Small Businesses With a Big Stake in the Pacific Trade Deal

The Trans-Pacific Partnership has detailed provisions to give smaller U.S. exporters a leg up.

See By Ed Gerwin, a senior fellow at the Progressive Policy Institute. Excerpts:

"the agreement includes groundbreaking provisions that better enable smaller businesses to prosper by exporting to the 12 countries that are in the partnership. The growing markets in these countries account for some 40% of the global economy.

Ninety-eight percent of America’s 300,000 exporters are small or medium-size enterprises (SMEs)—firms with fewer than 500 employees. Together they account for about a third of the $1.6 trillion in annual goods exports. And because only 5% of SMEs currently export, there’s a significant potential for growth.

Small businesses account for almost two-thirds of America’s net new jobs and—according to economists—are essential building blocks for economic mobility. Smaller firms that export are especially prolific creators of good jobs for diverse groups. Census Bureau data show that the average American women-owned exporter, for example, employs five times more workers and pays an average salary almost $17,000 more than women-owned non-exporters. Similarly, minority-owned exporters employ three times more workers and pay nearly $16,000 more.

TPP negotiators were keenly aware that trade barriers like high duties and costs, unnecessarily complex regulations and customs red tape often pose inordinate burdens for smaller exporters, who lack the resources, personnel and extensive contacts of larger traders. And they heard repeatedly from small business that the challenges of navigating foreign rules, competing for customers, clearing customs and getting paid often keep many small traders on the sidelines.

The trade agreement, unlike any previous U.S. trade deal, includes detailed provisions specifically designed to support smaller traders. One chapter establishes a permanent SME committee to monitor how the TPP is promoting SME trade and propose additional reforms. Other chapters—including those on competitiveness, customs, development and e-commerce—also include provisions of particular importance to small traders. The customs chapter requires expedited customs procedures for express shipments—a vital delivery channel for many smaller exporters. Among many other reforms, customs authorities must generally release express shipments within six hours after submission of the required documents."

"The TPP would further empower smaller exporters to connect digitally with foreign customers. It would require countries to create user-friendly digital portals that detail their trade rules; support e-commerce through required consumer protection, privacy, e-signature and electronic payment rules; encourage the use of electronic customs forms; and ensure vital cross-border data flows among the 12 countries of the partnership.

Despite what critics suggest, most of the TPP is about the traditional nuts and bolts of any trade agreement—eliminating tariff and nontariff barriers. The agreement slashes 18,000 tariffs, including high duties on key American small business exports like consumer goods and machinery (currently up to 70%) and fresh fruit (up to 40%). The TPP’s goods chapter would eliminate all tariffs on American manufactured goods and nearly all U.S. farm products. The majority of the tariff eliminations would occur immediately, while the rest would be phased in.

Smaller exporters—who often have a single person responsible for exporting and regulatory compliance—would especially appreciate the TPP’s many requirements to speed and simplify customs processing; increase transparency; and reduce unnecessary testing, certification and paperwork requirements."