[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
    READY TO EXPORT: SMALL BUSINESS POLICY RECOMMENDATIONS FOR USTR

=======================================================================



                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS

                             UNITED STATES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             JUNE 26, 2013

                               __________

                               [GRAPHIC] [TIFF OMITTED] 
                               

            Small Business Committee Document Number 113-026
              Available via the GPO Website: www.fdsys.gov




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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Ms. Pam Johnson, President, National Corn Growers, Floyd, IA, 
  testifying on behalf of the National Corn Growers Association..     3
Mr. Brooke Fishback, International Sales Manager, Health 
  Enterprises, Inc., North Attleboro, MA.........................     5
Mr. Gary Hufbauer, Reginald Jones Senior Fellow, Pete Peterson 
  Institute for International Economics, Washington, DC..........     7
Ms. Mariana Huberman, Owner, The UPS Store, Washington, DC.......     8

                                APPENDIX

Prepared Statements:
    Ms. Pam Johnson, President, National Corn Growers, Floyd, IA, 
      testifying on behalf of the National Corn Growers 
      Association................................................    24
    Mr. Brooke Fishback, International Sales Manager, Health 
      Enterprises, Inc., North Attleboro, MA.....................    28
    Mr. Gary Hufbauer, Reginald Jones Senior Fellow, Pete 
      Peterson Institute for International Economics, Washington, 
      DC.........................................................    35
    Ms. Mariana Huberman, Owner, The UPS Store, Washington, DC...    39
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.


    READY TO EXPORT: SMALL BUSINESS POLICY RECOMMENDATIONS FOR USTR

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                        WEDNESDAY, JUNE 26, 2013

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Chabot, King, Coffman, 
Luetkemeyer, Mulvaney, Tipton, Herrera Beutler, Hanna, 
Huelskamp, Schweikert, Collins, Rice, Velazquez, Schrader, Chu, 
Payne, Meng, and Schneider.
    Chairman GRAVES. Good afternoon, everybody. We will call 
this hearing to order.
    And I want to thank our witnesses for making the trip to 
Washington for this very important hearing. I look forward to 
your testimony. I know some of you have come a long way, and we 
appreciate that very much.
    This hearing comes at a very important time for the 
international trade community. Last week, at the G8 Summit in 
Northern Ireland, President Obama officially launched trade 
negotiations with the European Union. In addition, Michael 
Froman was sworn in as the United States trade representative. 
It appears that we may have some momentum on the trade agenda, 
which is welcomed news to many small businesses I know.
    This Committee understands the benefits of international 
trade for small firms in the economy overall. In 2012, exports 
of goods and services reached 2.2 trillion, or nearly 14 
percent of the U.S. gross domestic product. Those exports 
provide new sales opportunities, and most important, they help 
create and support good-paying American jobs. Unfortunately, 
along with limited resources, small firms face a variety of 
trade barriers that constrain their participation in the global 
market. As a result, small businesses that do export rely 
heavily on the negotiated free trade agreements that remove 
complex trade barriers, provide protection for their 
intellectual property, and help streamline the trade process.
    Currently, the USTR is working on a variety of initiatives 
that will help remove barriers and open new markets for small 
business exporters, most notably the Trans-Pacific Partnership, 
the Trans-Atlantic Trade and Investment Partnership, and the 
World Trade Organization negotiations regarding services and 
information technology. These agreements hold great potential 
for small businesses, and we must make these negotiations a 
priority.
    Earlier this year, the Committee drafted a set of trade 
policy principles aimed at identifying no-cost, common-sense 
solutions to assist small business exporters. The first 
principle, and the primary focus of today's hearing, is 
developing an aggressive trade strategy to open new markets for 
exporters, and we cannot sit on the sidelines while other 
countries negotiate trade agreements and put our businesses at 
a competitive disadvantage. We need leadership from the 
administration and new USTR to seize these opportunities.
    Today, we are going to hear directly from small businesses 
about the administration's trade policy agenda, and 
specifically, how to help increase U.S. exports and create 
good-paying, U.S. jobs. And with that, again, I want to thank 
all of our witnesses for being here. And I will turn to Ranking 
Member Velazquez for her opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    In the last year, international trade has emerged as a 
bright spot in the continuing U.S. economic recovery. According 
to the Department of Commerce, exports increased 1.2 percent to 
$187 billion in April, the second highest level on record. U.S. 
businesses are having particular success selling industrial and 
telecommunications commitment abroad, while American-made 
vehicles and auto parts also rose to a high level of $12.8 
billion.
    Given the critical connection between trade and job 
creation, this is good news for U.S. workers. With foreign 
trade on the rise, so are opportunities for small businesses as 
they make up 98 percent of all exporters. Recent research 
confirms this, showing that more small firms are exporting 
today than just three years ago, while many more are becoming 
increasingly interested in doing so. For many companies, their 
success depends in part on their ability to access these 
international markets.
    Small businesses, however, face many challenges. It takes 
time to identify foreign markets, to target new customers, and 
to learn the ins and outs of the exporting process. In fact, 
nearly half of small exporters spend a minimum of a few months 
a year, as well as an average of 8.4 percent of their annual 
operating revenue preparing to export. Compounding this 
obstacle is that they often have fewer resources to expand on 
developing a trade strategy or complying with complex 
regulations. As a result, they consistently enter fewer markets 
than their larger counterparts, with nearly 60 percent only 
entering one, while more than half of large firms export to 
four or five markets.
    In order to help breach this divide, there are several 
tools and resources available to small exporters. The key core 
are U.S. Export Assistance Centers, which fill a void by 
providing access to technical trade specialists in over 100 
cities in the United States and 80 countries worldwide. By 
delivering foreign industry and market expertise, as well as 
trade compliance assistance, small businesses are better able 
to navigate the complex terrain of the international 
marketplace.
    Another top challenge that small exporters face is securing 
credit, which is essential to finance cross-border 
transactions. If banks are unwilling to provide this funding, 
companies' ability to export will be severely curtailed.
    To address these very problems, the SBA and the Export-
Import Bank provide small business specific export financing 
products. Last year, SBA loans generated $1.7 billion worth of 
small business exports, while Ex-Im Bank authorized more than 
$6.1 billion in financing and insurance for small businesses, a 
record for the bank. These initiatives are critical, especially 
during periods when banks pull back on their own lending to 
exporters.
    While these nuts-and-bolts challenges always persist, there 
is another on the horizon that is even more serious--that weak 
global demand could reduce U.S. exports. The recession in 
Europe continues to put a dent in American sales abroad as 
exports to the European Union declined nearly 8 percent. With 
China, the trade deficit rose to $24 billion, the highest level 
since January, and the largest with any single nation. Exports 
to China decreased by 5 percent.
    Not only are American exports declining, but imports from 
these foreign nations are rising as the U.S. market remains a 
top destination. International trade will always be a complex 
undertaking dependent on this complex global macroeconomic 
climate, as well as a country's specific trade policies and 
resources. Regardless, it is absolutely critical that small 
businesses are able to participate in this marketplace. Doing 
so gives them access to more customers, which in turn fuels 
their growth and employment, and that of the U.S. economy 
overall.
    I would like to take a moment to thank all the witnesses 
for being here, and I look forward to hearing your perspective 
on these challenges. Thank you.
    Chairman GRAVES. I yield to Representative King for 
introduction.
    Mr. KING. Thank you, Mr. Chairman.
    I would like to welcome and introduce Pam Johnson, a 
constituent of mine, but also a friend, and a focused and 
determined and hard-working member of the family farm where she 
and her husband and two sons raise corn and soybeans near 
Floyd, Iowa. She is the president of the National Corn Growers 
Association, and also Pam is very active in national and state 
advocacy groups. She serves as a member of the National Agri 
Industry Council Executive Committee, and is the current 
director of the Iowa Corn Growers Association as well. All of 
that and still time to farm. She is testifying on behalf of the 
National Growers Association, and I want to thank Pam Johnson 
for being here to testify today.

  STATEMENTS OF PAM JOHNSON, PRESIDENT, NATIONAL CORN GROWERS 
  ASSOCIATION; BROOKE FISHBACK, INTERNATIONAL SALES MANAGER, 
HEALTH ENTERPRISES, INC.; GARY HUFBAUER, REGIONAL JONES SENIOR 
  FELLOW, PETERSON INSTITUTE FOR NATIONAL ECONOMICS; MARIANA 
                   HUBERMAN, UPS STORE OWNER.

