OECD WPTGS (Oct. 2010)
The Role of SMEs in
US and EU Exports
Alexander Hammer and James Stamps
Office of Economics
U.S. International Trade Commission
1
What is the USITC?
• Independent and objective U.S. government agency with
broad investigative responsibilities on matters of trade
•
Mission:
(1) Administer U.S. trade remedy laws
(2) Provide President/USTR, Senate, and House of Representatives with
independent analysis on trade issues
(3) Maintain U.S. Harmonized Tariff Schedule
• Connection to Policy: Informs but does not prescribe
•
Used at many stages in trade policy formulation & deliberation
•
NEVER determines policy, but is 1 input to policy process
2
USTR Requested USITC:
Study 1
Inv. No. 332-508
January 12, 2010
 What’s known &
unknown about U.S. SME
exports
Study 2
Inv. No. 332-509
Study 3
In. No. 332-510
July 6, 2010
October 6, 2010
Framework
 Compare US & EU
SME exports
 Reported views of
barriers
 Role of FTAs
 Identify barriers that
disproportionately affect
US SMEs
 Estimate role of
services
3
USTR Requested USITC:
Study 1
Inv. No. 332-508
January 12, 2010
 What’s known &
unknown about U.S. SME
exports
Study 2
Inv. No. 332-509
Study 3
In. No. 332-510
July 6, 2010
October 6, 2010
Framework
 Compare US & EU
SME exports
 Reported views of
barriers
 Role of FTAs
 Identify barriers that
disproportionately affect
US SMEs
 Estimate role of
services
4
What is an SME?
No universally accepted definition by U.S. Government
Even common definition is different from EU
Services
(Selected Exporting Sectors b)
Manufacturinga
a
Farm
Most Sectors
Large Sectorsc
Number of
Employees
< 500
< 500d
< 500
< 500
Maximum
Revenue
-
$250K
$7 million
$25 million
Defining
Institution
SBA Advocacye
(Based on U.S.
Census data)
USDA
SBAf / SBA
ADVOCACYf
SBAf / SBA
ADVOCACYf
Also includes non-exporting service sectors.
b
Selected on the basis of size and export potential, and includes (1) wholesale trade services, (2) professional, scientific, and technical
services, and (3) finance and insurance services, and their associates subsectors.
c
Computer services was the only subsector in this category.
d
Threshold imposed by Commission staff to partially harmonize definitions across sectors, but was not imposed by the defining institution.
SBA, Office of Advocacy from U.S. Cesus Bureau data.
f
Revenue parameter established by SBA, employee number established by SBA Advocacy for research purposes.
e
5
SME Role in U.S. Economy
SMEs:
 ~50% U.S. private
nonagricultural GDP
(1998-2004)
 ~99% nonemployerbased firms (2006)
15.3%
Wholesale and retail trade
23.5%
Real estate
11.6%
Professional, scientific, and technical services
Manufacturing and mining
8.0%
11.1%
Construction
Health care and social assistance
9.4%
10.0%
11.0%
Finance and insurance
Other
SME GDP = $4.7 trillion
Source: Kobe, The Small Business Share of GDP, 1998 – 2004 , 2007, 8-9.
Note: "Other" includes services sectors: utilities, transportation, information, education, entertainment,
accommodation and food, administrative and support and waste management and remediation services,
 Largest share:
management of companies, and other services.
wholesale/retail trade, real
Large Firms:
estate, professional services.
Dominant sector: manufacturing (23.3%)
Finance sector bigger than SMEs
6
Real estate & prof. service, & construction smaller
SME Role in U.S. Economy
U.S. Nonfarm Private Employment (2006)
SMEs: < 20 Employees
(15%)
Large Firms
(49%)
SMEs: 20-99
Employees
(18%)
SMEs: 100-499 Employees
(18%)
U.S. Nonfarm Private Employment Growth (1998-2006)
116
114
Index: 1998 = 100
CAGR = Com pound annual growth rate
CA GR 1.63%
CA GR 1.48%
112
CA GR 1.13%
110
CA GR 1.06%
108
CA GR 0.80%
106
104
102
100
1998
1999
2000
2001
2002
2003
2004
2005
2006
Num ber of em ployees per firm
< 20
20–99
100–499
500+
Source: SBA Advocacy, Data on Sm all Bus ines s , U.S. Data, from Cens us data.
SME
7
Data Limitations
1.
2.
Services Sector: No published SME exports data
Merchandise Sector: Data can be distortive
Key
Direct Channels
Indirect Channels
Available SME Data
On Direct Channels
Available SME Data
On Indirect Channels
Manufacturer
(SME)
Wholesaler
(SME)
Domestic
& Global
Market
Manufacturer
(Large Firm)
Wholesaler
(Large Firm)
8
Source: Commission staff.
Note: Wholesaling is an important
economic activity for SMEs
SME Account ~30% U.S. Exports
1,400
35
Unknown
Large
SME Share Of Known Exports (RHS)
1,200
30
1,000
25
800
20
600
15
400
10
200
5
-
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: U.S. Census.
