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(originally published by Booz & Company)


The Truth about Exports

A report card on how the U.S. export infrastructure has changed over the course of two decades (for better or for worse) might look something like the following:

Information flow is better. The Internet has given smaller U.S. companies greater access to information about foreign customers’ specific needs and has fostered improved real-time communication with them. But industry associations and chambers of commerce are still poorly organized compared with their European and Japanese counterparts.

Foreign anticorruption measures are better. American companies are still at a disadvantage against competitors whose home governments turn blind eyes to bribery. In general, however, most major exporting countries have become more vigilant about these activities.

Export promotion is worse. Although the Commerce Department has created a portal called and has renamed its local offices “export assistance centers,” the overall export challenge has outpaced these initiatives. The department’s effort, says NAM’s Primosch, “is not commensurate with the size of the market.”

The crux of the problem is the mishmash of agencies — some of them quasi-private, such as World Trade Centers — that impose red tape and offer conflicting advice. The Overseas Private Insurance Corporation (OPIC), the Export–Import Bank, the International Trade Administration, and other federal agencies, which could be helpful in fostering small-business exports, are focused on industry giants like Boeing and General Electric that don’t require governmental assistance. These chaotic efforts reflect an overarching political view that government should not be involved in private-sector activity, says Richardson. “We really have a passive view of what it takes to keep our firms as active exporters,” he notes. “We feel they should take care of themselves.”

Export finance is worse. Determining how an exporter gets paid for goods that are shipped is at the heart of the financing challenge. Long delays — or worse, nonpayment — can have a significant financial impact on smaller companies. But U.S. banks have never placed a premium on expanding their export financing capabilities and now appear to be in retreat from these sometimes risky instruments. “Trade finance is not for the faint of heart,” says Mark Cooper, director of the U.S. Export Assistance Center in Indianapolis.

Technology controls are worse. The George W. Bush administration has placed a much stronger emphasis, compared with Clinton, on nuclear nonproliferation and antiterrorism. Consequently, exports of sensitive goods related to materials processing, high-speed supercomputers, information security, sensors, and avionics are being delayed or prohibited by Washington, even if the goods are intended for civilian use. Some of the federal bureaucracy’s hesitation is understandable, but experts fear that security concerns have overpowered the economic priority of spurring more technology-based exports. Embassies have also cooled to the idea of promoting all exports, but particularly these dual-use goods. “There’s very little commercial activism in our embassies in the world,” says Richardson. “It’s been swamped by security and intelligence concerns.”

Paving the Road for Exports
On balance, there is clearly much to be done to improve the U.S. export machine. A big-impact first step would be streamlining government and quasi-government agencies involved in export advisory and financing activities. For example, the Small Business Administration, OPIC, the Export–Import Bank, and other organizations should be consolidated into a single institution, perhaps lodged within the Commerce Department, that can funnel working capital and export subsidies to small and midsized companies.

In addition, technology export controls should be reevaluated in view of new American concerns about the future of the U.S. economy, of which exports form part of the bedrock. There may be a handful of technologies — such as devices capable of triggering nuclear explosions — that should be monitored, but the Commerce Department, working with the Pentagon, blocks far too many dual-use technologies that have possible applications in both civilian and military sectors.

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  1. Timothy Aeppel and Joanna Slater, “Surging Exports Lighten the Gloom,” The Wall Street Journal, March 24, 2008: An example of prominent media coverage of exports. (Subscription required.)
  2. J. David Richardson, Sizing Up U.S. Export Disincentives (Institute for International Economics, 1991): This groundbreaking book remains relevant in today’s debate about the American export machine.
  3. Web site: The U.S. government’s export portal provides consolidated information to exporters.
  4. National Association of Manufacturers Web site: Learn about the complexities of exporting from the U.S.
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