                    STATEMENT OF PAM JOHNSON

    Ms. JOHNSON. Thank you for that kind introduction.
    Chairman Graves, Ranking Member Velazquez, and members of 
the Committee, thank you for the opportunity to testify about 
exports and policy recommendations for the U.S. Trade 
Representative.
    NCGA, as you have heard, I currently serve as president of 
the National Corn Growers Association. NCGA was founded in 1957 
and represents over 38,000 dues-paying farmers. We support a 
consistent U.S. trade policy that maximizes corn access, market 
access for corn and corn products, and does not disadvantage 
our industry for the benefit of another sector. As farmers, we 
know that 95 percent of the world's population lives outside of 
our borders. That is why trade is so important to us and to our 
nation.
    NCGA members have much to gain from government policies 
that encourage exports and facilitate small, family-owned farms 
entering the global marketplace. The administration's current 
trade agenda is ambitious and it is complex, negotiating 
simultaneously with the E.U. and the Asia-Pacific countries 
will require a tremendous amount of resources and a well-
defined set of principles to guide the trade talks. Trade is 
most efficient when policies are predictable, reliable, and 
designed to encourage, not hinder, the flow of trade. During my 
testimony, I hope to emphasize the recommendations that will 
maximize family farmers' access to foreign markets.
    Currently, USTR is preparing for the first round of the 
Trans-Atlantic Trade and Investment Partnership negotiations. 
NCGA has called for the trade agreement to be comprehensive and 
to tackle the significant hurdles that must be overcome when 
dealing with ag products. For NCGA members, the biggest 
challenge is the approval of corn and corn products that are 
derived through biotechnology. The E.U. is a market that holds 
great potential, but it is often overshadowed by delays and 
approvals and regulatory decisions that are dictated by 
political pressure and not by science-based evaluations.
    Unjustified regulations are costing family farmers millions 
in lost sales to the E.U. and could result in even greater 
losses of U.S. exports if they are adopted by other countries. 
So we urge USTR to keep the following principles in mind as 
they begin negotiations with the EU.
    International trade rules that fully support trade and 
products of biotechnology for planting, processing, and 
marketing subject to science-based regulation. We must oppose 
de facto bands or moratoria on approvals by Europe and other 
WTO member countries. There is no justification for measures 
taken under the guise of the precautionary principle absent the 
relevant scientific evidence and politically motivated bands or 
moratoria by WTO member states are not consistent with the 
members WTO obligations.
    NCGA members do not support a `` take what you can get'' 
approach to the bilateral agreement with the EU. The Trans-
Pacific Partnership negotiating structure should be used as a 
template for TTP. This is the best way to achieve an outcome 
that the food and ag sector can strongly support. TPP is 
intended to be a comprehensive agreement covering all sectors 
without exceptions. All topics are to be included as a single 
undertaking, which means that nothing is agreed to until 
everything is agreed to. Critical SBS provisions must be 
subject to dispute resolution; otherwise, USTR sends a signal 
that family farmers' issues are a low priority. USTR must keep 
the concept of competitiveness in mind when addressing 
international regulatory challenges for ag products derived 
from biotechnology. Trade disruptions caused by barriers to 
biotech stand to hurt the entire value chain. We encourage USTR 
to improve the international regulatory environment.
    Last month, the USDA released its fourth outlook for US ag 
trade in fiscal year 2013. USDA projects $139.5 billion in ag 
exports, which if realized would be a new record.
    In conclusion, ag producers succeed when industry and 
government work side by side. As a farmer, I cannot and should 
not assume that our industry will be taken care of in TPP or 
TTIP. It is critical that U.S. negotiators have an appreciation 
for how increasing exports translates into benefits for family 
farmers. The U.S. economy will not benefit from ag issues being 
placed on a to-do list, so now is the perfect time to eliminate 
longstanding barriers to ag exports and promote policies that 
bring economic opportunity back to rural America. Thank you.
    Chairman GRAVES. Thank you very much, Ms. Johnson.
    Our next witness is Brooke Fishback, international sales 
manager at Health Enterprises, Inc. He is a member of the 
International Trade Advisory Committee 11, which advises the 
secretary of commerce and the USTR on the small business trade 
policy.
    Thank you very much for being here. I look forward to 
hearing your testimony.

                  STATEMENT OF BROOKE FISHBACK

    Mr. FISHBACK. Chairman Graves, Ranking Member Velazquez, 
and members of the Committee, thank you for the invitation to 
testify at this hearing on international trade policy and for 
the opportunity to share my views and experiences of our 
company, Health Enterprises.
    My name is Brooke Fishback, and I am the international 
sales manager for Health Enterprises, a leading manufacturer 
and distributor of first aid and other consumer health products 
and a true American success story. In the early 1970s, Arthur 
Lehman founded the company in the basement of his home and sold 
products door-to-door to independent pharmacies. Today, still 
family-owned and operated, we sell our products under Acu-Life 
brand and as private label brands to over 25,000 retail stores 
here in the U.S. and have exported our products to over 60 
countries worldwide. Even with all this growth domestically and 
internationally, we are still a small business, with fewer than 
50 employees involved in sales, marketing, production, and 
logistics at our headquarters in North Attleboro, 
Massachusetts. That being the case, and similar to small 
businesses throughout the U.S., we do not have large legal 
teams or in-house regulatory departments to navigate 
complicated international rules for global commerce. Instead, 
we rely on the USTR to negotiate beneficial, easy-to-understand 
trade agreements, so that we can sell our products to those 95 
percent of consumers that live outside of our domestic market.
    First, I would like to talk about trade agreements, and I 
have two points for USTR. Point one, USTR should strive to 
include Trans-Pacific partnership negotiations as soon as 
possible so that we can begin receiving the benefits of the 
trade agreement. Currently, around 36 percent of our export 
sales are directed to TPP-negotiating countries. We are excited 
about exploring new sales opportunities and would estimate the 
market is worth tens of thousands of dollars per year in new 
business.
    Point two, USTR should energetically enter into Trans-
Atlantic Trade Investment Partnership negotiations. Around 38 
percent of our export sales are directed to E.U. member states, 
with the UK being our top market. Tariff rates between the U.S. 
and E.U. are already relatively low, and so the key will be to 
find common ground as it pertains to nontariff barriers, 
including standards and regulatory cohesion. We currently 
encounter issues of costly and time-consuming re-registration 
with our FTA registered products in the European Union. For 
example, for us to sell a simple finger splint, the kind that 
you would buy in the first aid aisle of a retail pharmacy here 
in the U.S., in the E.U. we need to register the product with 
the member country's Ministry of Health, which costs several 
thousand dollars and requires many man-hours to complete the 
paperwork.
    Second, I would like the USTR to continue to work on 
leveling the playing field for U.S. companies. For example, 
USTR needs to ensure the countries to whom we grant 
preferential duty rates to enter our market under the 
generalized system of preferences or other programs also grant 
U.S. exporters equitable access to their markets. Brazil, for 
example, represents the largest market in Latin America and 
should theoretically be a good market for U.S. exporters. The 
problem is they have high duties, taxes, regulatory, and other 
nontariff barriers to keep U.S. exports out, while we allow low 
tariff or duty-free access to most Brazilian exports.
    In conclusion, I would like to leave you with four key 
points which will help small businesses like ours increase 
exports. Point one, free trade. USTR needs to maintain an 
aggressive trade agenda to assist small businesses in growing 
their international business. Small businesses are the engines 
of export growth and exporting stimulates the economy and 
creates good American jobs.
    Point two, trade promotion authority. The president needs 
TPA for good faith trade negotiations with other countries. 
Trade agreements should not be renegotiated when sent to 
Congress but be subject to an up or down vote.
    Point three, exporter education. Ensure sufficient funding 
for the SBA's Small Business Development Centers so that they 
can provide export education for U.S. small businesses. In 
conjunction, we support your Committee's work in exploring 
additional opportunities for coordinating state and federal 
trade agencies to assist small businesses.
    Point four, export promotion. Ensure sufficient funding for 
the U.S. Commercial Service, and in particular, their overseas 
offices, which provide the `` boots on the ground'' support 
that we need for market information and which perform the Gold 
Key matchmaking service which arranges meetings for U.S. 
companies with prescreen potential partners in foreign 
countries. Ensure that costs for U.S. commercial service 
services like their Gold Key, remain affordable so that small 
businesses can actually participate.
    Thank you again for the opportunity to testify. I look 
forward to your questions.
    Ms. VELAZQUEZ. It is my pleasure to introduce to the 
committee Dr. Gary Hufbauer, the reginald Jones Senior Fellow 
with the Peterson Institute for National Economics where he has 
written extensively on foreign trade issues. He was formerly 
the Maurice Greenberg Chair and Director of Studies at the 
Council on Foreign Relations, the Marcus Wallenburg Professor 
of International Finance Diplomacy at Georgetown University, 
and the Deputy Assistant Secretary for International Trade and 
Investment Policy at the U.S. Department of Treasury. Welcome, 
sir.

