunate time. And, of course, corrupt individuals, with a much greater cost to society, are also found in private sector banks (and Congress, for that matter). In response, the Bank must be transparent in its anti-graft rules and their implementation in order to ensure we don’t toss out America’s top exporters with four bad apples.

Myth #3 — The private sector will do better.

The government intervenes when there are positive effects to lending in a sector. Take student loans. There are positive results derived by a more educated public, so governments offer students lower rates than they would receive on the private market.

The same argument can be made for trade (and exporters have a much lower default rate than students). There are public benefits from having more exporters, which create better jobs—exporting firms tend to pay more and offer more benefits than other firms—and are less vulnerable to fluctuations in local demand. In addition, there are a lot of hurdles to export participation, such as paperwork and logistics. Cheaper loans help to offset these costs, especially for small businesses that may otherwise be unable to enter the export market.

There is also a legal distortion in the private market. Trade is highly collateralized, but foreign accounts receivable are ineligible to count as collateral in bank borrowing. This means that private sector interest rates on trade finance tend to be well above what their real risk warrants.

Finally, there is the important issue of the level playing field. Our large trading partners have trade financing banks that are many times larger than the US Ex-Im bank. Without this tool, we put US firms that create good jobs for Americans at a disadvantage with respect to foreign competition.

Given the Bank’s extremely specialized role, with no obvious cost, it is difficult to understand why the Bank has even become a target. Unlike healthcare or unemployment insurance, where support follows traditional party lines, the reauthorization of the Ex-Im Bank pits the right against the far right. Does this new territory suggest that the Republican Party is fragmenting? Or is this part of a broader strategy, where bank closure brings the discussion on spending and redistribution one step closer to the bigger fish that conservatives in the party really want to fry?

SIA Deems Ex-Im Bank ‘Critical’ to US Satellite Industry

By Caleb Henry | Feature, Government, North America, Regional, Satellite TODAY News Feed


SSL workers assemble the ABS-2 satellite at the SS/L manufacturing facility in Palo Alto, Calif. Ex-Im Bank approved $461 million of credit to finance the export of three American-made satellites to Hong Kong. Photo: SSL [[Via Satellite 08-18-2014]

In less than two months the United States Congress must make a decision on the fate of the Export-Import Bank, an independent federal agency designed to provide export financing when private banks are not able. The satellite industry around the world stands out as the quickest-growing market the bank supports, which makes this decision pivotal for satellite as a whole. In one of her last interviews as president of the Satellite Industry Association (SIA), Patricia Cooper spoke to Via Satellite about the importance of the Ex-Im bank for the industry.

“We call it an increasingly critical element in U.S. companies winning satellite business, particularly given that there is such an increase in brand new satellite operators. More than 12 new countries in the last five years have become satellite operators, so while export credit financing may be helpful for traditional or fleet-based operators, there are a lot of new entrants to the business, and it’s a high upfront and fixed cost business. Securing the credit for such a costly up front project is a significant factor,” said Cooper.
Credit financing is one of many factors satellite operators consider when making a purchase. Without the Ex-Im bank, U.S. manufacturers would have to do their best to offer comparable terms to foreign competitors that have government-supported export credit agencies. According to the SIA’s “State of the Satellite Industry Report,” approximately 68 percent of the $15.7 billion global satellite manufacturing revenues in 2013 came from U.S. companies. Without the bank, satellite operator decision-making on new purchases is likely to change.

“The concern is it would distort decision making for buyers. They would no longer be looking at an even playing field where manufacturers from all of the global providers would have comparable [financing] packages. Instead they would be looking at financing as one of the lead items rather than one of the many factors they might consider,” said Cooper.

The Ex-Im bank has supported numerous satellite projects for SSL, Boeing, Lockheed Martin, Orbital Sciences and others. SpaceX too has received considerable support, including a 105.4 million loan to launch the Amos 6 satellite for Israeli satellite operator Spacecom. Without the bank, more deals may go to other foreign manufacturers and launch providers in the future.

“The bank is very important to Boeing, mostly for commercial airplane sales but also for satellite sales,report global or just within the U.S.?ext but I want to check with you that this is correct. is book.then see the headlines, I d” said Boeing spokesperson Tim Neale. “It is a significant competitive issue for us. Some 60 countries have export credit agencies, including all of the countries with aerospace industries. Airbus has the support of three export credit agencies (in France, Germany and the United Kingdom). Customers have been telling us for months that they are concerned about the future of the U.S. Export-Import Bank.”

Neale described the Ex-Im bank as a “critical competitive need.” Russia’s Export Insurance Agency of Russia (EXIAR) and France’s French Insurance Company for Foreign Trade (COFACE for its name in French) both support satellite projects in their respective economies. The decision to reauthorize the bank, should Congress do so, is seen as a move that would maintain a more level playing field for U.S. companies.

