The U.S. has the largest economy in the world at $21.4 trillion (2019). However, 95% of all consumers in the world live outside of the country. For small businesses it means the export market provides huge opportunities.
A new survey and report from Google and the U.S. Chamber of Commerce looks at the export market for small businesses. But it also identifies how small U.S. businesses have been approaching exports while exploring the barriers preventing them from exporting. The report comes from Google and the Chamber Technology Engagement Center (C_TEC).
In addition to identifying some of the opportunities and challenges, the report has an overall goal of determining how technology can simplify access to foreign markets. At the same time, it is also looking to find out what kind of impact it will have on the broader economic activity.
Small U.S. Business and The Export Market
The report reveals U.S. businesses that participate in the export market grow faster, create more jobs and are more resilient. Especially in the face of a changing economy.
The authors of the report say they have a less developed understanding of U.S. small business export potential. With the data from the survey, they want to learn the role small businesses play in U.S. export success; obstacles they face in exporting; how technology can help address those obstacles; how larger businesses, the U.S. government and other stakeholders can help small businesses realize export opportunities.
Considering U.S. small businesses have $6 trillion in annual economic output and they employ 85 million people, export should be part of their enterprise. The report rightfully says, “Questions about small business exports and their growth potential are more than academic. Understanding them will be critical to creating more economic opportunity in the United States.”
Small Business Export Opportunities
Of the more than 32 million small businesses in the U.S 9% of them export either goods or services. According to the report, this is more than previously realized.
Overall, exports have been a growing source of revenue for small businesses, with an increase of 20% since 2016. In fact, these very same businesses saw substantially faster overall growth from 2016 to 2018. The average revenue they were generating from export increased by 24.3%, compared with a 14.1% increase for non-exporting businesses.
When it comes to markets, North America is the best region for small business exporters. More than half or 57% of the exporters sell to Canada and/or Mexico. Globally the top five export markets are Canada, the United Kingdom, Mexico, Australia and France.
Overall, the average number of countries small business export to has grown from seven countries in 2016 to 10 countries in 2018.
In terms of contribution, small business exports generated $541 billion in output in 2017 while supporting more than 6 million jobs. But they say with the right support they can increase sales by 14% in the next three years. This can generate $81 billion in output and add 900,000 jobs to the economy.
Recommendations
In assessing the export market for small businesses, the report has five recommendations for policymakers in order to help this segment.
The first one is to develop a collaborative initiative between the federal government, state governments, the private sector and other stakeholders.
The second recommendation encourages innovators and technology providers to develop and distribute digital tools for addressing barriers impacting U.S. small business exporters.
The third is to develop data-driven strategies in order to understand and overcome exporting barriers U.S. small businesses face.
Fourth is to prioritize the negotiation of additional market-opening trade agreements that benefit small business exporters by building on the United States-Mexico-Canada Agreement (USMCA). This should address everything from rules in areas such as digital trade to the elimination of nontariff barriers. The reason is these rules affect small businesses disproportionately more than large enterprises.
The fifth recommendation is to ensure trade finance opportunities are available to prospective U.S. small business exporters.
Survey
The survey for the report is a comprehensive study of more than 3,800 American small businesses. It was carried out through a mixed-mode data collection method with the majority of the interviews (3,401 out of 3,818) taking place in a randomized sample of an opt-in online panel.
The response of the remaining 417 small businesses comes from telephone interviews. All of the respondents took part in the survey between July 8, 2019, and August 14, 2019.
Image: Depositphotos.com
What industries/types of products does Google see this potential in? Would love to know what specific areas should be looking more at exporting.
This is big. This means that Google can come up with new solutions when it comes to exporting as well.