                   STATEMENT OF GARY HUFBAUER

    Mr. HUFBAUER. Thank you, Ranking Member Velazquez, and 
thank you, Chairman Graves.
    In thinking about the impact of free trade agreements on 
small business, I think it is useful to distinguish between 
direct exports and indirect exports of these firms. Turning 
first to direct exports, over 300,000 American small business 
firms, defined as firms with fewer than 500 employees, directly 
export goods and services to foreign markets. The number, as 
Ranking Member Velazquez said, 98 percent of all U.S. firms 
that do any exporting. And they contributed about a third of 
U.S. merchandise exports between 2002 and 2010. We do not know 
what their contribution was to services exports. These same 
firms account for about half of U.S. employment, so the direct 
exports are less than their employment share in the U.S.
    Now, turning to indirect exports by small business, this is 
a very important component as suppliers to multinational 
corporations that export everything from heavy equipment to 
entertainment software and so forth. And these indirect exports 
are combined with other intermediates and mobile value chains. 
This is undercounted. This is underappreciated. But to give a 
rough idea of what is going on, the OECD recently conducted a 
study of the value-added and services exports, and they found 
that when we do it on a value-added basis, services exports are 
about 40 percent of merchandise exports amongst OECD countries, 
whereas the official statistic is only 20 percent. I think if 
we were able to get data on the indirect exports of small 
business firms we would find that they are much more important. 
And a big recommendation that I have is that this Committee 
press International Trade Commission and the Department of 
Commerce to do a much, much better job on the indirect export 
angle.
    Now, turning to free trade agreements, they are positive 
for the reasons my colleagues on the panel have said. A recent 
survey by the International Trade Commission on Korea--the 
U.S.-Korea Free Trade Agreement found a generally favorable 
impression by small business firms. Standards are an important 
issue as have been mentioned, a very important issue. U.S. 
firms have done much better in the Korean auto market and other 
examples that can be sold.
    Now, we should expect similar positive outcomes but on a 
much, much larger scale from the Trans-Pacific Partnership and 
the Trans-Atlantic Trade and Investment Partnership. An 
important issue again referenced by my colleagues is trade 
facilitation. That is kind of a gooney phrase but it means a 
lot. And to be very concrete and blunt, it means cutting down 
on corruption in a lot of foreign markets, which is a big 
problem for everyone, but the smaller you are, the bigger the 
problem. And hopefully we will get some progress on trade 
facilitation at the Bali Ministerial Summit from the WTO, but 
also in the TPP and the TTIP.
    I would also mention the new study by the World Bank on the 
so-called eBay effect when we combine Internet. Everybody knows 
about that. And eBay and sales and so forth. It really cuts the 
impact of distance on cutting down exports. More distance 
really reduces exports but the eBay effect, which is eBay-type 
online services plus UPS, FedEx, so forth, really does a great 
job, and that is important to small business.
    There are many actions outside FTAs to help small 
businesses. I recount them in my testimony and you all know 
them, but I would just conclude by saying that this country is 
really shrinking in infrastructure. I mean, really descending. 
You know, 20 years ago when I was out of graduate school we 
were first. In the 1990s we were about third, and now we are 
about 17th. It is really discouraging because that is a big 
part of doing business internationally and we are slipping.
    Thank you very much.
    Chairman GRAVES. Our final witness is Ms. Mariana Huberman, 
UPS Store owner that is here in Washington, D.C. As a service 
exporter, she advises and assists small businesses with 
exporting and transporting their products to foreign buyers. 
Welcome to the Small Business Committee and I look forward to 
hearing from you.

