[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
SBA MANAGEMENT REVIEW: OFFICE OF INTERNATIONAL TRADE
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
SEPTEMBER 20, 2022
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-067
Available via the GPO Website: www.govinfo.gov
___________
U.S. GOVERNMENT PUBLISHING OFFICE
48-579 WASHINGTON : 2023
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
SCOTT PETERS, California
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
MIKE FLOOD, Nebraska
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Blaine Luetkemeyer.......................................... 2
WITNESS
Mr. Gabriel Esparza, Associate Administrator, Office of
International Trade, U.S. Small Business Administration,
Washington, DC................................................. 5
APPENDIX
Prepared Statement:
Mr. Gabriel Esparza, Associate Administrator, Office of
International Trade, U.S. Small Business Administration,
Washington, DC............................................. 35
Questions and Answers for the Record:
Questions from Hon. Luetkemeyer to Mr. Esparza and Answers
from Mr. Esparza........................................... 39
Additional Material for the Record:
Glenroy Statement............................................ 43
SBA MANAGEMENT REVIEW: OFFICE OF INTERNATIONAL TRADE
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TUESDAY, SEPTEMBER 20, 2022
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:01 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Davids, Phillips,
Newman, Bourdeaux, Carter, Houlahan, Kim of New Jersey, Craig,
Peters, Luetkemeyer, Williams, Stauber, Meuser, Tenney,
Garbarino, Kim of California, Van Duyne, Fitzgerald, and Flood.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order. Without objection, the Chair is authorized to declare a
recess at any time.
I would like to begin by noting some important
requirements. Standing House and Committee rules will continue
to apply during hybrid proceedings. All Members are reminded
that they are expected to adhere to these rules.
House regulations require Members to be visual through a
video connection throughout the proceeding, so please keep your
cameras on. Also, remember to remain muted until you are
recognized to minimize background noise.
In the event a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available Member of the same party, and I
will recognize that Member at the next appropriate time slot,
provided they have returned to the proceeding.
For small businesses, exporting products abroad can jump-
start growth and unlock an enterprise's full potential. Nearly
96 percent of consumers live outside of the United States. When
small firms sell their products internationally, they can reach
countless new customers, become more resilient, and boost their
bottom line.
The approximately 166,000 small businesses in the U.S. that
export account for roughly $341 billion in sales. However,
small export businesses represent only 3 percent of U.S. small
employer firms. That is because exporting presents a range of
unique risks and challenges for small businesses stemming from
the complex nature of global trade.
Small businesses looking to expand overseas often have
difficulty obtaining the capital to fill foreign purchase
orders, struggle to connect with foreign buyers, and lack the
expertise to understand international rules and regulations.
Recognizing these challenges, the Small Business
Administration created the Office of International Trade in
2010 to work with other federal agencies to encourage small
business exports and provide expert assistance to small firms.
While OIT engages in a variety of activities to promote
exports, including managing three different loans specifically
targeted to small businesses looking to export--the Export
Express, Export Working Capital, and International Trade Loan
Programs--the office's primary responsibility is administering
the State Trade Expansion Program, otherwise known as STEP.
STEP educates small firms on the nuances of the exporting
process and provides technical assistance to support small
businesses as they expand into international markets.
The program awards loans to all states and territories for
participation in trade missions, international marketing
efforts, workshops, export trade show exhibits, and other
promotional activities. These funds must be matched by the
states at either 35 percent of the federal award for states
with high export volumes or 25 percent for states without high
export volumes.
Since its inception, STEP has helped thousands of small
businesses break into the international marketplace. In fiscal
year 2021, the SBA supported $832 million in export sales from
STEP and assisted over 3,400 small businesses. By expanding the
number of small firms that export, we can grow both the small
business and U.S. economy.
That is why we must act to strengthen and improve the STEP
program. Representative Evans, along with Representative Young
Kim, recently introduced the STEP Improvement Act of 2022,
which will reauthorize the program for 4 fiscal years.
The bill also includes measures to streamline STEP's
application process, increase grant spending flexibility,
improve communication between the SBA and participating states,
implement more robust reporting requirements, and allow small
firms to participate in the program sooner in their business
journey.
Last Congress, the House passed a similar bill, but
ultimately the Senate declined to take action. I hope that we
can continue our bipartisan work to pass this bill through the
House this Congress and work with our Senate counterparts to
enact this important legislation into law.
Today, I want to take a closer look at the operations of
SBA's Office of International Trade and particularly STEP. I
look forward to discussing the actions Congress can take to
improve the program and address any challenges facing the
office.
I want to thank Associate Administrator Esparza for being
here today, and I look forward to hearing your testimony.
I now would like to yield to the Ranking Member, Mr.
Luetkemeyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chairwoman.
And thank you, Associate Administrator Esparza, for taking
time to testify today.
I think it is important to hear directly from
administration officials on the programs they manage and their
work to support small business.
Unfortunately, today marks 512 days since Secretary Yellen
has missed the legal deadline to testify before the Small
Business Committee. This is unacceptable.
But, Mr. Esparza, we do appreciate you being here today and
fulfilling your responsibility.
Small businesses are the drivers of innovation, leaders in
job creation, and beacons of American ingenuity across the
globe. International trade policy impacts nearly every type of
small business, whether it is agricultural products from
Missouri or computer and electronic products from California.
We have seen how entrepreneurs' ability to compete on the world
stage can grow our economy, support our American workers, and
build communities.
To broaden markets and strengthen small businesses'
competitive advantage, the Trump administration confronted
unfair trade practices and negotiated historic trade deals,
including the United States-Mexico-Canada Agreement, USMCA, and
a written ``Phase One'' trade agreement With China.
Under pro-growth and pro-business policies, small business
optimism broke a 35-year-old record and we experienced a blue
collar boom where wages grew faster for workers than for
managers or supervisors prior to the COVID-19 pandemic.
However, I am concerned that under the Biden administration
China's economic aggression has gone unchecked, regulations and
taxes have increased for American manufacturers, and backlogs
at our ports have created supply chain disasters.
We have seen small business optimism decline, inflation
reach 40-year highs, and two consecutive quarters of negative
economic growth, which translates to a recession, despite the
left's effort to spin something to the contrary.
The Consumer Price Index, CPI, rose 8.3 percent in August
as compared to 1 year earlier. Additionally, the Producer Price
Index, or wholesale inflation, registered an annual increase of
8.7 percent. Inflation remains the top concern for small
business owners, yet the Biden administration fails to provide
solutions.
On the very same day that the Bureau of Labor Statistics
reported that CPI remains at a 40-year high, President Biden
celebrated on the White House lawn a bill that the CBO found
will not reduce inflation and in fact could slightly increase
inflation in 2023.
A recent survey of small business owners found that 90
percent of small business owners report that broader economic
trends, such as inflation, persistent supply chain issues, and
workforce challenges, are having a negative impact on their
business.
These economic headwinds impact every aspect of a small
business owner's operation. They struggle to pay exorbitant
high utility bills, place ``help wanted'' signs on their doors
in the search for skilled labor, and encounter backlogs waiting
for delayed parts and goods.
Further, small businesses looking to enter international
trade markets face a variety of trade barriers that limit their
ability to compete, including lack of resources, inadequate
access to financing, anti-competitive technical standards, and
complex export controls. These barriers are likely why small
businesses represent only 26 percent of total American export
value.
The Small Business Administration is tasked with advocating
for small businesses in trade negotiations and promoting small
business exports. Today we will review the SBA's Office of
International Trade, OIT, export promotion activities,
including management and training programs, loan programs, and
State Trade Expansion Program grants.
As the Ranking Member of this Committee, I appreciate the
work of OIT to help Main Street navigate the obstacles involved
with engaging in international trade and their advancement of
small business interests at home and abroad. To increase their
exports and expand into new markets, small businesses can
access counseling and training from the SBA's resource
partners, field offices, and United States Export Assistance
Centers.
To access additional capital, small businesses can utilize
any of the small business traditional loan programs. In
addition, SBA's three export loan programs--the Export Express
Loan Program, the Export Working Capital Program, and the
International Trade Loan Program--are facilitated by private
sector lenders and guaranteed by the SBA to assist small
businesses in building export operations, financing
transactions, or expanding production capacity.
The State Trade Expansion Program, or STEP, is also a
valuable tool for small businesses. STEP grants are awarded to
State trade agencies, which are then awarded to eligible small
businesses for specific export activities. The grant funding
can be used for participation in foreign trade missions and
trade show exhibitions, design and marketing media and
websites, and procurement of consulting services.
Missouri, my State, has participated in the STEP program
since its inception and over $2.5 million total has been
disbursed to hundreds of Missouri businesses. This program has
made a real impact on small business owners who have used the
program to internationalize their websites and create
relationships on foreign market sales trips.
In Missouri, Tram (ph) Systems, a veteran-owned small
business, used the STEP program to participate in a trade show
in Singapore, which resulted in product distribution to 10
countries in Southeast Asia and a new purchase order of
$27,000.
Mr. Esparza, it sounds like, from your response there, it
looks like you recognize this entity.
Stauder Consulting, Inc., based in St. Peters, Missouri,
again in my district, previously felt the company's size and
limited resources made it too difficult to market
internationally.
However, after receiving financial assistance and
connections from STEP grants, the company now reports: A small
business with limited business development funds, the MO-STEP
Program, which is for Missouri, the Missouri version of it, has
assisted our efforts to market and sell our products and
services internationally. In the past 5 years, we have
transitioned from zero percent international sales to 75
percent international sales. This program has made a
significant impact on our small business and our ability to
project our capabilities and products around the world.
This Committee has held multiple hearings on this important
program. In this past July, the Subcommittee on Economic
Growth, Tax, and Capital Access heard from beneficiaries of the
program.
Prior to becoming a Member of Congress, Ranking Member
Meuser, who is with us this morning, was a small business
owner, and during the hearing he shared how his small business
utilizes STEP grants to reach new markets and grow their
operations.