9
Share (%)
Export Value (Billions of $)
SME
SME Merchandise Exports: By Country
Largest in value: Canada & Mexico
Largest share: HK, Israel & Switzerland
SME
share
SME
growth
Canada
23.2
74.4
1.8
Mexico
28.9
66.4
4.1
China
34.3
224.3
2.8
Japan
31.0
28.8
1.1
Germany
26.0
114.7
2.4
United Kingdom
34.2
93.1
7.2
Korea
33.7
74.1
3.7
33.8
216.5
13.8
21.6
80.2
4.1
25.7
45.9
-1.0
18.1
66.8
0.1
27.1
147.6
5.8
27.3
142.2
4.5
46.6
73.3
2.4
28.6
119.4
9.9
29.9
232.3
-8.9
37.6
129.5
5.9
32.0
54.6
2.1
20.6
54.4
5.3
38.0
58.7
30.2
96.7
World
Billions of $
Netherlands
France
Taiwan
Singapore
Belgium
Brazil
Hong Kong
Australia
India
Switzerland
Italy
Malaysia
Israel
0
Source: U.S. Census.
50
100
150
SME
Large
200
Change
in share
-7.9
10
3.8
SME Merchandise Exports: By Sector
Largest in value: Electrical
product, machinery, & chemicals
Largest share: Wood products
apparel & accessories
SME
share
Billions of $
SME
growth
Change
in share
Transportation equipment
15.2
66.8
0.5
Computers and electronics products
27.6
59.9
5.6
Chemicals
24.8
143.8
5.4
Machinery, except electrical
30.6
95.4
2.3
Miscellaneous manufactured commodities
44.3
106.7
-0.2
Primary metal manufacturing
32.5
209.3
2.1
Food and kindred products
45.4
75.2
4.5
Electrical equipment, appliances, and component
26.4
83.4
2.1
Petroleum and coal products
31.7
488.2
8.6
Fabricated metal products, nesoi
37.6
109.5
7.4
Paper
26.8
43.7
-0.8
6.8
Plastics and rubber products
33.3
61.0
Nonmetallic mineral products
29.4
67.7
3.5
Textiles and fabrics
36.0
9.0
-2.0
Printed matter and related products, nesoi
36.4
12.0
-12.5
Wood products
62.7
42.2
2.5
Beverages and tobacco products
29.2
172.5
16.3
15.9
Apparel and accessories
56.2
-10.0
Leather and allied products
40.3
61.5
7.8
Furniture and fixtures
40.5
70.1
-1.5
Textile mill products
38.4
68.3
4.6
All nonmanufactured products
49.2
138.3
-3.0
30.2
96.7
0
Source: U.S. Census.
50
100
150
SME
Large
11
200
World
3.8
Smaller the Firm  More Export Growth
Dependent on Market Entrants
900,000
Large'07, 102.3
800,000
Export value (Millions of $)
700,000
600,000
500,000
Large'97, 55.4
400,000
300,000
200,000
Micro'07, 0.8
Medium'07, 5.4
100,000
(100,000)
(50,000)
Medium'97, 2.6
-
Small'07, 1.4
Small'97, 0.9
50,000
Micro'97, 0.5
100,000
Firms (number)
150,000
200,000
250,000
12
Source: U.S. Census.
Findings (Study 1)
• No universal U.S. Government SME definition (common <500)
• Data problems
 Lack of published services data inhibits analysis
 Data limitation on wholesale trade source inhibits analysis
• Despite ~50% U.S. GDP & employment and ~99% U.S. firms,
only ~ 30% U.S. merchandise exports
• SME merchandise exports
 Growth comparable to large firms, but more dependent on new entrants
 Mostly to NAFTA partners Canada & Mexico
 Mostly electrical products, machinery, & chemicals
• SME Services data
13
 Preliminary research using firm-level data suggest majority to EU, Asia, Canada,
w/professional services to UK and Canada.
Three Objectives (Study 2)
• Compare exporting activities of U.S. and EU
SMEs.
• Report U.S. SMEs’ views on barriers to
exporting, and strategies to overcome them.
• Identify the benefits to U.S. SMEs of improved
export opportunities from FTAs and other trading
arrangements.
14
U.S.-EU SME Data Comparisons:
Definitions of “SME”
Employment threshold*
• United States: generally <500 workers
• European Union: generally <250 workers
* In addition to employment thresholds, financial thresholds (annual
revenue, turnover, or balance sheet total) are also used.
15
U.S.-EU SME Data Comparisons:
OECD Trade by Enterprise
Characteristics (TEC) Database
5 Datasets
• Dataset 1: Trade by activity sector and
enterprise size.
• Dataset 2: Concentration of trade by activity.
• Dataset 3: Trade by partner countries and
activity.
• Dataset 4: Trade by number of partner countries
and activity.
• Dataset 5: Trade by commodity and activity.
16
U.S.-EU SME Data Comparisons:
Data comparability and data limitations
•
•
•
•
Data on U.S. and EU firms with <250 workers.
U.S. exports compared to EU exports outside of the EU.
Data are for 2005.
EU data are for “EU-17.”a USITC used econometric
estimate to provide data for EU-24.
