GAO Study Finds Fault With Export Program

IT-USExportsReprint_Page_1

    By SARAH E. NEEDLEMAN

 and   

    ADAM JANOFSKY, The Wall Street Journal

The Obama administration’s 3½-year-old export program aimed at doubling U.S. exports by 2015 isn’t properly managed, said Congress’s watchdog arm in a report to be released Wednesday.

The Government Accountability Office said the interagency committee that oversees the federal initiative doesn’t report or compile information on how the program is attempting to align resources to achieve its goal of helping small and midsize companies break into markets overseas.

“The data are neither consistent across agencies nor comprehensive enough to indicate how resources are allocated across priorities or the overall cost of carrying out the National Export [Initiative],” said the GAO. “In fact, the amount of information the [Trade Promotion Coordinating Committee] has reported on agencies’ resources has declined,” it said.

In an emailed statement, Sarah Horowitz, a spokeswoman for the Commerce Department said the U.S. “is now selling more U.S. goods and services to the 95% of global consumers who live outside of our borders than at any time in our history.” She added that there is still more work to be done, but “we will continue to take steps to increase exports that support jobs in the U.S.”

Rep. Sam Graves (R., Mo.), chairman of the House Committee on Small Business, said the “GAO report is further verification that federal trade agencies need better collaboration between our export programs so that small businesses can pursue new markets internationally.” .

U.S. exports rose to an all-time high of $191.2 billion in June from $185 billion a year earlier and $170 billion in June 2011, the Commerce Department reported on Aug. 6.

Still, only about 1% of the nation’s roughly 30 million small businesses sell overseas, according to U.S. Census data.

In a May survey of 500 U.S. small-business owners, 36% said none of the Obama administration’s recent proposals to enhance exporting opportunities, including the National Export Initiative, have helped them start or expand their exporting operations. Three percent said the proposals have already helped, 13% said they would in the future and 48% said they were unsure.

The survey was conducted between May 1 and May 17 of this year by the National Small Business Association and the Small Business Exporters Association.

Adie Horowitz, the owner of Licenders Inc. in New York, says she tried exporting her products overseas but gave up after a year because the regulatory and financial hurdles were too challenging. Ms. Horowitz wanted to sell her products in Europe and the Middle East in 2009. Licenders makes shampoos for removing head lice and runs salons that test for and remove head lice.

Meanwhile, Nancy Mercolino, owner of Ceilings Plus in Los Angeles, says expanding overseas has allowed her to more than double the size of her workforce to its current head count of 170 and more than double its annual revenue to roughly $30 million. Her 26-year-old-company, which designs, engineers and manufactures ceilings and walls, began doing business in the Middle East in 2006.

“Small-business owners who want to export have to wear a lot of different hats and there are a lot of challenges for people trying to get in the game,” said NSBA Chairman David Ickert. “Bigger business may have representatives in foreign countries, they may have people on the ground, small businesses in most instances will not have their own people there—they might have to pick up what they’re doing and hop on a plane.”

Mr. Ickert is also vice president of finance at Air Tractor Inc., an Olney, Texas-based manufacturer of agricultural airplanes that does business in Argentina and Brazil. He said the company, which has 280 employees, has had difficulty collecting on export deals and finding credit for buyers.

“Small business exporters need somebody to be by their side,” said Mr. Ickert. “This administration through the NEI is the first to recognize the issue and I applaud them for that, but the problems need all the attention they can get.”

_______________________

Inability of the government to effectively implement what should largely be a commercial initiative is precisely the reason Fluent In Foreign Business has been developed. By developing an championing the National Export Initiative, the Administration did exactly what was needed to call attention to the issue and to rally the troops. It was great. From there, private sector should have taken over, with the Administration providing peripheral support by the well-known actors – US Commercial Service, US Ex-Im Bank, USTR, SBA .  It is absolutely true that although our country’s exports are largest ever, they still are a fraction of their true potential.  Part of the reason is low private sector involvement in training and nurturing of potential exporters and part of the problem is the misplaced focus on technical training of the prospective exporters administered by the government and by the government enabled non-profit companies involved in world trade.

There is plenty of technical expertise available in the market from banks, shipping companies and insurers to assist exporters. What is much more scarce is the ability to nurture and groom new exporters, make them more aware of foreign markets, teach them to bridge cross-cultural divides, obtain financing, mitigate risks of non-payment and teach them to effectively develop business in the hyper-competitive international arena.

As demonstrated by export driven countries like Netherlands, Germany, Finland, successful exporting is a state of mind of the country’s population, not just a government initiative – well-managed, or not.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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