Tomorrow, this Committee will mark up the bipartisan STEP
Improvement Act of 2022. This legislation will improve
coordination, increase accountability, and ensure small
businesses can continue to benefit from this valuable program.
I applaud Representatives Evans, Newman, Kim, and Flood for
their work on this legislation.
In a growing global economy, we can all agree small
businesses deserve ample opportunities to engage in
international trade. To support entrepreneurs, we must stand up
to China and advocate for American innovation, reduce
regulatory burdens that hold small businesses back, restore our
supply chains for the movement of goods, keep taxes low for our
nation's job creators, and stop reckless spending on the backs
of Main Street USA.
I look forward to discussing the Office of International
Trade's initiatives, and I remind the administration that
reckless spending and increasing taxes and regulations fail to
support small businesses in their efforts to expand and export.
And with that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. Thank you. The Ranking Member yields
back.
I would like to take a moment to explain how this hearing
will proceed. The witness will have 5 minutes to provide a
statement and each Committee Member will have 5 minutes for
questions. Please ensure that your mic is on when you begin
speaking and that you return to mute when you finish.
With that, I would like to introduce our witness, Mr.
Gabriel Esparza, the Associate Administrator for the Office of
International Trade at SBA.
Mr. Esparza is a seasoned executive with over 25 years of
experience leading businesses from large corporations to
startups. Prior to joining the SBA, he was an investor,
adviser, and operator in a variety of entrepreneurial ventures.
Earlier in his career, Mr. Esparza spent 13 years at
American Express, including as Vice President of global
business development for the commercial payments business.
From 2009 to 2018, Mr. Esparza also served on the Board of
Civil Service Commissioners for the City of Los Angeles.
He holds a Master of Business Administration from Harvard
Business School and a Bachelor of Arts in international studies
from Stanford University.
Welcome, Mr. Esparza. I will now recognize you for 5
minutes.
STATEMENT OF MR. GABRIEL ESPARZA, ASSOCIATE ADMINISTRATOR,
OFFICE OF INTERNATIONAL TRADE, U.S. SMALL BUSINESS
ADMINISTRATION, WASHINGTON, DC
Mr. ESPARZA. Thank you. Chairwoman Velazquez, Ranking
Member Luetkemeyer, and distinguished Members of the Committee,
thank you for honoring me with an invitation to come before you
today to discuss the work of the Office of International Trade
at the U.S. Small Business Administration.
For America's small businesses, exporting is an engine for
growth that allows our firms to reach new customers in an
increasingly interconnected global marketplace. Data shows that
small businesses that export are more resilient, expand faster,
and create higher paying jobs for Americans.
Raising awareness of the availability of trade assistance
through the SBA requires shifting our frame of reference for
what an export looks like today. The advent of digital tools,
e-commerce engines, and maturing payment networks has reduced
barriers to entry for small businesses to export both products
and services.
At the SBA, Administrator Guzman has prioritized leveraging
these digital technologies to create a whole new generation of
exporters. During the pandemic, e-commerce increased in the
United States and small businesses adopted digital strategies
to survive and grow their revenues, often finding customers all
over the world.
We are driving transformational change so that the SBA can
help these ``accidental exporters'' become ``intentional
exporters'' by expanding and growing their businesses to new
markets.
I am proud to bring my lived experience working around the
globe to SBA's mission to help small businesses grow
internationally. Prior to joining the administration, I helped
lead a startup small business that built a modern 9-1-1
technology platform. Our company launched in the United States
and expanded around the world.
Prior to that, I spent 13 years at American Express working
with small businesses and eventually leading global business
development for the commercial payments division.
Over the course of my 26-year career, I have lived,
studied, and worked around the globe, now almost 70 countries
in total, while at the same time being deeply intertwined in
the small business arena.
In that connection, I have seen the power of American
entrepreneurship on a global scale, and I work each day at SBA
to ensure that our small businesses can find new customers to
grow and compete internationally.
One of our office's primary responsibilities is providing
education and training to small businesses that are interested
in exporting. We help businesses prepare for navigating the
complexities of international sales, including customs, trade
credit insurance, and foreign exchange. Our efforts are
supported by a range of partners throughout the SBA, across the
federal government, and with certain public-private
partnerships.
After a business has established a solid idea, product, or
service, often including a track record of successful domestic
sales, they need access to capital to fund and grow their
overseas expansion. SBA's lending portfolio provides guarantees
on loans and credit lines originated through the private
banking industry.
The Office of International Trade is authorized to provide
higher guarantees on these facilities due to the unique
circumstances faced by exporters, namely increased buyer risk,
country risk, and currency risk.
The SBA's Office of International Trade also focuses on
providing grants to small businesses in the form of export
expense reimbursement through the State Trade Expansion
Program, or STEP.
This year, we are proud to be celebrating the tenth
anniversary of STEP, which over the last decade has awarded
over $200 million to all 50 States and six territories. The
STEP program has supported 12,000 small businesses and
generated approximately $5.5 billion in export sales.
Demand for STEP resources from the States is strong. This
year, STEP applications were the highest ever, both in terms of
States and territories applying as well as the total dollars
requested. In 2022, we will have a record 48 States and 4
territories participating in the program.
Our partnership with the States, as well as with external
advocacy groups like the State International Development
Organizations, or SIDO, is critical to the efficiency,
relevancy, and impact of the program.
The last piece of the puzzle for most small businesses as
they seek international opportunities is access to foreign
markets. SBA is deeply involved in the interagency trade
apparatus of the federal government. It is there that we
advocate for small businesses for all matters related to trade
policy and trade agreements, bringing to life the real lived
experience of small business owners that we meet every day.
SBA is committed to ensuring that the core offerings of our
international trade office--education, capital, and market
access--are available to the growing universe of small business
exporters.
Across the agency, Administrator Guzman has tasked us with
developing more customer-centric approaches to our work that
meets our small business customers where they are. That is why
the SBA is focused on increasing awareness for trade by
connecting to broader audiences of small businesses who are
currently exporting or could potentially be exporting.
I am humbled by the opportunity to serve at the SBA, and I
am excited about the future of our nation's small businesses to
export American-made products to customers throughout the
world.
I appreciate the invitation to appear before you today, and
I look forward to your questions. Thank you.
Chairwoman VELAZQUEZ. Thank you, Mr. Esparza.
I will begin by recognizing myself for 5 minutes.
You just stated STEP could be a great tool for small
businesses, but the issue is 96 percent of customers live
outside the United States. Only 3 percent of small businesses
are exporting.
So as an Associate Administrator for OIT, do you have a
plan to market STEP to increase participation in exporting?
Mr. ESPARZA. Thank you, Chairwoman Velazquez.
Yes, of course. And, in fact, you hit on the correct word:
market, marketing awareness. We need to get the word out that
this program is effective. It has proven to be a generator of
export sales, a sustainer of jobs, allowing companies to expand
into new markets. We simply need to get the word out more.
So our office has reorganized around having a stronger
marketing function. We have tasked the entirety of the staff to
make sure that they have a growth mindset and a marketing
mindset. And we will continue to work in our office, including
across the ecosystem of partners that we have in federal
government and in the private sector, to make sure we continue
that effort.
Chairwoman VELAZQUEZ. I am glad that you mentioned resource
partners. What about district offices?
Mr. ESPARZA. Absolutely. So the 68 district offices, Madam
Chairwoman, that the SBA manages are part of that ecosystem.
The 200-plus field staff of the U.S. Commercial Service in the
United States are women's business offices, veterans business
office, the Small Business Development Centers.
The ecosystem is large. If people want to talk about
exporting, small businesses, they should not suffer for lack of
resources. It is simply us being able to get the word out.
Chairwoman VELAZQUEZ. Are you incorporating workshops in
some of our congressional districts, for example?
Mr. ESPARZA. Absolutely, Madam Chairwoman. In addition to
the one-on-one and in-person sessions, we are now, of course,
leveraging technology to do much broader seminars and webinars.
I speak very consistently out on the road at conferences in
a variety of venues in which I too can get the word out. And so
marketing is fundamental to all that we are doing today.
Chairwoman VELAZQUEZ. Can I ask you what will be the impact
of H.R. 8844 when we pass it?
Mr. ESPARZA. Thank you, Madam Chairwoman.
If and when we pass this bill, which we wholeheartedly
support, the opportunity for small businesses to continue to
export, to continue to add to new markets will be an important
driver of the U.S. economy.
In addition to existing firms, we also have a very specific
focus on new-to-exporting firms as well as companies that come
from historically underserved communities. And so our reach is
far and broad, and we continue that effort today.
Chairwoman VELAZQUEZ. In a recent hearing the Committee
heard from states and small businesses that participate in
STEP. Overwhelmingly, their testimony was positive, but we
heard concerns about the administrative aspects of managing the
grant.
What steps did you take to improve the grant application
process for the 2022 grant cycle?
Mr. ESPARZA. Chairwoman Velazquez, we are--I am very aware
of this feedback, and I have spent time talking with State
directors, talking with managers of the grant programs. And I
acknowledge that there are aspects of the program that States
want to have become more efficient.
Of course, along with this Committee, what I try to do is
make sure that we have the right balance between protecting
taxpayer dollars and managing this program, and understanding
at the same time we ask very specific questions and have
requirements of the States in terms of their application
process as well as their quarterly reporting.
And so wherever we have an opportunity to improve the
efficiency of this program and the reporting requirements that
we ask of States, we will absolutely do that.
Chairwoman VELAZQUEZ. Thank you.
Ensuring equitable knowledge of and access to SBA programs
and services has been a top priority for this Committee.
However, we have learned throughout the pandemic access to
funding and program support are not always equal.
How does SBA work to ensure that traditionally underserved
communities have access to STEP funds?
Mr. ESPARZA. Thank you, Madam Chairwoman.
This is important. Administrator Guzman has asked us across
the SBA not only to have a customer-centric lens in all that we
do, but to make sure that we have an equity lens with all that
we do as well so that historically underserved communities,
women small business owners, veteran small business owners,
rural small business owners all have an equal shot at the
programs that we do.
