by Tom Salisbury, Region VII Administrator, U.S. Small Business Administration
Finally, only an official signing ceremony by stands between small businesses and their benefit from the new U.S.-Mexico-Canada Agreement (USMCA.) The agreement establishes fair trade rules between our North American neighbors and its expected implementation sets the future for trade progress for small businesses by simplifying customs and trade rules and reducing barriers and costs that small businesses have historically faced.
In my role with the SBA, I have encountered many businesses in trade relationships with Canada and Mexico and have heard how these markets helped to expand their businesses. Now, they will benefit as the USMCA:
• Cuts red tape at the border and encourages small-business consideration when regulations are in development and implemented
• Supports the 21st century economy with strong digital trade detail supporting internet-enabled small businesses and e-commerce exports
• Promotes small-business participation in government procurement, offering another way to grow their customer base and expand
• Protects innovators’ intellectual property
• Eliminates local presence requirements for cross-border service providers, benefiting small businesses by removing the burden of opening a foreign office to do business.
In SBA’s Region VII perhaps the state of Iowa will benefit the most from the agreement. Canada and Mexico, ranked one and two as destinations, serve as key export markets for production from Iowa, constituting an estimated 47% of Iowa’s total exports. Last year, Iowa exported $4.2 billion worth of goods to Canada alone – which represents 30% of the state’s total goods exports – and nearly $2.3 billion worth of goods to Mexico, according to the U.S. Trade Representative. Out of the 12 million American jobs supported by trade with Canada and Mexico, nearly 130,000 of those currently exist in Iowa.
Missouri, Nebraska and Kansas will benefit greatly, too.
In Missouri, 56% of total exports are sent to Canada and Mexico accounting for $7.8 billion worth of trade, and 42% of Nebraska’s total exports ($3.1 billion worth of products) are sent to the two countries. Kansas exported $2.5 billion of goods to Canada last year, with hundreds of millions from aviation and agriculture. As Kansas’ top two trading destinations, Canada and Mexico purchase more than one-third of Kansas’s total global manufacturing exports. One of four Kansas manufacturing firms exporting to the countries.
These companies will enjoy an ongoing trade regulation involvement. The USMCA includes a Small and Medium Enterprise chapter that established a small business trade committee. Government officials from each country make up the committee, providing a forum where small businesses can share information about the impact of international business regulations and their concerns. Keeping the communication lines open will empower small businesses to share in the economic expansion the agreement will bring.
The International Trade Commission says that within five years, the USMCA could add up to $2.2 billion in new economic growth and 589,000 jobs to the American economy. Small businesses will create two out of three of those net new jobs according to history. Look for more new job growth as our small businesses access the two-thirds of the world’s purchasing power, which is in foreign countries. Trade is an imperative strategy for small businesses to sustain and generate growth.
The SBA is ready to support new and existing exporting small businesses. In fiscal year 2019, the SBA backed $1 billion in financing to small businesses through our export loan programs, where small firms can access from $500 to $5.5 million in loan assistance. Our State Trade and Export Promotion Program (STEP) program, a federal-state partnership initiative, provides state governments with funds to support direct export assistance and more. Since 2011, the STEP program has awarded approximately $157 million in grants to fund export opportunities and increase the footprint of small businesses in countries all over the world. The grants not only fund trade missions but create an avenue where small business firms can access other SBA resource partners and other state and federal assistance. In fiscal year 2020, the SBA will offer more STEP grants and increase the number of export financing workshops for small businesses across the nation. SBA export assistance staff are currently located in 21 U.S. Export Assistance Centers with U.S. Department of Commerce and Export-Import Bank staff, to coordinate export deals. This includes an export finance manager located in St. Louis for Region VII SBA. All these activities help small businesses through the exporting process.
The expansion of small business exports will add strength to an already historic resurgence in the American economy as determined, optimistic and innovative small businesses seize on this opportunity. The SBA is ready to help them.