“The concern is that international buyers, particularly [with] private financing on their own, would either not be able to buy satellites or they’d be directed by the absence of credit financing in the U.S. to buy non-U.S. spacecraft,” said Cooper.

On July 15, governors from 31 states sent a signed letter to John Boehner, R-Ohio, Harry Reid, D-Nev., Nancy Pelosi, D-Calif., and Mitch McConnell, R-Ky., urging them to prevent the bank’s charter from expiring this year. Congress is currently on summer recess, pushing the decision even closer to the edge. Without authorization, the 80-year old bank’s charter will expire on Sept. 30.

Wine-Infused Ice Cream Boosts U.S. Small Company Exports

By Jeff Kearns , Bloomberg

Mercer’s Dairy in Boonville, New York. Mercer’s manufactures all of its products in Boonville for distribution throughout the world.Photographer: Mike Bradley/Bloomberg

Used to be, Mercer’s ice cream wasn’t found far from the 60-year-old dairy in Boonville, a town of about 4,500 in central New York.

Now Mercer’s Dairy owners Ruth Mignerey and Roxaina Hurlburt and their 25 employees ship specialtywine-infused ice cream in a half-dozen flavors, including Cherry Merlot and Riesling, to 14 nationsincluding China, Indonesia, the Netherlands, Seychelles and Trinidad and Tobago. The product was conceived at a 2005 event sponsored by then-U.S. Senator Hillary Clinton and sales began two years later. Exports started in 2008 and now account for about a quarter of annual sales of more than $1 million. Employment is up from 20 four years ago.

“We went from being a local institution with maybe a 100-mile radius of people knowing Mercer to building a global brand,” Mignerey says by phone amid preparations to expand on four continents. “There are so many people who say something can’t be done and it can. Just don’t take no for an answer.”

Photographer: Mike Bradley/Bloomberg  Half gallon cans of wine ice cream at Mercer’s Dairy in Boonville, New York, 
 

Foreign sales by small companies like Mercer’s are becoming a focus for economic development officials in upstate New York and other U.S. regions who are seeking a bigger slice of record exports to boost growth. Shipments abroad by businesses with fewer than 500 employees accounted for 32.9 percent of the U.S. total in 2012, up from 29.2 percent in 2005, according to Census Bureau data.

Continuing to move the needle means persuading more such companies that it’s possible to sell outside of the country. President Barack Obama, who pledged in his 2010 State of the Union speech to double exports in five years, created the National Export Initiative, in part to help small businesses sell abroad.

Photographer: Mike Bradley/Bloomberg

One Country

There’s still plenty of room for improvement. Less than 1 percent of the nation’s 30 million companies ship outside the U.S., significantly less than other developed countries, according to the Commerce Department’s International Trade Administration. Of those that do, 58 percent sell to just one country.

U.S. exports rose last year to a fourth-straight record of $2.28 trillion, increasing by almost $700 billion from 2009 to account for 13.5 percent of the $16.8 trillion gross domestic product, according to Commerce Department data. Selling goods and services abroad supports 11.3 million jobs, the datashow.

A report today showed confidence among small businesses increased in July. The National Federation of Independent Business’s optimism index increased by 0.7 point to 95.7, close to the almost seven-year high of 96.6 reached in May. A net 13 percent of respondents said they planned to hire, the highest share since September 2007.

Skepticism Challenge

Skepticism is the main challenge in working with small firms to expand beyond the nation’s borders, according to Robert Simpson, president of the CenterState Corporation for Economic Opportunity in Syracuse, New York.

He said he often tells business leaders more than 95 percent of the world’s population is outside the U.S. Demand from the global middle class will soar to $56 trillion by 2030 from $21 trillion in 2010, according to a report from the Organization for Economic Co-operation and Development.

“Antipathy toward the global market is the single-biggest hurdle we have,” Simpson said in a presentation at a recent Federal Reserve Bank of Philadelphia community development conference. “Companies don’t yet fully understand how their products can compete internationally.”

Toni Corsini, who helps jump-start exports by smaller firms as a New York-based loan officer for the U.S. Small Business Administration’s Office of International Trade, shares Simpson’s mission. She says her three-biggest obstacles among small business owners are fear, financing, and lack of faith.

One-Stop Shop

She works to alleviate all three from the Export Assistance Center in lower Manhattan, one of about 100 regional centers around the country. The office (called USEAC, which stands for US Export Assistance Center sic) also is home to other federal agencies that assist with exports(among them US Commercial Service and the Export Import Bank of the United States – US ExIm, the main Agency which finances and insures exports for large and small business exporters sic), making it a kind of one-stop shop.