Some of them, as you know, are built into statute such that
the STEP program, for example, has to be distributed evenly to
all States, it can't be focused only on the highest exporting
States.
And so both with what we work with in terms of the rules of
our programs as well as our interest in marketing to all
communities, we make every effort to ensure that underserved
communities are included there as well.
Chairwoman VELAZQUEZ. Thank you, Mr. Esparza.
Now I yield to the Ranking Member, Mr. Luetkemeyer, for 5
minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Many in the American public feel that there is no identity
to what is driving the Biden administration's trade policy
agenda.
Are small businesses, the American worker, and private
sector growth key considerations when negotiating and examining
trade agreements?
Mr. ESPARZA. Thank you, Ranking Member.
We at the Office of International Trade work very closely
with the U.S. Trade Rep's office, the Commercial Service, the
entire trade apparatus of the federal government.
We believe--and I believe individually--that it is our
responsibility to advocate for small businesses in all that we
do and at every seat at the table that we have. I try to bring
those communications that I have with small businesses that I
meet around the country, bring those real life experiences and
stories to this trade apparatus when we talk.
Mr. LUETKEMEYER. I appreciate your comment that you want to
be an advocate for small business. I think that is your job,
quite frankly, and I appreciate that comment.
Do you talk to the administration at all with regards to
the effect of the policies of this administration with regards
to inflation, taxes, rules and regulations of small businesses
that you are trying to help export their products? Do you talk
to anybody in the administration about that?
Mr. ESPARZA. Thank you, Ranking Member.
I talk with not only my boss, Administrator Guzman, but,
again, the U.S. Trade Rep's office and Commercial Service, the
State Department, others in the federal trade apparatus. And I
am always advocating for small businesses, whatever their
experience is, whatever their circumstances.
Mr. LUETKEMEYER. Well, I appreciate that, because I asked
that same question of your director, Administrator Guzman, and
she is not talking to the administration, which is mind-blowing
from the standpoint that 99 percent of the businesses in this
country are small businesses, businesses she has a direct
impact overseeing and helping.
And yet we are not communicating the problems of small
businesses to the administration with regards to their
policies, whether they work or don't work. I mean, even if they
are working, they should be getting some feedback, positive
feedback. Unfortunately, most of it is negative.
But if you are not discussing that, I think it is very
difficult to help small businesses through all this.
When you advocate for small businesses in the trade arena,
what does your office do to hold China accountable for their
predatory digital trade policies, IP theft, currency
manipulation, and violation of WTO rules?
Mr. ESPARZA. Thank you, Ranking Member.
As I mentioned earlier, my advocacy for small businesses,
our office's advocacy, includes those small businesses that are
trading with China or would like to trade with China.
I am aware of circumstances and feedback from small
business in which tariffs in both directions can be positive
and at the same time can add friction to the system and be
challenging to small businesses.
So these are real experiences of small businesses that,
again, in my capacity in conversations with the trade apparatus
across the federal government, including the U.S. Trade Rep's
office, we share these experiences so that we can advocate for
small businesses wherever possible.
Chairwoman LUETKEMEYER. You know, tax policy is a real
driver. The old adage ``follow the money'' is true with all the
things that are business-oriented.
As we saw with the Tax Cuts and Jobs Act of 2017, the
inversion that was going on with big companies moving their
headquarters overseas as a result of tax policy changed
whenever we changed our tax policy here. And since then, there
hasn't been one single entity, not one, that has changed and
has inverted their home office to a foreign country. In fact,
many of them have brought them home.
What do you see from the standpoint of tax policy that is
harmful to small businesses' ability to transact trades with
foreign countries?
Mr. ESPARZA. Thank you, Ranking Member.
Tax policy is not part of the conversations that I have
personally had with small businesses. I hear from small
businesses their questions around: How do I find a buyer
overseas? How do I have access to capital? How can I take
advantage of your programs and services?
So while I am listening to them about their experiences and
their challenges, that is not one that I have specifically had
a conversation about.
Mr. LUETKEMEYER. That is curious, because I think, I would
believe that going into another country, for instance Canada, I
mean, they tax the dickens out of American companies up there.
I mean, if you make money up there, you are taxed on it.
I would think that that would be something that if I am a
small business owner, I want to know what the tax laws are so
if I sell something and I make a hundred dollars' worth of
profit how much of that do I actually get to keep and come home
with. That surprises me.
One quick follow-up. I saw an article this morning in The
Wall Street Journal how many people were coming back to work.
Is everybody back to work in your department now, or do you
still got some folks back home?
Mr. ESPARZA. We are back to work.
Chairwoman LUETKEMEYER. 100 percent?
Mr. ESPARZA. And I, Ranking Member, I probably split my
time half the time in the office, half the time out on the road
talking to small businesses. When I am in the office, I am glad
to see the team, inspire them, lead them. At the same time, I
do think it is important to be out on the road talking to small
businesses.
Mr. LUETKEMEYER. Well, I am not criticizing you being on
the road. What I am saying is we have too many people working
from home. We need to come back to work. And I assume that is
what you are doing. Most of your--all your people are back to
work.
Mr. ESPARZA. We are back in the office.
Mr. LUETKEMEYER. Perfect. Thank you very much.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
And now I recognize the gentlelady from Pennsylvania, Ms.
Houlahan, for 5 minutes.
Ms. HOULAHAN. Thank you.
Associate Administrator Esparza, we hold in common that we
both went to Stanford. It looks as though you are a little bit
younger than me, though, so we must have missed each other.
Very much appreciate the opportunity to have you appear
before the Committee. One of the things that makes me most
proud about serving on the Small Business Committee is that I
have quite a lot of experience in scaling small businesses to
larger businesses. And a couple of them have actually gone on
to be global in their scope and their span, one of them sold
into 110 different countries from startup.
Those were both started as two organizations in the
Pennsylvania area. And I am very, very glad to see that funding
is coming to Pennsylvania as part of the 2022 State Trade
Expansion Program awards.
This funding will support Pennsylvania's Global Access
Program, which is designed to enhance the capability of small
and midsize Pennsylvania companies to increase export sales
through innovative uses, such as website enhancements,
translator and interpreter fees, foreign market sales trips,
and other sorts of things that I know that I experienced as
being powerful tools to be able to grow your top line and
bottom line and scale globally.
Considering the importance of this program, I really would
like to understand how States like Pennsylvania can further
maximize the amount of funding they receive in future years.
Specifically, are there ways that States can better utilize
their funding in order to obtain the maximum amount allowed in
the next grant cycle?
One of the reasons why I am asking this question is that in
doing our research our team discovered that no States were
awarded the maximum amount of $2 million for 2022. How can we
be that State that gets the $2 million?
Mr. ESPARZA. Thank you, Congresswoman.
For $20 million in available funding this year, we had $39
million in requests from the States, almost two to one. And so
almost by definition we did not have enough money to satisfy
every State's request.
But I can tell you that, in terms of maximizing the
opportunity for Pennsylvania or any other State, a good place
to start is utilizing all the funds available in a given year.
We want to demonstrate to you all that every State is
maximizing the utility of the program by utilizing all the
funds.
Of course, we have several categories in which those funds
can be used. Principally, most small businesses look for
expense reimbursement through the STEP program for trade shows
and trade missions, but there are nine expense categories, and
they continue to expand. We recently included now reimbursement
for trade credit insurance.
So we are starting to get very specific about all the
aspects of exporting, and we hope to continue to work with your
State and others to be able to maximize the program.
Ms. HOULAHAN. That is really interesting. And basically it
is a problem of supply and demand. There is a significant
amount of demand and not enough supply. Thank you for that
answer.
Businesses in my community and nationwide are continuing to
be adversely impacted by increased costs due to Section 301
tariffs. For instance, my office has been in close
communication with a company in my community called Lasko
Products, which is an international home comfort product and
fan manufacturer that is headquartered in my community. It has
filed numerous requests for exemptions from 301 tariffs, noting
that the harmful impacts that they are having on their business
are difficult.
Given the role that your office does play in supporting
businesses that are engaged in exporting, I am sure that you
understand how challenging the 301 tariffs have been in the
wake of the pandemic.
So this year is the 4-year statutory review mark for all
four lists of 301 tariffs on Chinese products. And recognizing
that the United States Trade Representative oversees an
enforcement of the Section 301 tariff regime, but also noting
your expertise with their impacts on small businesses, can you
please explain to what extent you do engage with the USTR on
Section 301 tariffs?
Mr. ESPARZA. Thank you, Congresswoman.
So we are aware of the Section 301 process and the review
that is going on right now. We are also aware that several
companies have asked for exceptions from those tariffs.
Again, as I have said earlier, wherever we find real life
stories of small businesses that we meet every day across the
country, including the ones that you mentioned from
Pennsylvania, we share those stories, we share those examples
with the U.S. Trade Rep's office, and we continue to advocate
for them going forward.
More than anything, we keep abreast of these processes, the
review process, and we help in our capacity as educators and
communicators with small businesses about those processes. And
we hope to be able to continue to do so.
Ms. HOULAHAN. So with the last seconds, that was actually
the final question, which is, how can small businesses like the
ones in my community better work with you all, kind of raise
their hands and say they would like to be exemplars or examples
of kind of what is going on and how we need to help these
organizations?
What can your office do to seek these businesses out? And
can I direct this business to you more specifically?
Mr. ESPARZA. Yes, please, Congresswoman. On our website, we
have a trade tools portion of our website. We have a hotline.
We can take inbound calls. Communication and education relative
to not only tariffs but all aspects of the exporting journey is
something that we work on very hard, and I am happy to work
with your office for that particular business.
Ms. HOULAHAN. [Presiding.] Thank you. I appreciate it. And
I yield back my time.
But I am now also serving as the acting Chair. And so the
Chair will now recognize Representative Roger Williams, who is
the Vice Ranking Member of the Committee, for his 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chair.