                 STATEMENT OF MARIANA HUBERMAN

    Ms. HUBERMAN. Thank you, Chairman Graves, Ranking Member 
Velazquez, and members of the Committee for the opportunity to 
appear before the House Committee on Small Business to discuss 
some small business recommendations for international trade 
negotiations.
    As the chairman said, my name is Mariana Huberman, and I 
have been the owner of a UPS store here in Washington, D.C. 
since 2005. The UPS Store network is the world's largest 
franchisor of retail shipping, postal, printing, and business 
service centers. Today, there are nearly 4,700 independently 
owned UPS store locations in the U.S. and Canada, and I am 
proud to say that my store is ranked in the top 30 on that 
list.
    When I decided to open my store, I wanted to provide 
excellent customer service and critical business services that 
were lacking in my neighborhood. My staff knows the names of 
most of our clients, and they know ours. We really consider 
ourselves to be vital partners in their growth and success. 
Every day, my staff and I deal with small business owners 
looking to grow their businesses, both domestically and 
internationally. It is our job to make their jobs easier, 
whether by navigating complex custom rules when shipping their 
packages, providing a business mailbox to ensure they do not 
miss important shipments, or printing their marketing materials 
to grow their business footprint. It is also our goal to become 
an integral partner to each of them and help them access the 
global marketplace.
    However, these customers face a number of challenges when 
looking to export. For example, we have a couple of art 
galleries and artists who are clients. We ship their artwork 
all around the country and we also try to ship it around the 
globe, but we run into trouble when shipping to Italy because 
customs regulations there require that the Italian Ministry of 
Arts perform a mandatory inspection on all artwork which could 
delay artwork for a minimum of 10 days. Another customer sells 
non-prescription vitamin supplements and has a difficult time 
getting those delivered overseas because countries like 
Australia require import approval from the Department of 
Health. And Germany requires a German doctor's prescription. In 
the Ukraine, you not only need a doctor's prescription, but you 
also have to list the ingredients in English and Latin, and 
then their intended purpose in Ukrainian.
    We have a customer who is a potter and sells her items 
online. We tried to ship a set of coffee mugs to New Zealand 
and could not do it because we needed to provide a heavy metal 
certificate or have the item subjected to testing by the New 
Zealand Ministry of Health. We even ran into problems when a 
customer wanted to send some clothing to a children's charity 
in South Africa. Once we got everything ready to go, we found 
out that used clothing is not acceptable in South Africa and 
that full duties would be applied to any of the unworn items 
for things being sent to an orphanage.
    When one of these business owners ships an item overseas, 
we try our best to determine before we start if their items are 
going to be held up in customs or not. Once the packages arrive 
at their destinations, we work with UPS and their overseas 
customs contacts to clear the merchandise as quickly as 
possible. It is good to have a partner like UPS to help 
facilitate trade for our customers, but even UPS continues to 
face challenges in the customs arena, like the ones I mentioned 
and any improvements to these systems would be a great benefit 
to our customers.
    Small businesses can effectively export to global markets 
if only there are international rules that enable them and 
their service firms, such as UPS that serve them, to move their 
information, products, and services freely across borders. 
Fortunately, there are several international negotiations 
underway through which the U.S. government can eliminate 
barriers and create new international rules that will greatly 
expand the opportunities for small companies from the United 
States.
    Important trade negotiations for small businesses are 
taking place in Geneva, Switzerland. The first is the 
negotiations in the World Trade Organization on what is called 
trade facilitation. These are the procedures and rules at the 
border that determine how effectively and economically goods 
can enter foreign markets. Small businesses cannot afford 
delivery delays to their foreign customers because they do not 
get paid until their merchandise is delivered. New 
international rules are needed to reflect all the changes in 
the world since the last set of international rules for 
services was established almost 20 years ago. The United States 
recognizes this efficiency, and last year teamed with other 
countries to eliminate negotiations on the Trade and Services 
Agreement. The TSA negotiations could be most helpful to small 
businesses in the U.S. by establishing open markets and 
nondiscrimination for U.S. service companies enabling to reach 
the 95 percent of consumers who live outside the U.S.
    The United States is also negotiating a comprehensive trade 
and investment agreement with the E.U. and the so-called Trans-
Atlantic Trade and Investment Partnership and the Trans-Pacific 
Partnership with the 11 countries around the Pacific Rim. In 
both these negotiations, it is important that the U.S. 
negotiators seek the same high-level ambition as they are 
seeking in the two sets of negotiations in Geneva.
    Small businesses are the lifeblood of the American economy 
and the services are the central nervous system on which the 
small businesses depend. Small businesses cannot penetrate 
foreign markets without an array of services to support them, 
and those services must have free access to foreign markets and 
nondiscriminatory treatment within those markets.
    Given the several negotiations on new international rules, 
it is timely for the Committee to be holding this hearing today 
on small business recommendations to the newly confirmed U.S. 
trade representative and any agencies that participate in these 
negotiations.
    Thank you again, Chairman Graves and the Committee for 
giving attention to these issues of vital importance to the 
expansion and prosperity of America's small businesses and 
their employees.
    Chairman GRAVES. Thank you, Ms. Huberman.
    We have got two votes. We are going to go ahead and I think 
we have time for one question to start off which I will turn to 
and yield to Representative Luetkemeyer and we will recess for 
a short period and come back. Blaine.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    I appreciate everybody's testimony this afternoon. It was 
very interesting.
    Ms. Johnson, what percentage of the corn crop is exported 
right now per year roughly?
    Ms. JOHNSON. Well, because of the drought last year we have 
seen a decrease. In 2011, it was 13 percent. This last was 8 
percent, and we know that we have lost that market. I have 
personally been to Korea and Japan and China talking and 
building relationships, telling them their business is 
important to us and we want to be back to being their reliable 
supplier.
    Mr. LUETKEMEYER. One of the problems that we have with the 
E.U. is the genetically modified corn. Can you describe that 
just a little bit and what, if anything, is being done to solve 
that problem?
    Ms. JOHNSON. Sure. As I talked about in my testimony, 
solving the SPS restrictions is a priority for our members in 
the E.U. because that is used as a nontariff barrier to block 
biotech products, and in the United States our corn is now 88 
percent used as a biotechnology event. As is with our 
competitors in Brazil and Argentina, we are both up at about 
the same levels. So those SPS restrictions are hugely important 
to us in the EU.
    Mr. LUETKEMEYER. You made comment that you liked the Trans-
Pacific Agreement. You thought it would be a good template for 
our trade rep to use in his discussions with the EU. Can you 
elaborate just a little bit on the highlights of that that you 
like?
    Ms. JOHNSON. Sure. I think the main thing is, as I said, I 
think the big point is that we know that 95 percent of the 
population lives outside the United States. So using that as a 
template for TPP and TTIP would help us in a framework that 
would be workable. To hit the ground running I think would 
help.
    Mr. LUETKEMEYER. Mr. Hufbauer, you talked about indirect 
exports and were very emphatic about being able to use those or 
to expand those in the negotiations. Would you like to 
elaborate on just a little bit? It seemed like you had a lot of 
good information and were quite emphatic in your testimony 
about how important this was. I would like to hear a little bit 
more about that.
    Mr. HUFBAUER. Well, my guess--thank you, Congressman--my 
guess is that they are as important as the direct exports, but 
that is a guess because the data is so poor. So we need better 
data.
    Now, what the story of international trade today is 
increasingly becoming are these vast global value chains, which 
are really--there is a U.S.-E.U. There is a U.S-Mexico-Canada. 
There are Asian global value chains. Africa, unfortunately, is 
not part of this very much today. But behind these global value 
chains are lots and lots of suppliers and small businesses are 
a big part of those suppliers. And what happens is that these 
global value chains impose upon their suppliers all the 
standards that are required in the final market, so all the 
kinds of things that Ms. Johnson spoke of in the agricultural 
field or standards in any kind of medical area or any 
manufacturing, those are going to descend down to the 
suppliers. And if the supplier does not meet the standard, it 
is going to be knocked out of the chain.
    Mr. LUETKEMEYER. So how does it get addressed in a trade 
agreement?
    Mr. HUFBAUER. The way it gets addressed is by trying to 
have more objective standards. And the amount----
    Mr. LUETKEMEYER. Forgive me for interrupting. The objective 
standards versus the punitive standards that are set in some of 
the trade agreements?
    Mr. HUFBAUER. No, as opposed to--a big example of the 
nonobjective standards is the precautionary principle, which is 
basically, you know, we think it is going to harm three 
generations down so we do not import it. No scientific evidence 
for that.
    But that is just one. There are a lot of standards which 
are unique to the standards, are not compatible with 
international standards, and block imports, unless you meet 
their country's standards. So a major objective of the TTIP is 
supposedly to get regulatory convergence between the U.S. and 
Europe in lots of areas. We have worked over that ground for 20 
years without success. This is supposed to be the big 
initiative, so auto standards, electrical products--you go 
right down the list--we either recognize theirs or we convert 
with them over time. It will be a long-term process, but then 
that feeds down to suppliers. So if you are a small business 
firm to try to make one kind of product with one set of 
standards for the U.S. market and another for the Korean market 
and a third for the European market, I mean, you know, it kills 
you. Financially, that kills you. I headed up a national----
    Mr. LUETKEMEYER. Basically, you are looking for 
standardization in this agreement?
    Mr. HUFBAUER. Yeah. More standardization. I headed up a 
committee 20 years ago for the National Academy of Sciences on 
this, and it is a major, major problem. So that will hopefully 
be addressed to some extent in these agreements.
    Mr. LUETKEMEYER. Thank you very much. I see my time has 
expired. Thank you, Mr. Chairman.
    Chairman GRAVES. We will go ahead and recess, and when we 
come back Ms. Velazquez will have her questions. And so it will 
be about 30 minutes, 20 minutes. We will probably be back in 
about 20 minutes.
    [Recess]
    Chairman GRAVES. All right. We will call the hearing back 
to order, and we apologize for the delay.
    I will now turn to Ranking Member Velazquez, who we just 
learned is going to be one of the star players tonight in the 
congressional softball game. So I hope everybody can attend.
    Ms. VELAZQUEZ. Thank you. Thank you.
    Dr. Hufbauer, as labor costs have increased in foreign 
markets and transportation expenses remain high, there has been 
a pickup in reshoring. Many U.S. companies, including large 
companies like Apple and Caterpillar, as well as small 
businesses, are moving production back to the U.S. Do you 
expect this trend to accelerate?
    Mr. HUFBAUER. Thank you, Congresswoman Velazquez.
    I think there are two very favorable things for the U.S. in 
the next--let us say the next decade. One is that we will 
probably be the low cost energy country amongst major 
countries, and certainly, by comparison with China or Japan, 
Europe, we will be lower cost. And that will be very favorable.
    And secondly, as your question indicates, wage rates are 
rising fairly rapidly in Asia--not so much in Europe but in 
Asia they are--and that is favorable for the U.S. So I would 
expect at least the trend to continue and U.S. manufacturing to 
have a fairly good decade going ahead maybe compared to the 
decade of the past. But I have to add that productivity in 
manufacturing in this country is very high. Our growth rates in 
productivity are quite high and there is no indication they are 
slowing down. So it might not be such a boom in employment. 
Sales, yes; employment, less so. Thank you.
    Ms. VELAZQUEZ. What impact would the Trans-Pacific and 
Trans-Atlantic Partnership have on the economic viability of 
reshoring?
    Mr. HUFBAUER. Well, I think there is going to be a lot of 
this global value chain idea, which is tied in with offshoring 
and producing goods and services where they are, you know, 
least cost is definitely going to continue and we are just part 
of the way down this historic roadmap. But the TPP, if it 
succeeds, will cut barriers abroad very substantially. Our 
barriers are generally low. They are not zero but they are 
generally low whereas barriers in many countries in the TPP 
group are modest to high, especially when you talk about the 
standards and the behind-the-border barriers. So I think it 
will mean good times for U.S. participation in Asia. And if we 
did not have the TPP, I think the headwinds would be much 
harder for U.S. suppliers.
    Ms. VELAZQUEZ. Thank you.
    Ms. Johnson, many have questioned the benefits of free 
trade agreements, arguing that they actually divert demand for 
domestic goods to lower costs of foreign goods, which produces 
poor quality jobs abroad. If the Trans-Pacific Partnership is 
ratified, would U.S. corn growers create more jobs as a result 
of that? Or would the benefits flow mainly to foreign 
producers?
    Ms. JOHNSON. Well, first of all, we have to put it in the 
context of where we think the growth potential is, and TPP is 
focused on a region in the world where we know that the demand 
for corn and corn products and livestock is really growing 
because of the growth of the middle class there and the ability 
for purchases, and a diet that people want more protein. So 
this is very important to us. We think the growth part as we 
look out to the future, we think it is where we can grow our 
products and exports. And one in 12 jobs is directly tied back 
to agriculture in the United States, and if TPP is ratified, we 
think that it will increase the opportunities for a high demand 
for corn and those corn products, so that we will see economic 
growth on farms from increased exports and then more 
opportunities for the next generation. I have two young sons 