“We’re available, don’t be afraid, come to us,” she says of her message to business owners. “If you are serious about continuing your business and growing your business, you better understand this is a global marketplace.”

Frigid Fluid Co. took advantage of a Commerce Department program to help expand exports of its funeral products to 16 nations, adding ItalyMexico, Poland and Spain over the past two years. President Brian Yeazel, whose family has had the Chicago-area firm for 122 years and five generations, says he’s turning to predominantly Catholic countries more geared to traditional burials as Americans increasingly choose cremation.

Buyer Meetings

Yeazel used Commerce’s Gold Key Service, which gives firms market research and arranges meetings with buyers on visits to the country. Trips cost $700 for small companies like Frigid Fluid, which has 17 employees; first-time users pay half price. Commerce Department specialists in 80 countries plan trips, attend meetings, and provide translators.

Exports of products like embalming fluid and casket-lowering devices have grown to make up 34 percent of Frigid Fluid’s $4 million in annual sales, he said.

While such small businesses add to exports, there probably aren’t enough of them to help Obama reach the 2015 goal of $3.1 trillion.

Caroline Freund, a senior fellow at the Peterson Institute for International Economics in Washington, calls Obama’s initiative focusing on small firms misguided and impractical, given the export dominance of bigger companies such as Chicago-based Boeing Co., the largest U.S. exporter.

Large Businesses

“Exporting is by its nature dominated by large businesses,” Freund, a former economist at the Federal Reserve, World Bank and International Monetary Fund, wrote in a February research report. A strategy built around small companies does “little to lift exports because only the most productive firms can compete globally, and such highly productive firms grow to be large firms precisely because they are so efficient.”

Yet boosting exports is the missing piece of the full-fledged recovery in the U.S. economy, according to Ludovic Subran, chief economist at Euler Hermes Group. The Paris-based credit insurer pays companies if foreign customers don’t, tracking risk through 1,500 underwriters.

“There is a misconception about the potential to grow outside of the U.S.,” he said. “People don’t realize they can make the big bucks if they go to Latin America or Asia.”

Some business owners have doubts about repayment, a consideration when one big unpaid bill can threaten their future, said Laurel Delaney, the Chicago-based founder of GlobeTrade who’s been helping entrepreneurs sell abroad since 1985. Still, she says insurance can cut risk.

‘Growth Potential’

“They’re just not realizing their growth potential,” she said. “You need to develop a global mindset.”

At Mercer’s, Mignerey is working to expand in new markets, including AustraliaKenya, Puerto Rico,South Africa, South Korea, the U.K., Philippines and Suriname. Classification makes approval complicated because some jurisdictions call its wine ice cream food, others label it alcohol. Packaging needs vary.

The hybrid product was born at a 2005 Washington event promoting New York Farm Day sponsored by Clinton. When attendees made ice cream floats with the wine from the next booth, Clinton and others suggested it may have a commercial future.

Labeling Products

Mignerey and Hurlburt, her aunt, introduced wine ice cream, which has about 5 percent alcohol content, in 2007. At a New York City trade show the same year, they met a Dutch distributor, who arranged their first foreign deals. They weren’t worried about payment because it was done in advance, but they were concerned about simple labeling errors, Mignerey says. Exports of the wine flavors began in 2008 with the Netherlands, though the company wants to also sell more traditional varieties abroad.

Foreign sales help take the seasonality out of the ice cream business. In the production facility, four employees work year-round where previously winter staffing fell to two full-time and one part-time. In the office, four workers help with export-related administration, up from two.

“It can be done,” Mignerey says. “But it’s a lot of work.”

To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; Gail DeGeorge at gdegeorge@bloomberg.netCarlos Torres at ctorres2@bloomberg.net Gail DeGeorge, Carlos Torres

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The fate of US Ex-Im Bank

By  CC Solutions 

The Export-Import Bank of the United States (“EXIM”) is in the midst of a reauthorization battle. Whether or not EXIM gets reauthorized depends entirely on Congressional votes. Unfortunately, there are a significant number of vocal, powerful Congressional members who are seeking to shut the Bank. We ask readers to help reauthorize EXIM by engaging with elected officials and industry groups. Our collective voices need to be heard so Congress can be best informed as they prepare to vote on this critical issue.

Below are online petitions for the reauthorization EXIM. They take just a few moments to complete.

http://www.eximthoughtbank.com/?gclid=CIy2v-TzicACFYMF7AodnloADQ
http://www.secondtonone.org/site/PageNavigator/SecondToNone/Petitions/ExImBankPetition.html

Additionally, you can email your local Congressman/Congresswoman and Senators to let them know you support EXIM. We encourage you to write a short note asking for their vote to reauthorize EXIM. To find your Representative, click here and type your zip code. To find your Senator, click here, then navigate to their web page and write a quick note.