And as a small business owner--thanks for being here. As a
small business owner for 50 years--I am a car dealer, I have
been in business 51 years--I can tell you that President
Biden's SBA is totally out of touch with Main Street America.
And I am glad to see that you are a businessperson, because,
frankly, I didn't know they had any businesspeople over there.
So I am glad that you have that experience.
When I talk to business owners back in Texas, they are
concerned about the inability to find qualified workers,
excessive government regulations, increasing compliance costs,
and the constant threat of tax increases coming from
Washington.
And just real quick, do you think we should be raising
taxes on small business, on Main Street America? That is a
short answer, I mean, yes or no?
Mr. ESPARZA. Thank you, Congressman Williams.
I think tax fairness is an important aspect of what we
should be doing, and every American and every American small
business should pay its fair share of taxes.
Mr. WILLIAMS. See, I think we should cut taxes across the
board.
However, all businesses in my district are more concerned
about the--are most concerned about the out-of-control
inflation, which all of us are, which has soared to 13 percent
under the Biden administration and has caused prices across the
grid to skyrocket.
Small business owners are having to drastically alter their
operation to compensate for additional costs, forcing owners to
decide whether to reduce future capital investments, hold off
hiring a new employee, or raising prices on their consumers
just to keep the doors open. And you can't continue to just
raise prices. It is not that easy. Small businesses have to eat
most of that.
So, Mr. Esparza, as you talk with small business owners
like myself, what changes are they having to make to their
businesses' operations in response to inflation? And what would
be your advice to small businesses struggling with rising
costs?
Mr. ESPARZA. Congressman, thank you.
Whether it is the current circumstances, whether it is the
pandemic, whether it is a hurricane that is hurting Puerto Rico
today, for example, American small businesses are resilient.
And it is our domain in the Office of International Trade to
make sure that they have the education, training, access to
capital, access to markets.
And so our office continues not only to be an advocate for
these small businesses, to provide them with the products and
services to help them in their exporting journey.
Mr. WILLIAMS. But how about being an adviser? That was my
question. I mean, what advice are you giving small business to
deal with these rising costs?
Mr. ESPARZA. What we tell them is that exporting can be an
important part of the journey. International sales, as was
mentioned earlier, 95 percent of the world's consumers live
outside the United States.
And so wherever we have an opportunity to talk with small
businesses about the opportunities that exist overseas, we do
that. And then we provide them with opportunities for access to
capital and ensure that market access is an important part of
that journey as well.
Mr. WILLIAMS. We will move on, but if I was asking for
advice, you haven't given me any.
So, number two, many businesses are facing a new problem
they have never had to deal with before, and that is supply
chain. I am in the car business. I used to have this many cars.
Now I got this many cars.
And U.S. ports are struggling to unload deliveries, and
inventories are sitting on container ships in the middle of the
ocean. A recent Goldman Sachs survey found that 61 percent of
small business owners reported supply chain issues that have
been getting worse over the past 3 months, and I am surprised
that it is not higher than that.
And so it is the responsibility of your office to assist
small businesses in navigating the obstacles involved with
international trade and exporting.
So, Mr. Esparza, what is your office doing to help small
businesses navigate these supply chain disruptions?
Mr. ESPARZA. Thank you, Congressman.
I was actually out in Seattle just a couple of weeks ago.
Port Commissioner Sam Cho there is somebody who has shared with
me the dynamics related to that particular port, and other
ports that I have come to understand their dynamics.
I do understand that the supply chain challenges in our
ports around the United States are easing to a certain degree.
That is not to say that those challenges don't still exist, but
they are easing. The cost of a crate, the cost of storage, the
time in and out of containers is improving.
But nevertheless, wherever we have an opportunity to
discuss these issues with small businesses we provide them with
tools and training and access to capital and market access so
that we can continue to help them on their journey, whatever
they happen to be shipping, whether it is product. Obviously,
the advent of digital tools helps the service side of the
economy. But we advocate wherever we can.
Mr. WILLIAMS. Well, advocating, again, is one thing, but
helping is different. So I will move on. I don't feel I got a
good answer from you there. I think you dodged it.
Excessive amounts of red tape and administrative burdens
can make it extremely costly and overwhelming for smaller
businesses attempting to break into the international trade
market.
While the STEP program was designed to increase the number
of small exporters, I have heard that the STEP reporting
requirements tend to be more detailed and more burdensome
compared to other agencies' grant programs.
This can be very discouraging, again, to smaller businesses
who don't have the resources. They don't have the people and
they may not have the money to fight bureaucratic red tape.
So, quickly, do you have a suggestion on how Congress can
ensure that the STEP program can be made more accessible for
small businesses?
Mr. ESPARZA. Thank you, Congressman.
Well, obviously, more resources would be good for us to be
able to invest in technology platforms to help with some of
that reporting requirement.
I give my predecessor good credit for having changed some
of our reporting process such that we are not collecting 50
Excel spreadsheets from the States, but we are leveraging
technology to be able to do so.
We will continue to invest in that technology and improve
those processes so that we can make the reporting requirements
as efficient and burdenless as possible.
Mr. WILLIAMS. All right. I yield my time back.
Ms. HOULAHAN. The gentleman's time has expired.
I now recognize Representative Carolyn Bourdeaux from the
State of Georgia for her 5 minutes.
Ms. BOURDEAUX. Thank you so much.
And thank you, Administrator Esparza, for joining us here
today.
The SBA's Office of International Trade can be an important
tool for small businesses who are looking to reach markets
beyond the U.S. borders.
I was very pleased to see the State of Georgia receive a
$181,000 State Trade Expansion Program grant earlier this month
after the Committee heard from the Georgia Department of
Economic Development in July about the importance of this
program to supporting small businesses.
One of the things this Committee has heard about repeatedly
is the need to ensure that programs like STEP and other SBA
programs are accessible to all small business owners, including
those who may not speak English as their first language.
And in my district, 30 percent of the people in the
district were born outside of this country. We have an enormous
and vibrant immigrant community, probably a dozen or so
chambers of commerce that are targeted at different subgroups,
such as the Korean chamber, the Vietnamese chamber, the
Taiwanese chamber.
And so one question is, what are you doing to reach out to
people who may not speak English particularly fluently but have
these great ties? They are small business owners, have great
ties to the community they emigrated from.
And I guess the second part of that is, what should I
advise them about how to take better advantage of the STEP
program?
Mr. ESPARZA. Thank you, Congresswoman.
Administrator Guzman has tasked all of us in the SBA to
make sure that we have an equity lens in all that we do. And so
communicating where customers are, where small businesses are
in a way that is impactful and effective for them, including
another language, is important.
I, myself, as a Spanish speaker, have participated in
webinars and seminars to help assist that particular community.
Your mention of the Korean community is important. Again,
just a few weeks ago we had a Korean diaspora event. We
actually believe that diaspora communities, immigrant
communities are of particular importance to all things export-
related, not just with our STEP program, in that diaspora
communities are predisposed to export back to countries of
origin because they speak the language. They know the culture.
They know the systems. They know how to get things done.
And so our efforts in that regard not only are about
reaching out to small businesses in the methods in which they
communicate, but also to specifically focus on diaspora
communities as a part of our marketing and outreach efforts to
promote exports across the spectrum.
Ms. BOURDEAUX. Thank you so much.
I just want to add in closing with this is that I know we
have a lot of concerns--I hear this in the foreign affairs
space--about China and how China has gone to many of these
countries and is building infrastructure and setting up
businesses. And we have this wonderful opportunity to leverage
our immigrant communities as ways to expand our influence not
only to do well economically but also to make sure that we have
a presence and show that we are deeply engaged in these
countries around the world.
Thank you so much, and I yield back.
Ms. HOULAHAN. The gentlewoman yields back.
The gentleman from the great Commonwealth of Pennsylvania,
Mr. Dan Meuser, the Ranking Member on the Subcommittee on
Economic Growth, Tax, and Capital Access, is now recognized for
5 minutes.
Mr. MEUSER. And I thank the Chairwoman very much from the
great Commonwealth of Pennsylvania.
Mr. Esparza, thank you for being here with us. Appreciate
it. Your business background is helpful, I think, in these
discussions, and it is good to hear that STEP is at its highest
ever.
You spend a lot of time traveling and working with small
businesses, obviously, as I do. What they are facing today is
maybe the most burdens they have faced. From small business,
you have heard a hundred times, as have I, if not a thousand:
Why did I ever get into this, right, why did I ever start this
business?
Now, some of those that say that after 2 years go on to be
great, sizable employers. Some go out of business. But let's
face it. Between the gasoline prices, utility prices, general
cost of supplies, workforce, crime, regulations that exist,
things have gotten that much more difficult. Fortunately, we
continue to have an entrepreneurial spirit in America.
But you made a comment about taxes and paying their fair
share. Just briefly, when you are dealing with exports, it is
not about paying your fair share. It is about being the most
competitive. Lower taxes are lower costs, so therefore that
would increase and improve made in the USA, right?
The more competitive we can be here versus other countries.
I mean, we now have a 21 percent corporate tax rate that many
on the other side complain about, yet that is middle of the
pack, at best. I mean, it is not even that much lower than--in
fact, it is on the high side for manufacturing countries, large
companies. So you know this.
And you also understand that small businesses pay a lot
more than that. I mean, we did have the 20 percent deduction
from 2017, but they are still paying in the 25, 26, 27 percent
range.
So that doesn't give us an advantage when it comes to
exports, right? And if you don't give an advantage to exports,
you are giving an advantage to imports, and that largely means
goods from China, right?
So let's just now talk about inflation, the number one
issue that small businesses are facing. It reduces profits,
obviously. Reduces ability to grow. They don't add employees
and they don't really focus on growing their business. They
work upon survival.
It reduces tax revenue. So they are going to be seeing that
this year. It makes capital access more difficult, because
banks don't want to lend if you are not making any money.
It increases interest rates, as we are seeing being spiked.
