STATEMENT
of the
Honorable Nydia Velázquez, Chair
Committee on Small Business
Hearing U.S. Trade Policy and Small Business
June 13, 2007

The country is currently facing many decisions concerning how we engage in global trade.  New international commitments are being considered—such as free trade agreements with countries in Latin America and Asia—as well as with World Trade Organization members. 

Congress is also considering reauthorizing the president’s Trade Promotion Authority, which expires this month.  Further, new resources are being proposed to help Americans adapt to global market integration through the reauthorization of the Trade Adjustment Assistance Act. 

Designing this nation’s trade strategy should incorporate a key source of competition and innovation in international markets—small businesses.  U.S. businesses have experienced mixed results as our economy has become integrated with those of foreign countries. Benefits from these changes include increased availability of foreign goods and vast new markets for businesses to access. 

Since 2002, however, the nation’s annual trade deficit has been rising to unprecedented levels, growing over 15 percent per year. This imbalance is largely attributed to a flood of imports, which has resulted in many U.S. industries losing their position as global leaders.

Small businesses can help reverse some of the unfortunate trends caused by global integration and increase its benefits.  Small businesses represent 97 percent of all export enterprises and dominate many industries that sell goods abroad.  Entrepreneurs are also successful in meeting the challenges of a free market.  Highly innovative and flexible, they are capable of adjusting to the dynamic needs of consumers. 

However, these firms face barriers in maintaining a significant share of domestic and global markets.  They are hit with higher costs for overseas transactions and domestic production.  As a result, small companies generate less than one-third of export revenues and confront steep competition from low-cost producers. 

 

Given their contributions, it is critical that entrepreneurs are considered in the nation’s trade strategy and that obstacles to their competitiveness are removed.  The first step is to incorporate their interests in the negotiation and implementation of trade policies.  It is not enough for trade commitments to open markets—they must also be accessible for all American businesses. 

Prioritizing small businesses in regional and world trade agreements requires mandating market access to the sectors in which entrepreneurs participate.  It also involves providing trade facilitation measures and ensuring information is available so that businesses can cost-effectively market and transport goods abroad.

As unfair trade practices, such as intellectual property violations and import dumping, continue, U.S. enforcement must be strengthened.  Harmonizing rules and fairly enforcing them helps level the playing field for small firms. Addressing unfair trade balances, such as the U.S.-China deficit, which increased by 12 percent since March, ensures small businesses remain competitive both globally and at home.

A comprehensive trade strategy must ensure that as we open our doors to foreign competition, our firms remain strong.  U.S. trade policy should create a modern framework that ensures businesses can access markets freely.  Domestic assistance programs, such as those administered by the federal agencies here today, are key components of this framework.  Related assistance, including that contained in the National Export Strategy and the Trade Adjustment Assistance program, will ensure small businesses can take advantage of new markets.

Small firms play a crucial role in promoting the global competitiveness of our country’s industries.  Including them in the process of developing U.S. trade strategy will support the growth of the nation’s economy as well as reduce the trade deficit.  Effective policies and enforcement will ensure this nation remains a global leader.  By doing so, we will make sure the benefits of trade are more widely distributed to not only businesses, but also to more of our nation’s communities.