• Data are for firms in manufacturing industries, and
exclude sectors such as agriculture, wholesalers, and
financial services.
a
Austria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Hungary, Italy,
Latvia, Lithuania, Luxembourg, Poland, Portugal, Slovak Republic, Slovenia, and
Sweden.
17
Role of SMEs in Exporting and
Manufacturing
SMEs (<250 workers) play a less prominent role in both exporting and
manufacturing in the United States than in the European Union.
TABLE 2.2 Estimated exports and sales for manufacturing firms, by firm size, United States and European
Union, 2005
a
b
United States
EU-17 (observed)
EU-24 (estimated)
c
Billion of $
Billion of $
Billion of $
Percent
Percent
Percent
Exports
65.0
12.7
126.8
34.1
252.9
e
(230.9–274.9)
31.2
Large firms
445.2
87.3
221.1
59.5
535.0
e
(497.6–572.3)
65.9
Total
510.1
100.0
371.6
100.0
811.5
e
(728.5–847.2)
100.0
920.0
19.3
80.7
100.0
1,589.8
45.4
54.6
100.0
SMEs
d
Sales
SMEs
Large firms
3,839.8
Total
4,759.8
1,914.8
3,504.6
3,096.7
4,727.6
7,824.3
39.6
60.4
100.0
Exports/sales ratio
SMEs
Large firms
7.1
8.0
11.6
11.5
8.2
e
(7.5–8.9)
11.3
e
(10.5–12.1)
10.4
e
(9.3–10.8)
Notes: For sources and notes, see USITC, Small and Medium-Sized Enterprise: U.S. and EU
Export Activities, and Barriers and Opportunities Experienced by U.S. Firms, July 2010, table 2.2.
Total
10.7
10.6
18
Role of Wholesalers/Intermediaries
Exporting SMEs in the United States (<250 workers) are more likely to be
wholesalers/intermediaries than in the European Union.
TABLE 2.3 Estimated share of exports by firm size and major industry, 2005
United States
Percent
EU-17
Percent
a
Share of SME exports through
Manufacturers
Wholesalers
Other
39.2
41.0
19.8
51.4
23.8
24.8
Share of large exports through
Manufacturers
Wholesalers
Other
77.4
13.8
8.8
75.2
2.3
22.4
Share of total exports through
Manufacturers
Wholesalers
Other
68.4
19.7
11.8
65.3
12.3
22.4
86.6
88.5
20.9
26.2
Manufactured goods exports as a share of all goods
b
exports, all firm types
Implied minimum share of manufactured good exports
b
by non-manufacturing firms
19
Exports by Firm Size and
Major Industry
•
•
U.S. export-oriented wholesale firms are larger then EU wholesale
firms.
SME manufacturers (<250 workers) in the European Union had larger
exports than those in the United States.
TABLE 2.4 Estimated exports by firm size and major industry, 2005
United States
Billion $
Percent
Exports
510.1
Total manufacturers
b
65.0
12.7
SME
445.2
87.3
Large
Total wholesalers
b
SME
Large
Total other
b
SME
Large
Total, all firms
b
SME
Large
EU-17
Billion $
371.6
126.8
221.2
Percent
a
34.1
59.5
147.2
68.0
79.2
46.2
53.8
70.0
58.6
6.9
83.7
9.9
88.1
32.8
50.8
37.2
57.7
127.2
61.3
65.9
48.2
51.8
745.4
165.8
575.2
22.2
77.2
568.8
246.7
294.0
43.4
51.7
Notes: For sources and notes, see USITC, Small and Medium-Sized Enterprise: U.S. and EU Export
Activities, and Barriers and Opportunities Experienced by U.S. Firms, July 2010, table 2.4.
20
SME Exports by Sector
The export share of U.S. SMEs (<250 workers) is lower than that of the
EU in nearly every sector.
– Greater export intensity of EU SMEs relative to U.S. SMEs might be, in
part, related to a difference in U.S. and EU industry composition.
– SMEs in the European Union accounted for more than 50 percent of
exports in 7 manufacturing sectors: furniture manufacturing; metal
products; publishing, printing, and reproduction of recorded media; leather;
textiles; wearing apparel; and wood products.
21
Findings (Study 2)
•
SMEs play a less prominent role in both manufacturing and exports in the
United States than in the European Union. However, the export/sales ratios
for U.S. and EU manufacturing firms are similar.
•
The role of SME wholesalers/intermediaries is greater for the United States
than for the European Union.
•
U.S. export-oriented wholesale firms are larger than EU wholesale firms.
The data suggest that U.S. SME manufacturing firms may benefit from the
export services of large wholesalers to a greater extent than do SMEs in the
European Union.
•
The export share of U.S. SMEs was found to be lower than that of the EU in
nearly every sector.
22
Next Steps
3rd USITC report on SMEs:
• Due in October 2010
• Report focus on U.S. SMEs only
23
Major components of study
•
Profile of services SME exporters: new data
–
–
•
•
•
•
Uses customized U.S. BEA and Census data
Questionnaire
Top trade barriers that disproportionately
impede SME exports
Exports and SME performance
Indirect exports by SMEs
SME operations as multinationals
24