We are going to see it go up perhaps another point tomorrow. So
that decreases market value, more for larger companies, but
certainly public companies, any company. It decreases your
value.
And therefore it strengthens the dollar, the interest
rates. So, as you well know, strengthening the dollar means our
exports are a lot less attractive all over the world, again,
assisting imports.
So all these factors coming together make your job a little
bit harder and make the United States' economic strength
weaker. So we need to reverse a lot of those things.
So on to what you have authority on. The three-step plan,
the STEP plan, it is a three-point plan, basically, you put
together on it. And it looks good, and I am sure you have some
goals set for it.
What are the goals in the----
Mr. ESPARZA. For STEP, Congressman?
Mr. MEUSER. Yeah, for the new bill that we will be voting
on and I look forward to supporting. What are the goals for it?
Mr. ESPARZA. Thank you, Congressman.
So STEP has--of course, at the very top line we want to
simply increase U.S. exports, period. The way that STEP does
that, of course, is driving export sales and sustaining or
expanding jobs.
Below that, we look at return on investment to the program
of any particular expense category, the degree to which we are
engaging not only existing exporters but new-to-exporting small
businesses, as well as the degree to which we are engaging, as
some of the previous people asked, around underserved
communities.
So all of those things are things that we track.
Mr. MEUSER. Could you give us an example of a small
business that has benefited well from the current STEP program
and how that may be enhanced moving forward?
Mr. ESPARZA. Sure, Congressman.
Again, I am out every day talking to small businesses. Our
exporter of the year was a small brewer up in the State of
Montana. We happened to over-index in brewers for some reason,
but we have got our exporter of the year there, and that is
Glacier Hops Ranch up in Montana.
They took advantage of the STEP program and were able to
visit trade shows, visit other countries, translate websites
into other languages, work with wholesalers around the world.
And their sales are booming.
This is very common that we see these types of examples
across the country of folks who have taken advantage of STEP to
be able to find new markets and offset some of the costs
associated with exporting.
Mr. MEUSER. All right. I appreciate it.
Madam Chair, I yield back.
Ms. HOULAHAN. The gentleman yields back.
The gentleman from the great State of California,
Representative Scott Peters, is now recognized for 5 minutes.
Mr. PETERS. Thank you, Madam Chair.
Mr. Esparza, thanks for being with us today.
And to Administrator Guzman, thank you for providing
$600,000 for California for the State Trade Expansion Program,
or STEP.
These additional resources will help businesses in San
Diego to become better exporters and strengthen economic growth
in our region. So we really very much appreciate that. I also
appreciate the Administrator's visit to San Diego just
recently.
SBA offers three loan programs specifically targeted to
small business exporters, the Export Express, Export Working
Capital, and International Trade Loan Programs. Do you have a
sense or can you give me a sense of how many small businesses
currently utilize these programs?
Mr. ESPARZA. Thank you, Congressman.
And I actually was just out in San Diego last week as well
at the America's Small Business Development Center's
conference. So I love being out there.
We do just north of 500 loans a year. What we focus on
right now--and this is unique to exporters--is our working
capital lines of credit happen to be a much more important
product than our term loans.
We support all three products, of course, but we put quite
a bit of emphasis on our working capital lines of credit
because, given the lengthier sales cycle, cash conversion
cycle, and all the risks that we discussed earlier around
country risk, currency risk, buyer risk, working capital is a
much more important tool today.
That portfolio is expanding. We are also in the process of
updating some of the standard operating procedures such that we
can continue to evolve not only the one that is unique to our
office, but in the Office of Capital Access, my sister
organization within the SBA, to make sure that their domestic
tool is one that can accommodate small businesses that have a
smaller nexus relative to exporting.
Mr. PETERS. Mr. Esparza, I guess sort of what is the plan
to increase the use of the program? And what actions
particularly can this Committee take to ensure that these loan
programs will meet the needs of America's small business
exporters?
Mr. ESPARZA. Thank you, Congressman, because we are very
interested in evolving the program, evolving our products to
make sure that they fit the needs of the marketplace.
It has been over a decade since we raised the cap on the
spending limit or spending authority of the program. Right now,
it is capped at $5 million. I think it is time that we relook
at that.
We believe one of the biggest drivers of our ability to get
these loans out in the marketplace is expanding the lender base
as well. There have been a number of mergers and acquisitions
in the banking community, particularly in smaller banks, which
is the primary--90 percent of our loans go through community
and regional banks.
But to the degree that they have gone through a number of
mergers, our ability to lend through and increase the lending
authority through all sorts of trade finance specialty banks
and so forth are ways that we can continue to do.
This program should be much larger than it is today. I
readily recognize that. And we hope to work with your office
and this Committee to continue to evolve our products and
services.
Mr. PETERS. On that, do you have a feel for us of where the
sweet spot on the cap might be if it is not $5 million?
Mr. ESPARZA. Just by the metrics, I would suggest $7.5
million would be sort of the next raise.
The original increase in the cap was back in 2010 from $2.5
million to $5 million. I would propose another $2.5 million
raise to $7.5 million if we could. But I am happy to work with
this Committee on the specifics of that.
Mr. PETERS. Okay.
STEP since its inception has provided grants to over 12,000
small businesses?
Mr. ESPARZA. That is correct.
Mr. PETERS. $200 million in the United States. And I want
to know--you are going to tell me you need more resources, but
what does that look like to get more small businesses to STEP?
What do we have to do?
Mr. ESPARZA. Yeah. Thank you, Congressman.
Mr. PETERS. And, alternatively, what kind of resources
would you be looking for?
Mr. ESPARZA. Thank you, Congressman.
I think one of the challenges we have is the concentration
of the STEP awards. We don't tell the States how they can
distribute those awards. Sometimes they cap the amount that any
given company can get. Sometimes they have fewer participants
with a higher amount. Sometimes they have more participants
with a smaller amount.
Whatever they choose to do, of course, our interest is
maximizing the number of small businesses that participate.
Of course, given the demand that we just saw in the recent
application cycle, $39 million for only $20 million of
available funds, if we had what I understand to be potentially
$30 million in the new authorization, that of course would
continue to drive not only as many States and territories
participating as possible, but spread that number of--that
amount of money throughout as many small businesses
participating.
Mr. PETERS. Thank you so much.
Madam Chair, my time has expired. I yield back.
Ms. HOULAHAN. The gentleman yields back.
The gentlewoman, Ms. Claudia Tenney from New York, is now
recognized for 5 minutes.
Ms. TENNEY. Thank you, Madam Chairwoman. It is the great
State of New York, once known as the Empire State.
So, yeah, we do have a border with the great Commonwealth
of Pennsylvania. Sometimes we wish we had more of your policies
than we do in New York. We kind of call that the Berlin Wall,
because it is tough for our small business community to compete
right across the border with Pennsylvania.
I am also a small business owner and involved in
manufacturing, and it has been a passion of mine ever since I
first ran for office. And I appreciate what you do and having a
business background.
But my concern is that in upstate New York and central New
York, this is where the Erie Canal was founded. This is the
beginning of industrialization. This is where the government
actually invested in a project that was criticized but turned
out to be really changing for so much of upstate New York and
the region and our whole country. We had titans like IBM,
Kodak, Oneida Limited, Remington, all these along the beautiful
canal which is all in my area.
And we would love to see more investment. And over the
decades, we were told: Oh, we are going to be making things
again, we are going to be investing, and that this new
globalization was going to bring us all these great
opportunities.
And what we have seen is this creative destruction has
actually not really empowered our manufacturing but sent our
jobs overseas. And so that is the complexity that we face.
And as we opened up our American markets to cheaper foreign
products, we didn't invest and we didn't continue to invest in
manufacturing and do the work that we need to invest, create,
and cultivate these foreign markets, and I think undervaluing
our manufacturing policy.
And our policymakers also need to look to the business
community to lead us away and into creating and bringing these
jobs back. It has left us with weak and fragile supply chains.
We learned that during the pandemic. And now this is hurting a
lot of our producers.
And the shortsightedness I think of this. And a lot of--
look, it was both sides of the aisle. It wasn't just--it was
both sides.
And that is why I did a plan for community renewal. We went
out and asked everyone in our region and across the country:
What do we do? And that is why I introduced the bills like Make
in America to Sell in America Act and also the American
Innovation and Manufacturing Act.
And that is because I think we need to move our trade
policy beyond just to disburse grants, which I think is great,
but also toward a more actual comprehensive national industrial
policy.
How do we increase the value of our markets, bring American
products back and reshore them?
And I guess that is what really drives me to my first
question for you is, is there, with your work that you are
doing, a plan with this administration to reindustrialize and
bring us back to making things again, helping our supply
chains? And is that something that you are focused on, either
with the SBA representative or with your organization?
And sorry for my long intro there, but I think it is really
important that we talk about getting our supply chains back
here, especially what we have learned during the pandemic and
what we have learned with the American workers suffering and
our small businesses suffering at the hands of predatory
competition like, for example, from the People's Republic of
China.
Mr. ESPARZA. Thank you, Congresswoman.
Manufacturing is critical to American small businesses and
American small businesses exporters in particular. This is
Manufacturing Month, October is Manufacturing Month, so we are
engaged in a number of events in that celebration.
I will also tell you that, in addition to being very aware
of and in support of the Made in America efforts across the
administration and the federal government, 80 percent of the
loans and lines of credit that I was discussing earlier with
the Congressman from California are lent to manufacturing and
wholesale companies.
So while I earlier mentioned that the economy is evolving
and the service economy and the digital economy are growing,
there is no doubt that the small businesses that we deal with
on a day-to-day basis are still very much rooted in the
manufacturing base.
And so wherever we can continue to work to advocate for
manufacturing Made in America, American jobs, and allowing
those manufacturing companies to export their products
overseas, we will continue to do that.
Ms. TENNEY. Is there an overall plan, though, to try to
bring this--is there something--is that a priority of the
administration to not--obviously, we would love to see more
manufacturing. We have a lot of people that would love to go to
work, would be great at making things, building things, and I
think we need to focus on that with more of a comprehensive
plan, is what we have learned.