And here are some other organizations you can contact to voice your opinion in favor of EXIM:

National Association of Manufacturers (NAM)
Bankers Association for Foreign Trade (BAFT-IFSA)
Coalition for Employment through Exports (CEE)

Why is there such a challenge to EXIM’s existence? According to EXIM’s website, it has supported more than 1.2 million private sector jobs and has generated >USD 2 billion for US taxpayers since 2009. Nevertheless, many Congressional Conservatives and Tea Party activists consider EXIM to engage in corporate welfare due to loans supporting large exporters. While EXIM certainly finances the export of large capital goods, last year nearly 90% of transactions supported American small businesses.

And what if EXIM did not exist? American companies will be at a competitive exporting disadvantage to exporters in 59 other major exporting countries that have active export credit agencies. Republican Rep. Tom Reed states, “To unilaterally kill the Export-Import Bank would be a huge hit the the competitiveness of American companies.” Republican Rep. Chris Collins seconds the opinion, “This isn’t a government handout.” Jay Timmons, CEO of NAM articulates the competitive need for EXIM, “Our trading partners have larger export credit agencies and are growing them to boost their exports much more than the United States.” The closing of EXIM would negatively impact the US economy; lost sales, lost jobs, lost tax dollars. Please do your part and help save EXIM. Thank you.

Trade Gap Narrows Sharply as Imports Tumble

Economists Bump Up Second-Quarter GDP Forecasts

WASHINGTON—The U.S. trade deficit narrowed more than expected in June amid a sharp decline in imports, a development that is likely to boost economic-growth readings but raises a concern about domestic demand.

The U.S. trade deficit shrank 7% to a seasonally adjusted $41.54 billion in June from May, the Commerce Department said Wednesday. That was the fastest contraction in the gap since November. Imports fell 1.2% in June, the steepest decline in a year, while exports increased 0.1% to reach a record high.

The smaller gap than projected has many economists expecting the government to upgrade its measure of second-quarter gross domestic product later this month. The trade deficit has shrunk about 6% since March; a narrower trade deficit generally supports economic growth.

Forecasting firm Macroeconomic Advisers now projects GDP, the broadest measure of goods and services produced across the economy, expanded at 4.2% rate in the quarter. Other economists project as high as a 4.5% gain. Last week, the Commerce Department said second-quarter GDP expanded at 4.0% annual pace.

The latest data also may support third-quarter growth. Imports, especially outside of oil, surged in April and May but fell back in June. “A further correction is likely over the next two months,” said IHS Global Insight economist Patrick Newport. “As a result, imports will be a much smaller drag on growth than they were in the second quarter.”

But the trend isn’t entirely positive. It suggests importers may not be confident that U.S. consumers will ramp up spending in the second half. That runs counter to the Commerce Department’s measure of consumer spending, which increased steadily during the second quarter.

The June decline in imports was led by decreased U.S. demand for consumer goods, cars and car parts, and foreign oil.

“The broad-based declines in import activity seem at odds with the narrative of improving domestic demand,” said TD Securities economist Millan Mulraine.

Growth in consumer spending eased in the first quarter and exports fell, contributing to the economy contracting at a 2.1% rate. Those factors reversed in the second quarter, supporting the rebound in growth.

Exports rose sharply in May and held those gains in June. The small June improvement was led by increased foreign demand for U.S. cars, consumer goods and services, which include travel and intellectual-property use.

The numbers coincide with improved growth in China this spring and a stabilizing European economy. However, unrest in the Mideast, Africa and Ukraine could pose headwinds to global trade.

The U.S. trade ledger with Russia fell in June amid an escalating sanctions battle over the conflict in Ukraine. Exports plummeted 34% on the month to the lowest level since January last year. Imports from Russia fell nearly 10%. Russia, however, accounts for a relatively small share of total U.S. trade.

Trade with China, the No. 2 U.S. partner, has expanded modestly this year. The U.S. trade gap for goods with China widened 4.9% through June, compared with the same period a year earlier. That is only slightly larger than the 4% overall growth in the goods-trade deficit.

The goods deficit with European Union expanded 15.2% in the first half. The gap with Canada, the largest U.S. trading partner, widened this year. But the gap with Mexico, Japan and Brazil narrowed during the first six months of 2014.

—Ian Talley contributed to this article.

Write to Eric Morath at eric.morath@wsj.com and Jonathan House atjonathan.house@wsj.com

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