that are back farming and a lot of people their age are able to 
come back if there is opportunity to participate in those jobs. 
And I think that U.S. Corn Growers, we believe that we can 
compete on quality. And as I said before, you know, we have 
been--even though our exports have gone down to 8 percent, we 
have been back recreating those relationships so that we can 
get back in the market and be competitive with other countries 
who are also going after these same markets.
    Ms. VELAZQUEZ. Thank you.
    Mr. Fishback, you spoke about the importance of 
assistance--technical assistance and support for exporters, our 
American exporters. The recent sequester has reduced funding 
for the Commerce Department's International Trade 
Administration limiting export promotion services and trade 
compliance assistance. What will the impact of these reductions 
to small businesses or small importers be?
    Mr. FISHBACK. Thank you for the question.
    I think one of the primary things to remember is that 
expenditures on programs that support export promotion actually 
generate revenue, so a lot of expenditures----
    Ms. VELAZQUEZ. Yeah. So it is a wonderful thing to actually 
spend money on because it generates the revenue. So by not 
spending more money on it you are going to have less 
opportunities for especially new-to-export companies entering 
new markets, you are going to reduce potential revenue for 
those companies, and then on the back end, decrease tax revenue 
from the increased salaries that you would experience from 
someone working in one of those companies, and corporate income 
taxes from those companies as well. So by not spending money on 
it you are doing great injustice to not only small businesses 
and their ability to grow, but also to the overall revenue for 
the U.S. government.
    Ms. VELAZQUEZ. Yes. That is why it is so important----
    Mr. FISHBACK. It is very important.
    Ms. VELAZQUEZ.--that we come together in Congress and put 
an end to sequestration.
    Ms. Huberman, the U.S. is currently part of the 
negotiations to update rules for the ``trade in services.'' As 
a business that provides shipping and logistics services, can 
you discuss how this will impact your franchise, directly?
    Ms. HUBERMAN. I think it will impact my customers in a way 
that makes--levels the playing field and allows them to export 
their goods and services. It will affect my business because I 
will receive revenue, I will be able to hire more people, and 
pay more taxes as we were talking about, which is not 
necessarily a good thing for me anyway. But that is what it is 
about. It is about leveling the playing field for all of the 
small businesses who cannot get their products overseas. I 
mean, the delays that we have with getting just simple things 
delivered is just ridiculous for reasons like the ones I 
mentioned earlier.
    Ms. VELAZQUEZ. And what is the practical impact of these 
delays on small exporters' bottom line?
    Ms. HUBERMAN. They do not ship. They do not do it. They 
would rather give up the sale than deal with those delays 
because they end up looking back to the customers on the 
backend, or their items might spoil or they will get--sometimes 
a lot of things get lost in customs depending what countries 
you are shipping to. Things just happen to disappear once they 
get into the hands of customs officials overseas.
    Ms. VELAZQUEZ. Thank you. Thank you, Mr. Chairman.
    Chairman GRAVES. Mr. Coffman.
    Mr. COFFMAN. Thank you, Mr. Chairman.
    I wonder if the panel could just briefly answer this. If 
you think that the U.S. economy and small business exporters in 
particular are better off with a free trade agreement in place 
or worse off? I want to maybe start with you, Ms. Johnson.
    Ms. JOHNSON. Well, as we look at the competition and we see 
that all the free trade agreements that they have been making 
with different countries, I think that we have to be also to be 
competitive; that we have to be in the game also. And so those 
are very important to us, whatever trade agreements they are. 
As I said, our future is dependent on being able to export. 
Small business is the engine that makes the United States work. 
And so true for farmers, also. As I said, we are only 5 percent 
of the population in the world now, so our growth potential 
depends on good trade policy and FTAs.
    Mr. COFFMAN. Mr. Fishback.
    Mr. FISHBACK. The last statistic with free trade agreements 
is that we actually have a trade surplus with any countries 
with whom we have a trade agreement. Having a trade agreement 
in place for small business exports only increases our ability 
to increase our sales in a given market because it reduces our 
costs and improves the avenues that we have for actually 
facilitating the trade; the more free trade agreements, the 
better, from my perspective, for a small business. In fact, I 
was just in South Africa a month and a half ago doing a Gold 
Key service in Cape Town, and the president came out with his 
`` Doing Business in Africa'' campaign last year but did not 
back it up with any support for small businesses. So while I 
was there, I found out that the European Union has a trade 
agreement with South Africa, which could reduce some of their 
tariff rates by 20 percent versus the ones that I am paying. 
And so if we are going to come out with some type of agenda 
item like that, maybe we should back it up with exploring new 
free trade agreements with companies to help us out.
    Mr. COFFMAN. Mr. Hufbauer.
    Mr. HUFBAUER. Thanks.
    I think that free trade agreements are a very big plus for 
small business. There is a lot of evidence that trade 
internationally is much smaller than it is domestically, and 
there are a lot of barriers and free trade agreements tend to 
cut into the barriers.
    The one additional point I would make is that it is really 
too costly and too cumbersome for a small business firm to 
bring a dispute under a trade agreement. These things, these 
disputes that you read about, the legal costs start at 
$100,000, and you can quickly march up to a million dollars. So 
what the government should do, in my opinion, and of course, it 
will require money, is be more aggressive on looking at 
barriers which adversely affect small businesses and bringing 
cases on their behalf. GE can take care of itself but small 
business firms cannot.
    Mr. COFFMAN. Ms. Huberman.
    Ms. HUBERMAN. I can only speak to it from a practical 
everyday interaction with my customers, and I can tell you that 
the trade deal we have with Canada makes my customers' ability 
to get their products into Canada much easier than any place 
else right now.
    Mr. COFFMAN. Well, I want to thank you all for your 
testimony here today. I think that small business is the engine 
that certainly drives economic development in this country; 
that drives job creation. And so I think whatever we can do to 
facilitate more export markets, particularly for small 
business, I think is such a plus for the U.S. economy.
    Mr. Chairman, I yield back.
    Chairman GRAVES. Mr. Collins.
    Mr. COLLINS. Thank you, Mr. Chairman.
    I am just really happy to hear all the stories of small 
business exporting, and you are right, 95 percent of the people 
are elsewhere. Every small business wants to grow, and I think 
every small business wants to export, and most of them do not. 
They look at it. They know they should be doing it.
    So I guess Mr. Fishback is somebody who sells what you 
sell. What advice would you give to that small business person, 
and what role do our free trade agreements play versus just all 
the regulations getting started. How do they get started?
    Mr. FISHBACK. That is a great question. And your Committee 
is actually working on some things to assist that by looking at 
ways to take government resources and blend them together to 
make more clear points of contact for companies that want to 
start exporting. And it comes down to education; making sure 
that there are channels for those companies to get education on 
exporting, which comes through looking at what we currently 
have in place with states and with federal governments, finding 
ways to bring the state and the federal government together so 
they can work together to train these people so that they are 
able to do it.
    In looking at that, our belief is that the SBDCs in the 
states do the best job of the initial counseling with companies 
that are new to exporting or wanting to export. In 
Massachusetts, we have the Mass Export Center that does a 
fantastic job and should potentially be considered a model for 
the nation. And then once they have that understanding of how 
it works, it is basically a template that you can follow into 
other markets and then bring in the UCX and the commercial 
services----
    Mr. COLLINS. Do you think finding a partner, I mean, in 
some cases the government helping you find that partner in that 
first key export market where you can get your product over 
there but you have got somebody doing the heavy lifting is key 
to a new small business putting their toe in the water?
    Mr. FISHBACK. That is a huge amount of assistance. I did 
three Gold Key services here already this year using the 
services of the U.S. Commercial Service, and the commercial 
attache at the embassies overseas. It provides companies with 
access to a group of prequalified companies that they would not 
normally be able to get in front of working with the U.S. 
government provides instant credibility for these new export 
companies. And it works. And one of the points that I made in 
my testimony was that the U.S. Commercial Service is looking to 
increase costs on small businesses for their international 
services, and if they do that then small businesses will not 
use them because it will be too expensive. And for us, by using 
them we have seen and experienced quick and good sales growth.
    For example, I was in New Zealand about a month ago doing a 
Gold Key service in Auckland, signed up a new distributor right 
away. The Gold Key cost $700. We have already had about 
$14,000-$15,000 in sales from it. So you already see the 
revenue generation that can happen from it. So those services, 
the `` boots on the ground'' overseas are essential for our 
companies to be able to compete.
    Mr. COLLINS. Good. Thank you.
    One other interesting thing as we look at the TPP, and 
there is concern I think with Japan and their currency and 
their situation with the value of their currency dropping, and 
I have heard folk talk. What role does the trade representative 
play in the currency world in free trade versus Treasury? I 
wonder, Mr. Hufbauer, if you have just got a thought on that.
    Mr. HUFBAUER. I could give you a three hour dissertation 
but that is not what you want.
    Mr. COLLINS. No, we have one minute and 20 seconds.
    Mr. HUFBAUER. Exactly.
    The turf between USTR and Treasury is closely guarded. 
Treasury does not want USTR to be involved in this area, and 
they have been very explicit on that when I was in government 
30 years ago; the same story today. But there is growing 
recognition that the currency issue is critical in trade 
agreements because of the argument, you know, currencies can 
drop 5 percent overnight. You spend three years negotiating 
tariffs down. So I expect this will play a role in the TPP, and 
maybe in TTIP as well.
    Mr. COLLINS. Thank you.
    Mr. Chairman, I yield back.
    Chairman GRAVES. Mr. King.
    Mr. KING. Thank you, Mr. Chairman.
    I want to thank the witnesses for your testimony. It is not 
always an easy thing to leave your busy lives and come here to 
help advise us on the path that we need to take, plus sometimes 
it just puts us in a position where we are given advice on down 
the line as well.
    But I was interested in what I heard in your testimony, Ms. 
Johnson, when you were speaking, I believe, of the Trans-
Pacific partnership, asking for a comprehensive agreement. And 
I like the language, `` Nothing is agreed to until everything 
is agreed to.'' And I was not clear whether that also applies 
to TTIP as well as TTP--TPP, excuse me.
    Ms. JOHNSON. Thank you for that question.
    Yes, it does. I think that is a key point that you picked 
up on is it has to be comprehensive, and so we said that it 
will be a template for TPP, so a comprehensive plan on TTIP and 
then comprehensive plan on TPP also is I think one of the most 
critical recommendations that we would give about going 
forward.
    Mr. KING. And then to embellish that point, when I sit down 
and talk to the Europeans about trade, and I do more of that 
than I ever thought I would coming into this job, they are 
constantly trying to pull us back from why do they not say--
they say, why do you not exempt GMOs and then we will apply our 
sanitary and phytosanitary specs to your things, and then we 
can go ahead and do business. I would guess that you have been 
in some of those negotiations I have just described. Could you 
describe some of that for the panel, please?
    Ms. JOHNSON. Well, I think the point that you bring up is, 
and my point in the testimony, is that it has to be a 
comprehensive package; that we cannot leave certain things out 
to renegotiate later because it will come back to really hurt 
agriculture. So, you know, SPS has been used in the E.U. to 
prevent a lot of our ag products, a lot of our corn products, 
livestock issues, our production practices here. They have used 
the SPS against us. So I believe it is very important that we 
make sure that we do not leave anything off the table; we do it 
right the first time.
    Mr. KING. And I point out also it is really interesting 
that I can sit down with, say, German intellectuals, 
industrialists, or agriculture people and they all come to the 
same point. It is agriculture that is our barrier in our trade, 
and most everything else we seem to be able to get worked out 
but agriculture is a barrier. Is that your experience, too, Ms. 
Johnson?
    Ms. JOHNSON. Yes, it is. And, you know, I am still hopeful 
that once in a while you hear something optimistic about the 
comment out of the U.K. now that maybe the E.U. should take a 
different look at biotech. So we are still very hopeful that 
that will happen, and as America's National Corn Growers 
Association, we have been working with the Corn Growers 
Associations in Brazil and Argentina saying yes, we are 
competitors, but there are certain things that we need to 
collaborate on. And it is just what you are saying, is the 
trade barriers, the trade disruptions that are due to 
biotechnology and modern farm practices hurt everybody and 
curtain the ability of agriculture no matter where you are from 
to be able to grow in a global marketplace.
    Mr. KING. And I recall as GMO, roundup ready soybeans came 
to the floor in Argentina but not Brazil, but they found their 
way across the border and essentially washed over the 
continent, and now I see that the European Union seems to be 
the citadel that is locking those products out. And I think 
that they are going to end up being--they will be the last 
stand but eventually productivity and the demands of that and 
the health of the food will become apparent.
    I spoke with an elected member of the German Bundestag who 
represented a region--I better not say where because I will 
identify him then--but he said, `` I agree with you that there 
is no sound science that says that GMOs are a risk to healthy, 
but we have to take this position.'' And I said, `` Why do you 
not just take my position?'' He said, `` Well, I cannot do 
that; I am elected.'' I said, `` How about I will go with you 
and I can take this position and you can nod your head?'' And 