I mean, we are desperate for employees. I know in this
Committee that is all we talk about, is our businesses needing
people to come to work who can make things, across all sectors,
whether it is high tech, whether it is lesser tech
manufacturing. And I think that is really important.
We tend to focus on the high tech, good shiny stuff, but
sometimes just making great things is really important. And I
think it could really help our economy and our competitiveness.
So I think I am out of time. But we do appreciate your
efforts. But it is up to the Chairwoman if you want to answer
that quickly.
Ms. HOULAHAN. Sure. Why don't you go ahead and answer that
real quick?
Mr. ESPARZA. Thank you, Congresswoman.
So post-pandemic there was a great deal of work done in the
administration about supply chain resiliency and onshoring and
making sure Made in America was an important part of the safety
and security of our supply chains. And so that, of course, has
an enormous impact on the manufacturing base, and we absolutely
support that in the Office of International Trade.
Ms. TENNEY. Thank you so much.
I yield back.
Ms. HOULAHAN. Of course. And my apologies to the gentlelady
from the great State, the Empire State of New York. I was
remiss in saying that.
The Chair now recognizes the gentlewoman, Representative
Van Duyne, Ranking Member, Subcommittee on Oversight,
Investigations, and Regulations, for 5 minutes.
Ms. VAN DUYNE. And you can introduce me as coming from the
great State of Texas, because that is what we are known for.
Ms. HOULAHAN. From the great State of Texas.
Ms. VAN DUYNE. The great State of Texas, which also happens
to be the largest exporter in the country for 20 years running,
more exports than both California and New York combined, just
to give some context.
Over the August recess I traveled to South Korea, Cambodia,
and Singapore on delegations to learn more about the role that
the U.S. is playing in Southeast Asia and trade, as well as to
find out what the perceptions of the U.S. engagement is over
there and how that is affecting China's influence in the
region.
All three of those countries could not be more different,
yet the message that they portrayed to us was the same: A
strong U.S. is essential to balance the power that China is
exerting, but the U.S. is absent. And China is happy, by the
way, to fill that void.
It is a changing time in that region. Trade is still
occurring with or without us. Unfortunately, since the U.S. is
not participating, we are left with China writing the rules and
taking ownership in the region.
They were very clear in their messages with every single
branch of their government that the Indo-Pacific economic
framework that has been put out by this administration is a
fine conversation starter, but that it lacks any teeth or
direction.
And I agree with them that something is better than
nothing, but the ground that we are giving up, it is dangerous,
and it is allowing China far too many opportunities to
strengthen its muscle, as reflected by the Solomon Islands
suspending all visits by not only U.S., but also by British
ships.
As you know, Solomon Islands is very strategic. The U.S.
lost blood and lives fighting for it. And now China is pretty
much demanding that we can't even land.
Do you believe that the U.S. is doing enough when it comes
to trade?
Mr. ESPARZA. Well, thank you, Congresswoman.
Trade is fundamental to driving aspects of our economy, and
particularly for small businesses. It is an opportunity, given
how many consumers actually live outside the United States, to
be able to focus on trade. That is the entirety of the focus of
my office.
And so we work every day to make sure education, training,
technical assistance, access to capital, access to markets are
in every conversation that we have with small businesses.
Our ability to advocate for small businesses across the
U.S. trade apparatus is important in making sure small
businesses have a seat at the table in this economy, and we
hope to continue to do that.
Ms. VAN DUYNE. But do you think that we could be doing
more?
Mr. ESPARZA. I am very optimistic. I always think we can be
doing more in every capacity. I would love to see more free
trade agreements.
Anywhere that there is friction in the system that causes
challenges for small businesses to be able to sell their goods
overseas, we want to make sure that we have as many robust
relationships and partnerships around the world to be able to
provide markets for American small businesses to sell their
products, absolutely.
Ms. VAN DUYNE. When you say we could be doing more, do you
think that we could be doing more to combat China?
Mr. ESPARZA. You know, Congresswoman, I think the China
relationship is a complex one. Trade is only one component of
that broader geopolitical relationship.
And as I have said earlier, wherever we see examples of
small businesses that have interactions with the Asian market
broadly, China in particular, and whether it is based on
tariffs that China imposes or tariffs that we have imposed, we
simply want to be able to communicate what the impact of those
dynamics are for a particular small business.
I met a small business the other day who was importing kelp
from China to make chemicals. It is a company in North
Carolina. And the tariffs that we place on imports from China
were challenging to her, and she has asked for an exception for
some of those.
At the same time, the tariffs that China put on us can be--
--
Ms. VAN DUYNE. Yeah, but China is actually even shutting
down the ability for U.S. companies specifically to be able to
import or export. I mean, they are being very discriminatory
against U.S. companies. I mean, they told us that directly.
But do you believe that this administration has empowered
U.S. Trade Rep Katherine Tai, or do you think she is being held
back?
Mr. ESPARZA. I don't know, Congresswoman, if I am in a
position to say that.
I will tell you that, again, wherever we advocate for small
businesses and can find examples, we are surely in
communication with the U.S. Trade Rep's office and have very
consistent and open communication with her office about those
small businesses that we find in the export universe.
Ms. VAN DUYNE. Do you personally believe that she is being
empowered?
Mr. ESPARZA. She is a Member of the Cabinet, Congresswoman,
and I believe she has every opportunity to do her job.
Ms. VAN DUYNE. Okay. And what is your opinion of IPEF? Do
you believe IPEF is good for small businesses? And do you
believe that the Congress should weigh in?
Mr. ESPARZA. I am sorry. What was that again?
Ms. VAN DUYNE. For the Indo-Pacific Economic Framework, do
you think Congress should weigh in, or do you think it is a
fine framework?
Ms. HOULAHAN. And very quickly because the gentlewoman's
time has expired.
Mr. ESPARZA. Yeah. Thank you, Congresswoman.
As that framework continues to evolve, obviously at the
point in which anything needs to be passed, this Congress will
have a say in that.
Ms. VAN DUYNE. Thank you very much.
I yield back.
Ms. HOULAHAN. The gentlewoman from the great State of Texas
yields back.
The Chair now recognizes Representative Mike Flood for 5
minutes from the great State of Nebraska.
Mr. FLOOD. Thank you, Madam Chair.
Thank you for your testimony today.
One of my goals here is to ensure that Nebraska's small
businesses are as competitive as possible in today's globalized
economy.
I am interested, obviously, in e-commerce, which has made a
lot of businesses, large and small, obvious exporters. We need
to ensure that we are capitalizing on the doors opened by the
internet so that our constituents can reap the rewards of the
truly global economy.
Associate Administrator Esparza, in your testimony you
emphasize education is a core piece of the SBA's trade agenda.
Can you speak to what kinds of education your Office of
International Trade can provide?
Mr. ESPARZA. Sure. Thank you, Congressman.
Let me begin actually, if I may, by referring to your
comment on e-commerce.
One of the things that we found during the pandemic is
that, for whatever reason, people who either were displaced
from their jobs or chose to leave their jobs, find a new place
to live, they didn't just sit still. These are people that
started a side hustle, created a website, have some product,
put up an e-commerce engine, as you referred to. And, lo and
behold, they got an order from overseas.
And so it might not have been on purpose. In fact, the
Administrator calls these accidental exporters.
Our intention in the Office of International Trade is to
make sure that these accidental exporters become intentional
exporters. And so part of that journey, as you referred to, is
education, training, and technical assistance.
And so either through our website, through our inbound
hotline, but more importantly through outbound efforts, all of
the Members of our staff are working very hard through
webinars, training, one-on-one consultations to make sure that
American small businesses have the education and training they
need to be able to compete in the marketplace.
Mr. FLOOD. Thank you.
Following up on my colleague from Texas' question on China,
China's government provides very aggressive subsidies and
export assistance to aid their businesses.
Can you speak to how China's aggressive and frequent
government intervention affects American small businesses?
Because they are out there really promoting their products. And
where are we in comparison to that, and are they hurting us?
Mr. ESPARZA. Thank you, Congressman.
Any country that provides subsidies to its companies can
potentially create an unfair marketplace. So this is, again,
where our office, as we listen to small businesses around the
country provide examples where this dynamic comes into play--I
don't recall any off the top of my head--but as these examples
of unfair trade practices, unfair competitive practices come
into play, we make sure that we communicate those not only to
you all in forums like this, but to the Trade Rep's office, the
Commerce Department, throughout the trade apparatus of the
government.
Mr. FLOOD. I appreciate that answer.
I am passionate about developing an economic environment
where Nebraska businesses can take risks, and I think that is
lacking sometimes. People don't understand that that is how we
build wealth. Sometimes small businesses and startups fail, and
that is part of our free market system.
It is important that when our entrepreneurs come up with
these ideas, good ideas and a good business plan, those
entrepreneurs are given the opportunity to thrive.
That is why I am co-leading H.R. 8844, along with my
colleagues Congressman Dwight Evans, Congresswoman Marie
Newman, and Congresswoman Young Kim. This H.R. 8844 would
reauthorize the State Trade Expansion Program, or STEP, within
the Small Business Administration.
As you know, as you have testified, STEP provides funding
to small businesses to help them develop their exports, and
this program is very important.
I note that the State of Nebraska funded 85 ESBC
activities, and I am hopeful that as we go forward we can also
see an increase in the number of fintech products that we are
pushing.
I looked through a lot of the different States, and I would
like to see more fintech products being pushed around the
globe. Can you speak to that briefly?
Mr. ESPARZA. Sure. Thank you, Congressman. And thank you
for the authorship of the bill.
I also know Nebraska got 100 percent of what it has asked
for in this STEP cycle, so I am glad Nebraska can use those
funds to be as competitive as possible.
Obviously, fintech is a growing part of the economy, not
only for those products and services, but the payment networks
that they ride on. And to the degree that we can continue to
evolve our efforts to accommodate and celebrate that aspect of
the developing economy, we will do so.
