Why Small Businesses Should Pursue Free Trade

By Barbara Weltman on 21 October 2011 (Updated 10 November 2011) 0 comments
Photo: p_a_p_a

Congress has recently approved new free trade agreements with Columbia, Panama, and South Korea. These agreements are expected over time to reduce or eliminate high tariffs and other trade barriers, such as bureaucratic regulations, with these countries. The U.S. International Trade Commission estimates that the three trade agreements will increase U.S. exports by $13 billion and affect about four million small businesses.

Why it Matters to You

Free trade agreements (FTAs) with these three countries, along with agreements that exist with 17 other countries, make it easier for you to become an exporter or expand your exporting activities. The United States is also in the process of negotiating a regional free trade agreement called the Trans-Pacific Partnership, with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. For a complete list of countries that have FTAs, go to Export.gov.

In light of FTAs, now may be a good time to consider exporting your goods and services abroad. Exporting means new markets and revenue opportunities to expand your business. Start-up costs to expand abroad can be modest. There are two basic ways to export: direct or indirect.

  • The direct method: you sell directly to a foreign buyer and make all arrangements for shipping your products overseas. Sixty-two percent of small business exporters sell through their own websites and 25 percent sell through other commercial sites such as eBay and Alibaba.
  • The indirect method: you sell to an export intermediary, such as a commissioned agent, an export management company, or an export trading company. The intermediary makes all arrangements for shipping and other exporting chores.

Getting Help

If you want to begin exporting but are not sure what to do or need help with specific issues, you can get free help through the SBA’s three-year pilot program called State Trade and Export Promotion Grant (STEP) Pilot Grant Initiative. Under this program, grants have been given to 47 states and the District of Columbia to support small business participation in foreign trade missions and foreign market sales trips, to get help with website translation fees and the design of international marketing media, to have access to training workshops, and more.

The Export-Import Bank of the U.S. also has a Global Access program to help small business exporters. This help is also free.

Export Financing

While exporting may not require a huge investment, you may need additional financing to expand your export activities. There are many resources to help you in exporting activities:

The Ex-Im Bank can help with working capital, supply chain guarantees, and letters of credit.

Legal Concerns

If you plan to export your goods or services, be sure to protect your intellectual property abroad. Registration of trademarks or patents in the U.S. does not give you any foreign protection. Learn about what this means to you from the U.S. Patent and Trademark Office.

Also understand the impact of such things as currency conversion and taxes on your exporting activities. For example, because you are a U.S. small business, you pay income tax on your worldwide income.

Final Word

If exporting sounds appealing to you, learn about the process. The best starting point is Export.gov, which can help you with general information, market research, documents, and more. Also check the Small Business Exporters Association, which claims to be America’s premier small business exporting network.

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