he said, `` I would be voted out of office.'' It is a political 
position that has grown. The Green Party, for example, in some 
countries in Western Europe, it does not exist anymore because 
it has been so absorbed by the other parties. It is not true in 
very case, but I think we have to just keep pushing the GMOs 
and push the sound science that we have. If we do that then 
eventually this trade component of this thing will wash over 
that continent and we will get it done.
    But I wanted to turn quickly to Mr. Fishback, and you 
mentioned regulations, how difficult it is to fill all the 
paperwork out. Have you compared how difficult it is for 
someone who wants to export to the United States when they fill 
out our paperwork? Are we also putting the barrier up like that 
for them?
    Mr. FISHBACK. That is a great question. And I have not had 
the opportunity to do that but my natural reaction is they must 
be doing something if they are not going to budget on their 
end.
    Mr. COLLINS. The clock has run down. I appreciate all the 
witnesses. And Mr. Chairman, I thank you and I yield back the 
balance of my time.
    Chairman GRAVES. Thank you, Chairman.
    Mr. HANNA. Mr. Hufbauer, you mentioned, to pick up on what 
Ms. Velazquez says, the ranking member, things that encourage 
other companies to come back. You mentioned energy, which is 
yet to be seen but is clearly on the horizon. You mentioned 
productivity.
    I am going to ask you two questions. What other things are 
there? I mean, as an economist, what other items specifically 
are there? And then I want to dig a little deeper. In your 
testimony you talk about transportation and how other countries 
are so far ahead of us. And I wondered if you could be more 
specific about both of those items. The reason companies are 
coming back besides those two and how big of a barrier and how 
big a problem transportation is and how you might quantify that 
for me.
    Mr. HUFBAUER. Thank you, Congressman. Let me start with 
your last point on transportation.
    The way this is typically measured is the turnaround time 
in ports and the cost per container. No one is better than 
Singapore on both counts. Singapore's cost for entering a 
container is about $400, is a standard container. In the U.S. 
it is about $1,800. That is a big difference. The turnaround 
time in Singapore, but also impressively in Shanghai, Hong 
Kong, and a few other ports around the world, you know, that is 
24 hours. We are not there. We take longer. Long Beach is 
really congested and you can go right through a lot of ports. 
You can find their turnaround times. World Bank does this. And 
we are up into days. And that adds to the expense, and then we 
do not have the intermodal transportation we should from some 
of our ports to the inland. The rail does not connect as 
efficiently as it should or the roads for the trucks do not 
connect.
    You know, we are way behind, and not just Asia. We are 
behind Netherlands. We are behind the U.K. We are not good at 
ports the way we were years ago comparatively. And we are 
behind Canada. That would be my comment on transportation.
    On air transportation cargo, we are quite good. We are not 
maybe the best but we are very high on that. And obviously, for 
an increasing amount of trade done by Internet and so forth we 
are top of the game. So that is a big plus.
    Now, as for other factors that are going to favor the U.S. 
economy--I do not want to be all negative--but another way we 
are relatively losing--not in an absolute sense but relative to 
other countries--is our educational system, as I am sure you 
have heard many times, is not keeping us far ahead of the 
competition. And there a lot of things in technical vocational 
education and so forth where we could learn from other 
countries, but still we are tops but others are catching up 
with us on the education, engineering sides, the whole lot of 
it. But still we are tops and we do produce and extremely wide 
variety of products and goods and services which other 
countries do not usually have that same variety, and that is a 
great strength of the U.S. because you can have these networks 
which combine all these inputs. We are very inventive in terms 
of biotech and medical and so forth and so on. Those are our 
strengths going forward and I think they will prevail.
    Mr. HANNA. And other reasons why companies might come here 
that once looked to leave?
    Mr. HUFBAUER. Well, it is those strengths. Let me just be 
very specific. On technical vocational--the Germans pioneered 
this--they linked up their equivalent of our technical 
vocational schools with companies. We are not doing that. That 
is a reason companies will locate here because they can get a 
college, whatever it calls itself, to train people for the very 
specific kind of either computer or mechanical or whatever that 
they need. And that is a big reason to be here.
    In terms of labor relations, you know, every country has 
difficulties from time to time, strikes. Our strike rate or 
labor disturbance rate is very low compared to other countries. 
You have a good workforce in this country, and that is a big 
plus. And we are not tops. Tops in terms of honesty for 
countries goes to Finland, but we are not too far down. We are 
like five or six on the World Bank rankings, and that means we 
are a very honest country, and that makes a lot of difference 
to companies who do not want to have to deal with corruption.
    Mr. HANNA. Thank you for that, sir. I yield back.
    Chairman GRAVES. I have one question.
    As far as the U.S. Trade Representative goes, how would 
each of you grade his performance in terms of working with 
small businesses to try and improve some of the prospects out 
there?
    Ms. JOHNSON. I do not really have a good answer for that 
because I do not know enough to comment on it, but one thing I 
would like to say is that I think good trade policy is really 
necessary to move everything forward for all of us. And I was 
asked earlier about jobs and how important that is and how 
important it is for the USTR for us in agriculture. And we form 
partnerships with public-private partnership with the 
government for market access programs and foreign market 
development, and so the statistics from that is every billion 
dollars that we have in ag exports that the USTR helps us with 
supports approximately 6,800 U.S. jobs. So extremely important 
to us that position.
    Chairman GRAVES. Mr. Fishback.
    Mr. FISHBACK. Yeah. I would say that they have done a good 
job in the last couple of years of reaching out to small 
businesses, even creating small business liaisons within 
different departments to specifically address the needs of 
small businesses. Now, the key is that that continues. Now we 
have a new trade representative who follows the president's 
agenda but also has his own line items that he wants to run 
through as well, so the key now is that they have started to 
reach out to small businesses more, which we appreciate. I 
think that just needs to continue moving forward.
    Chairman GRAVES. Mr. Hufbauer.
    Mr. HUFBAUER. I will be a little more negative.
    The USTR is absolutely overwhelmed. Our trade ministry 
compared to the trade ministry of other countries is very small 
and the budget was cut as Ranking Member Velazquez said, and 
they are suffering from the sequester as well.
    I was recently in Surabaya--and I do not know if you travel 
to Indonesia very much. It is a long trip. It is an exhausting 
trip. I was fortunate to go business class. The U.S. reps went 
economy class. I mean, that is a tough trip and they are 
exhausted when they get there. They are younger than I am. They 
marshaled through the meetings. There was an Asia-Pacific 
Economic Cooperation (APEC) meeting. This is amazing that we do 
what we do with the budget that we give--that we as a country 
give USTR. And I just do not think that they have enough 
resources to do what they are supposed to do. And certainly, I 
would think they need more resources to do a proper job for 
small business.
    Ms. HUBERMAN. And chairman, I appreciate you asking me the 
question but I really do not feel qualified to answer it.
    Chairman GRAVES. Mr. Huelskamp.
    Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the 
opportunity to ask some questions.
    Ms. Johnson, particularly as a farmer, good to see you 
here, and I look at our ag exports and the opportunities out 
there, I mean, it is tremendous. And as we discuss our Farm 
Bill, I hope we continue to look forward to the export side of 
the equation because that is tremendous growth and resulting 
prosperity for rural America. Whether it be corn or other 
commodities, what do you see as the best prospects for ag 
exports around the world?
    Ms. JOHNSON. That is a great question. And I think one 
thing that we are very optimistic about is the potential for 
growth for rural communities and farmers and all ag exports and 
corn and coal products. So corn and DDGs and livestock, 
especially now when we are looking at countries like China, 
considering what food security means to them and what they have 
to do and what they have to learn from us, possibly the 
Smithfield purchase. And that will translate into millions of 
dollars worth of exports, whether it is raw greens or it is 
meats. So I think that potential is huge.
    Before you came in we talked about how we are 5 percent of 
the world's population now. So if we are going to look at what 
our future is going to look like, we are going to have to 
figure this out. So I really appreciate the Committee's 
recognition about how important exports are to small 
businesses, including agriculture.
    Mr. HUELSKAMP. And in your opinion--I appreciate that, Ms. 
Johnson--in your opinion, whether it be the U.S. trade 
representative or other offices, do you think they do a 
sufficient enough job promoting ag exports? Oftentimes, those 
of us in ag country feel that perhaps it is not high on the 
agenda for these big negotiations and happens to get lost. Past 
administrations have clearly not been very supportive of 
agriculture. But I am just curious of your current take on the 
efforts and negotiations.
    Ms. JOHNSON. Thank you for that question. That is why I am 
really thankful to be at the table today and to be able to give 
input on what our recommendations would be going forward with 
TPP and TTIP is because we think they have to be comprehensive 
trade agreements and that no single thing is agreed to until 
everything is agreed to and how important it is to agriculture. 
Now that that framework is established going forward, I think 
it is critical to making these trade agreements fruitful for 
the future of agriculture and the future of rural America and 
small businesses in general.
    Mr. HUELSKAMP. Absolutely. And whether it is the beef 
industry, which is very big in my district; wheat, which half 
of it leaves the country generally; and numerous products, what 
is driving our growth and prosperity in rural America is that 
ability to export and feed the world, fuel the world, and in 
some cases, clothe the world. And I appreciate the chairman's 
bringing folks in here to talk about that because it has an 
impact obviously on some of the very large businesses in this 
country, but for the very small businesses it is amazing how 
highly dependent they are on export markets, whether it is 
another 20 cents on the price of a bushel of corn or whatever 
the numbers are today, it makes an incredible difference in 
rural America. So I appreciate your testimony.
    I yield back.
    Ms. JOHNSON. Thank you.
    Chairman GRAVES. Go ahead.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Mr. Hufbauer, and I invite anyone on the panel to comment, 
given the fact that here we are discussing the important role 
of small businesses as exporters--98 percent of all exporters 
are small businesses--they represent 30 percent of the all the 
revenues when it comes to export-import. And 60 percent of 
small exporters enter one market, and in that market only one 
customer. So there is so much that can be done to increase the 
role of small exporters.
    My question to you is we have the Office of the USTR, and 
in that office we do not have anyone whose sole responsibility 
is to be at the table whenever we are negotiating any trade 
agreements that represent the interests of small businesses.
    Mr. HUFBAUER. I could not agree with you more. They are 
stretched but if you want it to happen you have to kind of 
legislated on a line item basis or something to have the kind 
of people--they might come from the Small Business 
Administration or whatever--who are delegated to USTR to really 
zero in on the problems of the, for example, the health care 
products industry might be quite different than the problems of 
say the software, the small software products and so forth. So 
the person or persons have to have some industry expertise and 
really have to drill down into the barriers. I will not go on 
at length, but I did review a thesis from a very able Ph.D. 
student at the Hebrew University a couple of years ago who 
looked into small business representation in the WTO and found 
it was lacking. Generally, it is not just the U.S. Generally, 
small business just does not get the attention it deserves 
given the potential that you have outlined. Thank you.
    Ms. VELAZQUEZ. Mr. Fishback.
    Mr. FISHBACK. I would echo those remarks. I think it is 
essential, as you mentioned, just based on the statements that 
you made that we have a seat at the table--that small business 
have a seat at the table during these trade negotiations.
    I know recently--and I mentioned Brazil previously as a 
probable market for small business exporters--I know recently 
there was a Federal Register notice to try to get a small 
business executive as a part of the CEO Forum. So at least that 
is a voice at the table. But to the extent that you can have a 
small business government official at the table advocating on 
behalf of small businesses who like the members of the panel 
understand what it takes to run a small business is essential.
    Ms. VELAZQUEZ. Ms. Johnson.
    Ms. JOHNSON. I think as Congressman Huelskamp outlined for 
us, that certainly in these new, huge opportunities in trade we 
do not want agriculture left out of the picture as it has 
sometimes in the past. So I would appreciate a voice at the 
table and make sure that the agreements--because agriculture is 
so important to our country, it is also important for the 
growth of our country. And I know you outlined some good points 
but it is also the way we are going to bring the next 
generation back not just to farming but to small businesses and 
all those processes that go down the line for value added 
processes and products, whether it is livestock and corn 
products.
    Ms. VELAZQUEZ. Thank you.
    Thank you, Mr. Chairman.
    Chairman GRAVES. With that, I want to thank you all for 
participating today. This Committee is going to continue to 
make sure that the small businesses are a priority for the U.S. 
Trade Representative during international trade negotiations. 
And we have invited Ambassador Froman to address our Committee 
on the status of the negotiations and how the administration is 
working to help increase exports for small businesses, and we 
look forward to hearing--or hosting him, I guess, later this 
year.
    But with that, I would ask unanimous consent that members 
have five legislative days to submit statements and supporting 
materials for the record. Without objection that is so ordered.
    And with that the hearing is adjourned. Thank you.
    [Whereupon, at 2:53 p.m., the Committee was adjourned.]