In fact, the Administrator has established a Small Business
Digital Alliance that very much focuses on the digital economy.
There are payment networks as a part of that. And we will
continue to work on fintech, sir.
Mr. FLOOD. Thank you for your efforts. Thank you, sir.
I yield back.
Ms. HOULAHAN. The gentleman yields.
The gentleman, Representative Dean Phillips from the great
State of Minnesota, is now recognized for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair.
And greetings, Mr. Esparza.
As a former export manager for our business, I recognize
how integral it is and also how challenging it is. This was
about 25 years ago, before e-commerce, so we had to do it the
old-fashion way. So I celebrate the STEP program in particular.
In Minnesota, I know we are receiving $175,000 since 2017.
STEP has generated, I think, $30 for every dollar of
investment, which is a return on investment that I wish every
government program could claim. So I really do celebrate it.
I know it is a competitive application process, and I was
hoping you could speak about what factors go into that
consideration as you take those applications into account.
Mr. ESPARZA. Sure. Thank you, Congressman.
The primary factors that we take into consideration, as is
explicitly described in the notice of funds opportunity, is not
only primarily what the State proposes to do with that money,
but also the secondary component of past performance.
So the past performance is important relative to return on
investment, relative to the number of the mix of new-to-export
businesses, as well as existing exporters that have been
included.
And then the third component there is the degree to which
underserved communities--women small business owners, veteran
small business owners, rural small business owners--have been
addressed in the past.
So it is both what is being proposed to do in the future as
well as past performance.
Mr. PHILLIPS. Okay. And what advice would you give to small
businesses that wish to apply? How can they best present
themselves?
Mr. ESPARZA. Well, any small business, of course, that
wants to participate in the program and take advantage of these
reimbursement funds needs to approach the State apparatus that
manages the funds on our behalf.
So there are 50 different versions--or 48 and 4 territories
that are doing it this year. Every State has its own
application process for small businesses that want to
participate.
So I can't speak to the uniqueness of Minnesota in this
case, Congressman. But what I would simply tell a small
business--assuming they know about it; part of our challenge is
making sure we get the word out--is to contact the local State
director for our program. All of those names and contact
information are on our website.
Mr. PHILLIPS. Great. Thank you.
And I also know SBA guarantees three export loan products,
Export Express, Export Working Capital, and International
Trade. Can you speak to us about how those loan guarantees
enable those programs and the efficacy of each of them?
Mr. ESPARZA. Thank you, Congressman.
The Office of International Trade is actually empowered to
have a higher guarantee on the loans. So the typical loan, the
7(a) loans that I am sure you are all familiar with that the
SBA broadly manages, have a 75 percent guarantee. The Office of
International Trade is authorized to have up to a 90 percent
guarantee.
That is largely because exporting, by definition, is more
risky. Our small businesses, not only are they small businesses
and therefore risky to bankers, but because they are dealing
with different types of risks overseas--buyer risk, country
risk, currency risk--we are authorized as such to have a higher
guarantee.
So our products and services are meant to be able to
support the growth and development of the export economy, and
we look forward to continuing to do that.
Mr. PHILLIPS. Great.
And since I have a little bit of time left, I like bench
marketing and identifying best practices, and I think it is
important that we look around the world.
Are there any other countries that are supporting small
businesses and their export dreams and aspirations as well as
we do or perhaps even better?
Mr. ESPARZA. Well, I believe America is the shining star
and the number one export economy, and we have our processes
and programs running well.
I will tell you that, as a part of a variety of our free
trade agreements, I participate in a small business dialogue
between the U.S., Mexico, and Canada. Similarly, I am
participating in a small business dialogue next week in Europe
with the European Union and later this year with the U.K. We
have already had one with the U.K.
So we engage in these small business dialogues with other
governments not only relative to how our free trade agreements
are functioning, but to continue to talk with our sister
governments and friendly partners on how we can support small
businesses in their trade and international sales activities
and do so in a way that is beneficial for both countries and
both markets.
Mr. PHILLIPS. Okay. So if we are number one in supporting
small businesses and their export aspirations, who would be
number two?
Mr. ESPARZA. That is hard for me to say, Congressman. We
have so many--in fact, we have 20 free trade agreements around
the world, and I would look to those important partners as
examples of countries that are working with us in a productive
way.
Mr. PHILLIPS. I appreciate it. Thank you.
And I yield back.
Ms. HOULAHAN. The gentleman yields back.
The Chair now recognizes the gentlelady, Representative
Young Kim, Ranking Member of the Subcommittee on Innovation,
Entrepreneurship, and Workforce Development, from the great
State of California, for 5 minutes.
Ms. YOUNG KIM. Thank you, Chairwoman.
And, Mr. Esparza, thank you so much for being with us and
answering our questions.
My congressional district is home to probably the top two
largest seaports in the Western Hemisphere. The Ports of L.A.,
Ports of Long Beach, together they make up the San Pedro Port
Complex, and they are the fifth largest in the world.
So I do represent a very important segment in the region
that pertains to our industry in the trade area, so I have seen
firsthand the persistent supply chain disruptions and how it
could impact our ability to export and hinder our country's
ability to expand our markets abroad.
We have as a result a golden opportunity to counter China's
growing influence in the Indo-Pacific region. And as you know,
we do have the Biden administration that started the Indo-
Pacific Economic Framework.
So I wanted to ask you what type of involvement the Office
of International Trade has had in developing that IPEF and how
is the administration planning to increase our country's small
business exports using the IPEF model.
Mr. ESPARZA. Thank you, Congresswoman.
Let me begin by saying that much of my family lives in
southern California in your district, and so I appreciate your
representation.
The Indo-Pacific Economic Framework is something that this
administration, and particularly the U.S. Trade Rep's office,
is driving. We work very hard to make sure the voice of the
small business owner and American small business exporters are
heard and represented in all of the agreements and policies
that we have relative to trade, including the Indo-Pacific
Economic Framework.
And so our communication with the U.S. Trade Rep's office
and with other actors across the trade apparatus of the
government continues to be filled with that advocacy. And you
have every commitment on my part to continue to advocate not
only for small businesses in southern California, but across
the American economy.
Ms. YOUNG KIM. As you know, IPEF is not a traditional free
trade agreement model. So do you think this is the right model
to support our friends and allies in the Indo-Pacific as
China's dominance and their goal to dominate the world economy
is becoming more apparent?
Mr. ESPARZA. It is the model that we have chosen to pursue
at this point. I mentioned to your colleague before, we have 20
free trade agreements. This is a different version of that. And
we will support the administration's effort to further those
interests in the Asian-Pacific region.
Ms. YOUNG KIM. Sure.
My view is that instead of having a framework that did not
go through the proper consideration of Congress or the trade
promotion authority process, I would like to ask the
administration to engage Congress on meaningful trade
agreements in the region.
And I know this is a step, but I would like to see our U.S.
getting back in the CPTPP, as I have also advocated for U.S.
TPP. We will be missing out if we don't, because China is
getting ready to get into CPTPP, and it could be exercising its
influence and pressuring our allies. So I just wanted to
mention that.
And my colleague earlier talked about H.R. 8844, the STEP
Improvement Act. I am very proud to be one of the original
sponsors there because, among other things, it would improve
the implementation of a standardized application process.
So can you tell us or our Committee here how the standard
process could make it easier for small businesses to apply for
the STEP program?
Mr. ESPARZA. Thank you, Congresswoman, and thank you for
your sponsorship of the bill. I think it is an important part
of continuing to support American exporters around the country.
Of course, anywhere that we can improve processes and
standardize processes we would hope to do so. We have
absolutely contemplated whether or not we can work with the
States to provide one standard application for small businesses
to apply for STEP funds.
The challenge is that not every State authorizes every
expensable category. Some choose not to reimburse every
category. And that would have an impact potentially on the
application process.
So we will continue to research this one. Again, I am in
very close contact with SIDO, which is the advocacy
organization that supports many of the States in this endeavor.
Where we can collectively come up with opportunities to
standardize and improve processes we will absolutely do so.
Ms. YOUNG KIM. Thank you.
I know my time is up, even though I wanted to ask another
question. So I yield my time back.
Ms. HOULAHAN. The gentlewoman yields back.
The Chair now recognizes the gentleman from Wisconsin, the
great State of Wisconsin, Representative Scott Fitzgerald, for
5 minutes.
Mr. FITZGERALD. Thank you, Madam Chair.
Thank you for being here, sir. Appreciate it.
I want to get kind of real specific now and probably
something that we can do some follow-up on. You mentioned in
your testimony that OIT is an advocate for small business for
all matters related to trade policy and trade agreements.
And kind of this, there is a situation, I think, that is
starting to evolve, and it is some manufacturing that has
happened in China is actually kind of making its way as a
secondary product into a lot of American, for the most part,
light manufacturing.
So I have a small business in my district, Glenroy, Inc. It
is located in Menomonee Falls, Wisconsin. Glenroy
manufactures--it is that real thin, flexible packaging. It is
tin foil that is part of pharmaceuticals when you may kind of
get access to any over-the-counter pharmaceutical for the most
part.
And Glenroy was recently informed by the Department of
Commerce that it is going to initiate an investigation into
certain aluminum foil imports that may have inputs from China,
even though they are produced in South Korea.
So I would think that this--you know, this is a very
specific, I think, example of something that we think is going
on, a little bit more widespread than that.
So my point is there have got to be certain trade policies
by the Biden administration that could be negatively affecting
some of these small businesses because of the level of
investigation. And Glenroy is a company, it has only got 250
employees.
But my bigger question is kind of what has been the
involvement and kind of the back channels on making sure that
manufacturing going on in Asia, and specifically China, how is
that being tracked or what is the administration looking at
when--if they are going to launch these investigations, how
widespread are these? And what do they look like, I guess?
Mr. ESPARZA. Well, Congressman, respectfully, is your
question that we should be limiting the amount of China inputs
into manufacturing or allowing them?