                            A P P E N D I X


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                   House Committee on Small Business


                                Hearing


                             June 26, 2013


           Impact on Recent and Pending Free Trade Agreements


                          on Small Businesses


                              Statement by


                             Gary Hufbauer


                      Reginald Jones Senior Fellow


             Peterson Institute for International Economics

    Chairman Graves and members of the Committee, thank you for 
inviting me to testify. My name is Gary Hufbauer and I am a 
Senior Fellow at the Peterson Institute for International 
Economics, a non-profit, non-partisan policy research 
institute.\1\
---------------------------------------------------------------------------
    \1\ Sean Miner, Research Analyst at the Peterson Institute, gave 
valuable assistance in preparing this testimony.

    In thinking about the impact of free trade agreements 
(FTAs) on US small business firms, it is useful to distinguish 
between direct exports and indirect exports of these firms. 
---------------------------------------------------------------------------
Trade agreements improve both channels.

    Direct Exports by Small Business

    Over 300,000 American small business firms, defined as 
firms with fewer than 500 employees, directly export goods and 
services to foreign markets. These firms number 98% of all US 
firms than export; between 2002 and 2010 they contributed about 
a third of total US merchandise exports, and this share seems 
to be rising.\2\ Since small business firms account for almost 
half of US employment,\3\ their direct export share is somewhat 
less than their employment share.\4\ However, small businesses 
that export usually grow faster, increase employees, and pay 
higher salaries than those that just sell domestically. Canada 
is the top destination country for small business exporters, 
followed by China, the United Kingdom, Mexico, and Australia. 
It is not a coincidence that the United States has free trade 
agreements with three of these countries, and that the English 
language is spoken in three of them--features that make doing 
business abroad much easier.
---------------------------------------------------------------------------
    \2\ SBA, Office of Advocacy, FAQ http://www.sba.gov/sites/default/
files/FAQ--Sept--2012.pdf
    \3\ http:www.ustr.gov/about-us/press-office/blog/2013/june/ustr-
celebrates-small-business-week
    \4\ See National Small Business Association and the Small Business 
Exporters Association Survey http://news.yahoo.com/small-business-
exports-picking-survey-040313009.html. For more than half of small 
business exporters, exports account for less than 10% of revenue. 
Exports account for more than half of revenue for only one in seven 
small business firms.

---------------------------------------------------------------------------
    Indirect Exports by Small Business

    Small business firms play an important role as suppliers to 
multinational corporations that in turn export everything from 
heavy equipment and aircraft to entertainment and software. A 
large volume of exported goods and services are intermediate 
products that are combined with other intermediates in global 
value chains (GVCs). Again, small business firms supply a large 
share of goods and services to these GVCs. Unfortunately, 
official statistics do a poor job of tracking indirect exports 
of small business firms. To give an indication of how important 
such sales might be, a recent evaluation by the OECD and WTO 
concluded that, after properly accounting for specialized 
business services purchased by manufacturing exporters, 
services contribute fully 40% of the value of world exports, 
about twice the direct export figure reported in official 
statistics.\5\ My guess is that a similar calculation of 
indirect exports by small business firms would boost their 
contribution perhaps to 50% of US exports. The US Department of 
Commerce and the US International Trade Commission should do a 
much better job of tracking the indirect exports of small 
business firms.
---------------------------------------------------------------------------
    \5\ OECD - WTO http://www.oecd.org/industry/ind/
measuringtradeinvalue-addedanoecd-wtojointinitiative.htm

---------------------------------------------------------------------------
    Impact of Free Trade Agreements

    FTAs make a significant positive impact on small business 
exports by lowering the fixed and variable costs of doing 
business abroad. They do this by eliminating tariffs, cutting 
red tape at the border, simplifying international payments, and 
allowing multiple entries on a single business visa.

    A recent survey by the International Trade Commission on 
the effects of the Korea-US FTA on small and medium size 
enterprises (SMEs) found that respondents viewed the FTA in a 
favorable light, and expected benefits to grow over time.\6\ 
The report stated that small manufacturers experienced an 
improved trading environment in Korea by opening new business 
opportunities, strengthening business relationships, and 
fostering more regular sales. US agriculture firms also 
increased their exports, especially where high tariffs were cut 
or eliminated. Service sales improved, often attributed to the 
better environment for intellectual property rights (IPR).\7\
---------------------------------------------------------------------------
    \6\ ITC: U.S.-Korea FTA effect on SMEs http://www.usitc.gov/
publications/332/pub4393.pdf
    \7\ ITC: U.S.-Korea FTA effect on SMEs http://www.usitc.gov/
publications/332/pub4393.pdf

    Standards for suppliers often serve as a barrier to entry 
for smaller American companies looking to export. US auto 
companies that wanted to sell to Korea's market before the FTA 
often faced strict safety standards, limiting their business 
opportunities, particularly for firms that were exporting 
smaller volumes.\8\ Another obstacle addressed in FTAs is the 
arbitrary use of environmental standards for protectionist 
purposes. Provisions in the FTA seek to ensure that 
environmental standards answer genuine problems.\9\
---------------------------------------------------------------------------
    \8\ http://www.whitehouse.gov/sites/default/files/email-files/
South--Korea--Trade--Agreement--
Overview.pdf
    \9\ http://www.wto.org/english/thewto--e/
whatis--e/tif--e/agrm4--e.htm#TRS

    We should expect similar positive outcomes, on a much 
larger scale, if the Trans-Pacific Partnership (TTP) and the 
Transatlantic Trade and Investment Partnership (TTIP) are 
concluded. Here are some examples. ``Trade facilitation'' will 
be an important payoff. This is the technical jargon for agreed 
measures that cut red-tape at customs ports and upgrade hard 
and soft infrastructure. Another payoff, both in the TPP and 
TTIP, will be convergence of standards, or mutual recognition 
of standards, so that small business firms can sell their goods 
and services abroad without expensive modification. Improving 
the channels for online marketing will be another benefit. A 
new study by the World Bank shows how the ``eBay effect'' 
lowers the negative impact of distance on international sales 
by some 65%.\10\ The alliance between online marketing firms, 
such as eBay, and express carriers (FedEx, UPS, DHL) will make 
it much easier for small business firms to reach foreign 
markets.
---------------------------------------------------------------------------
    \10\ World Bank: How eBay Reduces Trade Costs http://www-
wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2012/10/25/
000158349--20121025161729/Rendered/PDF/wps6253.pdf

---------------------------------------------------------------------------
    Actions outside FTAs to Help Small Business

    Unlike the situation two decades ago, US infrastructure is 
far from the world's beset. The United States is well behind 
several Asian and European countries--meaning that our roads, 
ports and airports are second class. These deficiencies 
adversely impact US exports. Small business exporters are 
further hindered by the scarcity of finance. A report from the 
Small Business Administration's Office of Advocacy concluded 
that small business relies more than big business on bank 
finance, but that credit conditions have been tight.\11\ For 
some small business firms, export controls are an important 
issue. The vice president of international affairs at the 
Aerospace Industries Association, Remy Nathan, said ``The 
existing web of regulations spans across multiple agencies and 
is so complex that some smaller firms are hesitant to attempt 
exports for fear they might break the law.'' \12\
---------------------------------------------------------------------------
    \11\ SBA Credit Availability Effects on Small Business http://
www.sba/gov/sites/default/files/files/rs404tot(3).pdf
    \12\ http://thehill.com/blogs/regwatch/business/296035-obama-
forges-ahead-with-overhaul-of-export-controls

    These subjects call for action in the United States, under 
Congressional leadership, Shortcomings that curtail America's 
export potential will not be cured by event the most ambitious 
---------------------------------------------------------------------------
FTA; they require reform here at home.

    Thank you, Chairman Graves and members of the committee. I 
am happy to answer questions.
                     Testimony of Mariana Huberman


                       Owner, The UPS Store #5259


              Before the House Committee on Small Business


    Ready to Export: Small Business Policy Recommendations for USTR


                             June 26, 2013


    Thank you Chairman Graves, Ranking Member Velazquez, and 
members of the Committee for the opportunity to appear before 
the House Committee on Small Business to discuss small business 
recommendations for international trade negotiations. My name 
is Mariana Huberman and I have been an owner of The UPS Store 
#5259 in Washington, D.C. since 2005.

    The UPS Store network is the world's largest franchisor of 
retail shipping, postal, printing and business service centers. 
Today, there are nearly 4,700 independently owned The UPS Store 
locations in the U.S., Puerto Rico and Canada. And I am proud 
to say my UPS Store is ranked in top 30 of these Stores.

    When I decided to open my Store, I wanted to provide 
excellent customer service and provide critical business 
services that were lacking in my neighborhood. My staff knows 
the names of most of our customers and they know ours. We 
really consider ourselves to be vital partners in their growth 
and success.

    Every day my staff and I deal with small business owners 
looking to grow their businesses both domestically and 
internationally. It is our job to make their jobs easier--
whether by navigating complex customs rules when shipping their 
international packages, providing a business mailbox to ensure 
they don't miss an important shipment, or printing their 
marketing materials to grow their business footprint--it is 
also our goal to become an integral partner to each of them and 
help them access the global marketplace. However, these 
customers face a number of challenges when looking to export.

    For example, we have a couple of art galleries and a number 
of self-represented artists who are clients. We ship their 
artwork all around the country and we also work to ship it all 
around the globe, but we run into trouble when shipping to 
Italy because, customs regulations require that the Italian 
Ministry of Arts perform a mandatory inspection of all the 
artwork which could delay the delivery for a minimum of 10 
days.

    Another customer sells non-prescription vitamin supplements 
and has a difficult time getting those delivered overseas 
because some countries, like Australia, require import approval 
from the Department of Health and in Germany, the supplements 
can only be shipped to a German pharmacy with a German doctor's 
prescription and copy of the pharmacy order. To ship to the 
Ukraine, you not only need a doctor's prescription, you also 
have to list the contents in English and Latin and then their 
intended purpose in Ukrainian!

    We have a customer who is a potter and sells her items 
online. We tried to shop a set of coffee mugs to New Zealand 
and ended up not doing it because we needed to provide a Heavy 
Metals Certificate or have the items subjected to testing by 
the New Zealand Ministry of Health.

    We even ran into a problem when a customer wanted to send 
some clothing to a children's charity in South Africa. Once we 
got everything ready to go, we found out that used clothing was 
not acceptable into South Africa and that full duties would be 
applied to any of the unworn items--for items being sent to an 
orphanage!

    When one of these business owners ships an item overseas, 
we try to determine before we start processing their packages 
if they are going to be held up in Customs or not. While we 
cannot control things like customs duties, we try to inform our 
customers of the current regulations and restrictions before 
shipping their items. Once the packages arrive at their 
destinations, we work with UPS and their overseas Customs 
contacts to clear their merchandise as quickly as possible. It 
is good to have a partner like UPS to help facilitate trade for 
our customers but even they continue to face challenges in the 
Customs arena, like the ones I mentioned, and any improvements 
to these systems would benefit our customers. Particularly 
since UPS operates one of the world's largest, most 
sophisticated, intermodal transportation service networks and 
is one of the world's largest customs brokerage firms.

    Why American Small Businesses Need New Trade Agreements

    The United States is the world's largest and most 
competitive provider of services, with a trade surplus of more 
than $150 billion last year. But around the world, U.S. 
services firms are not able to compete fairly because of entry 
barriers, discriminatory treatment, and a general failure to 
keep international rules aligned with new technologies and the 
realities of modern business practices. Small businesses are 
least able to cope with these barriers and outdated rules.

    The digital revolution, especially the development of the 
Internet, has made it possible for small businesses to provide 
our services to foreign countries. But small businesses do not 
always have the resources to break down the barriers that they 
face. We need the U.S. government to negotiate and enforce fair 
international rules in services and customs procedures.

    As a result of the Internet, small businesses can advertise 
our products and services across the globe at negligible cost. 
We can receive payments from our customers across the Internet. 
We can determine the various requirements and standards in 
foreign markets from the various websites. And, of course, we 
can ship our products directly to foreign customers by UPS and 
other express delivery companies.

    Small entrepreneurs can realistically aspire to serve 
foreign markets without having to be physically present in 
those markets. However, this only is possible if there are 
international rules that enable these small businesses, and the 
services firms such as UPS that serve them, to move their 
information, products, and services freely across borders.

    It also is essential for small businesses that governments 
be required to publicize their various regulations, product and 
service standards, and customs rules, and to provide due 
process for dealing with compliance issues.

    Fortunately, there are several international negotiations 
underway in which the U.S. government can eliminate barriers 
and create new international rules that will greatly expand the 
opportunities for small companies and professionals from the 
United States.

    Two important trade negotiations for small businesses are 
taking place in Geneva, Switzerland.

    Negotiations on Trade Facilitation in the WTO

    The first is the negotiations in the World Trade 
Organization (WTO) on what is called ``trade facilitation''. 
These are the procedures and rules at the border that determine 
how efficiently and economically goods can enter a foreign 
market. This is extremely important for the small business 
customers of UPS and other express delivery companies.

    Small businesses cannot afford to have their products 
delayed in being delivered to their foreign customers because 
they won't get paid until the customer receives its 
merchandise. While some large companies may have the financial 
resources to wait for payment, small businesses rarely have 
that ability.

    Also, small businesses do not have the resources or the 
ability to fight discrimination or other forms of unfair 
treatment by foreign customs officials. There needs to be 
predictable, enforceable, and fair treatment for the exports of 
small U.S. businesses.

    Efficient and speedy customs processes, coordinated between 
the U.S. and its global trading partners, will constitute a 
huge step towards removing the bottlenecks found in global 
supply chains. By embracing the opportunities of e-commerce and 
meeting the growing demands of international trade flows 
through effective trade facilitation, the global economy stands 
to gain immensely.

    Chokepoints at the border, such as costly customs 
procedures, inefficient facilitation programs, and burdensome 
regulations, reduce the critical predictability of the supply 
chain, and as a result can have the same stifling impact on 
trade as tariffs.

    Negotiations on the Trade in Services Agreement (TISA)

    New international rules are needed to reflect all the 
changes in the world since the last set of international rules 
for services were established twenty years ago by the World 
Trade Organizations in the General Agreement on Trade in 
Services (GATS). The United States recognized this deficiency 
and teamed last year with other countries to initiate 
negotiations on the Trade in Services Agreement (TISA). The 
purpose of these negotiations is to increase access to 
international markets for services firms and to establish new 
rules for services. These negotiations now include 50 countries 
accounting for over 70 percent of world trade in services.

    The TISA negotiations could be most helpful to small 
businesses in the United States by establishing open markets 
and non-discrimination for the U.S. services companies upon 
which U.S. small businesses depend. Among the services which 
facilitate the exports of small businesses are: express 
delivery, electronic payment services, information and 
communications technology services, retail services, and 
insurance services. If these services are not able to operate 
freely in foreign markets, then small businesses in the United 
States will not succeed in reaching the 95 percent of consumers 
who live outside the United States.

    Other Negotiations

    As the United States negotiates the trade facilitation in 
the WTO and the TISA, it also is negotiating a comprehensive 
trade and investment agreement with the European Union, the so-
called Transatlantic Trade and Investment Partnership (TTIP) 
and the Trans-Pacific Partnership (TPP) with eleven countries 
around the Pacific Rim.

    In both these negotiations, it is important that the U.S. 
negotiators seek the same high-level of ambition as they are 
seeking in the two sets of negotiations in Geneva (Trade 
Facilitation and the Trade in Services Agreement).

    Conclusion

    Small businesses are the lifeblood of the American economy, 
and services are the central nervous system on which small 
businesses depend. They cannot penetrate foreign markets 
without an array of services to support them. And those 
services must have free access to foreign markets and non-
discriminatory treatment within those markets.

    Given the several negotiations on new international rules, 
it is timely for the Committee to be holding its hearing today 
on small business recommendations to the incoming U.S. Trade 
Representative and the many agencies that participate in these 
negotiations.

    Thank you again, Chairman Graves and the Committee, for 
giving attention to these issues of vital importance to the 
expansion and prosperity of America's small businesses and 
their employees.

                                 