Mr. FITZGERALD. Well, if there is going to be--if they are
actually going to launch investigations or put some of these
smaller size companies, I think, kind of through the wringer on
this stuff, what would be--kind of what is the position on
that, or has there been a position developed on these
manufacturing processes? Because it seems to be happening quite
often.
Mr. ESPARZA. Yeah. Thank you, Congressman.
I am personally not aware of the degree to which we are
investigating small businesses relative to China inputs. I am
happy to follow up with your office on that particular example
and what we might be able to uncover.
And more importantly, where there are these types of
processes I think it is our role to be able to provide
information to small businesses so that they are aware of any
of these dynamics and can be advised as to how to either avoid
the investigations that you are talking about or to advocate
for themselves to continue to manufacture as they wish.
Mr. FITZGERALD. Yeah. And it kind of adds another wrinkle
to the whole supply chain issue that we are faced with right
now is that I think oftentimes it is kind of thought as--I go
back to light manufacturing, because that is what my State is
more directly involved in.
But I think there are some challenges here that we could
overcome if we would be a little bit more upfront and kind of
work towards making sure that these smaller businesses
understand what the guardrails are, what the parameters are,
instead of finding themselves with somebody mailing them a
letter or contacting them directly and saying: Well, we are
going to start kind of digging through some of these things.
So it is something I wanted to put on your radar this
morning and certainly will be able to forward any of the
materials on this corporation in Menomonee Falls, too.
Mr. ESPARZA. I appreciate that.
And, again, the SBA typically is not in the investigation
mode relative to sources of manufacturing. But where that might
occur from other pieces of the government, again, we want to
make sure that we are informing small businesses for all the
dynamics relative to exporting. And so this might be one that
we add to our list of things to inform small businesses about.
Mr. FITZGERALD. Very good. Thank you very much.
I yield back, Madam Chair.
Ms. HOULAHAN. The gentleman yields.
The gentleman, Representative Pete Stauber from the great
State of Minnesota, is now recognized for 5 minutes.
Mr. STAUBER. Well, thank you very much, Madam Chair.
According to an analysis of President Biden's first year in
office, this administration has issued regulations that will
cost $201 billion of additional regulations and add 131 million
hours in annual paperwork. That is a brutal reality for our
small businesses.
Bureaucratic red tape, however, has always been a
significant hurdle for small firms looking to enter
international trade markets.
Mr. Esparza, in your role at the SBA, you are supposed to
be an advocate for small business interests. How are you
working to unwind burdensome regulations that hold small
businesses back from participating in these international
markets?
Mr. ESPARZA. Thank you, Congressman.
I think whenever we are talking with small businesses and
we hear from them what their challenges might be, I will tell
you that the number one challenge I hear from small businesses
is simply how to find a buyer. They are working overseas to
explores new markets, and they simply ask us: How do I find a
buyer? What can I do from a market research standpoint? What
can I do to connect with resources to help us find a buyer?
That is number one.
The second challenge that we hear from them is around
access to capital. They want to make sure that in order to grow
and develop their businesses that they have access to capital.
And so our relationship with the private banking industry and
the guarantees that we put on loans and lines of credit is an
important part of that journey.
So I hope to continue to advocate our small businesses for
whatever their dynamics are, but those are the two things that
we hear most from small businesses, sir.
Mr. STAUBER. I appreciate that.
The number one priority I hear is the rules and regulations
that are stifling their potential growth to move into the
international markets if they so choose.
In your testimony you referenced the Biden-Harris
administration's commitment to equity. Can you explain how the
Office of International Trade considers equity during the
grant- and loan-making process?
Mr. ESPARZA. Yes. So thank you, Congressman.
First and foremost, it is the communication to the
marketplace as to the availability and the process that
administers in this case the STEP program, I assume you are
talking about.
I did also mention that one of the explicit categories of
assessment that we have in analyzing any particular application
is the degree to which a given applicant has reached out and
addressed and had participation from underserved communities.
That is both minority communities, women small businesses,
veteran small businesses, and rural small businesses. That
equity lens is explicit and a part of the notice of funds
opportunity.
It is also, as I mentioned earlier, an explicit----
Mr. STAUBER. Let me, because my time is limited, I don't
mean to interrupt you.
Mr. ESPARZA. Right.
Mr. STAUBER. But are you prioritizing rural Americans in
middle America like the ones in Minnesota's Eighth
Congressional District?
Mr. ESPARZA. Yes, Congressman, in the sense that, while
your colleague from Texas pointed out that Texas is the largest
exporter in the United States, largest exporting State, the
rules of the STEP program actually require that the
concentration of our awards cannot be overindexed into those
largest States. It is very explicit.
And so by definition we are distributing a relatively
higher portion of those funds to nontraditionally exporting
States or more rural States. So that is absolutely something we
do. And it is also explicitly in the assessment criteria----
Mr. STAUBER. Well, Mr. Esparza, what percentage of those
funds are going to rural America, do you think?
Mr. ESPARZA. That is a good question. I am not sure I have
that number off the top of my head, sir, but I am happy to look
into that.
Mr. STAUBER. Yeah, would you look into that and give it to
the Chair or Ranking Member? That would be great.
Mr. ESPARZA. Sure.
Mr. STAUBER. Madam Chair, how much time do I have? I don't
have a timer here.
Ms. HOULAHAN. Thirty-five seconds.
Mr. STAUBER. Thirty-five. Okay.
Well, I just appreciate this opportunity to be with you
all, and I appreciate the Chair and Ranking Member bringing
this together.
So one of the things that we do that I wanted to get into
was energy costs and the devastation that it is costing our
small businesses to produce their energy to make whatever they
are making in the industry. So that is what I am hearing as
well, the energy costs are through the roof.
So, Madam Chair, I yield back.
Ms. HOULAHAN. The gentleman yields back.
The gentleman, Andrew Garbarino, Representative Andrew
Garbarino from the great State, the Empire State of New York,
is now recognized for 5 minutes.
Mr. GARBARINO. Thank you, Chairwoman, and thank you to the
Ranking Member, for hosting this hearing. I also want to thank
our witness for being here today.
I want to echo some of the comments that my colleague just
made about things I have heard from small businesses in my
district is the red tape in being able to become an exporter.
So I think that is something we should try to work on to make
it easier.
But something else I have heard from offices or small
businesses in my district is, if they export, what is being
done to protect their intellectual property? They are
concerned.
I have several manufacturers, as well as companies that I
have spoken to that also deal with a lot of different computer
chips and other things. What is being done by the Office of
International Trade to help protect that innovation here and
intellectual property?
Mr. ESPARZA. Thank you, Congressman.
The answer is twofold.
Number one is where we hear those stories of challenges
around the world where intellectual property is at risk, we
make sure we communicate those stories not only in forums like
this, but to the rest of the trade apparatus across the federal
government.
Secondarily, the ability to apply for and pay for the legal
services to help get patent protection and other intellectual
capital protection around the world is something that the STEP
funds can be used for.
So the costs associated with intellectual property
protection, applying for patent protection, applying for other
sources of intellectual capital protection around the world,
the costs associated with that are an approved reimbursable
expense category under STEP.
Mr. GARBARINO. What about enforcement? I mean, to get the
protection is one thing. But are these small businesses--you
know, they can't--they are not the Intels or the Microsofts of
the world where they have a legal team after their IP has been
stolen. So what can be done on the enforcement end?
Mr. ESPARZA. Yeah. Thank you, Congressman.
The enforcement end is not one that we directly have
authority over. I will tell you that not only do we share the
stories when we hear them, but we also generally tend to drive
small businesses towards those markets in which we have free
trade agreements.
There are 20 free trade agreements that we have around the
world, and we know that there are increased assurances and
levels of patent protection and intellectual property
protection in those markets. That is where we typically drive
most of the small businesses that we work with.
But wherever they are trading around the world, part of our
education, consulting, and technical assistance does discuss
and contemplate intellectual property and other patent
protection measures that they can take. So that is an important
part of the journey that we have with small businesses.
Mr. GARBARINO. All right. And I appreciate that.
And you talked about free trade agreements that we have
across the world.
What is the Office of International Trade, are they taking
any action to support trade negotiations with the U.K. or Kenya
and other partners worldwide to get more access, to have more
countries where we can have these trade agreements?
Mr. ESPARZA. Absolutely. We are a hundred percent at the
table when it comes to any free trade agreements or any trade
policy discussions. Our ability to advocate for small
businesses and small business owners is critical as we help to
literally line by line edit and work on provisions in various
agreements and various policies that contemplate impacts on
small businesses.
So I believe we are well represented in those discussions,
and you have my commitment that we will continue to advocate
vigorously for small business exporters wherever they might be
in the United States.
Mr. GARBARINO. Can you give an example? Like you said we go
line by line. Can you give an example of something that the
office has had a hand in changing one of these agreements to
specifically help small businesses?
Mr. ESPARZA. Sure, Congressman.
Two recently. The national export strategy is a policy that
is put forth across, again, the trade apparatus of the
government. And, secondarily, the national trade and tourism
policy also contemplates many small business provisions. And we
were right there at the table helping to edit those documents
line by line.
Mr. GARBARINO. I appreciate that answer.
I had another question, but I am down to 10 seconds, so
definitely not enough time.
I thank the witness.
And I yield back.
Ms. HOULAHAN. The gentleman yields back.
I want to thank Associate Administrator Esparza again for
joining us today. Your testimony has shed light on the
importance of STEP and the actions that Congress can take to
help this program reach its full potential.
Today we have discussed many ways that Congress can
optimize STEP to help more small firms. The STEP Improvement
Act of 2022 would institute many of these changes and take the
critical step of reauthorizing the program.
I look forward very much to supporting the bill when it
comes before the Committee tomorrow.
Without objection, Members have 5 legislative days to
submit statements and supporting materials for the record.
And if there is no further business to come before the
Committee, without objection, we are adjourned.
[Whereupon, at 11:30 a.m., the Committee was adjourned.]
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