By Hector Barreto
Published March 06, 2019
Right now, Congress has a big opportunity to help small business. And while the nature of the opportunity is tremendous, and historic, it may not fit with common perceptions about what type of policies really help local or family-owned companies. The issue before Congress? Approval of a major international trade agreement.
International trade is actually incredibly important to small businesses. It is a little-known fact, but 98 percent of all U.S. exporters are small firms. Nearly 300,000 small and medium-sized enterprises (SMEs) are exporting to foreign markets every day; those companies support around four million American jobs as a result.
I remember the moment my own father – a Mexican immigrant to this country who achieved his own American dream by becoming a restaurant owner – decided to grow his business to include the import and export of goods. It made sense to him to import and export from and to Mexico, but the opportunity to engage in trade was only worthwhile as long as the United States government had a free, fair agreement with the Mexican government. Thankfully, the ground rules were favorable and my father was able to grow his business, hire more people and even pay higher wages as a result.
My father’s story is typical of American businesses – of all sizes – that engage in international trade. According to Jeffrey J. Schott of the Peterson Institute for International Economics, workers in manufacturing companies that produce exports earn wages 12 to 18 percent higher than workers at companies that only serve the U.S. market.
If approved by Congress, President Donald Trump’s carefully negotiated agreement with Mexico and Canada (the “United States-Mexico-Canada Agreement,” which would replace NAFTA) will promote cooperation between the three countries to increase trade and investment opportunities for smaller businesses. The USMCA is actually the first trade agreement in our nation’s history to include a chapter specifically focusing on small and medium-sized enterprises. This chapter will establish a committee, made up of officials from all three countries, that focuses specifically on SMEs. It will also establish patentability standards and patent office best practices to ensure that U.S. innovators (which are so often smaller businesses) are able to protect their inventions. Perhaps most importantly, this historic chapter will create information-sharing tools that will help small-business owners better understand the opportunities the agreement will unlock for them, their businesses, and their employees.
Small businesses tend to be disproportionately impacted by one-size-fits-all government regulations, and the USMCA takes that fact into consideration as well. The agreement will help small firms by enforcing consideration of, and even removing some of, the unnecessary burdens that might currently discourage entrepreneurs from engaging in international trade. For example, the agreement will eliminate the need to open a foreign office as a condition for doing business in another country.
As a long-time advocate for small-business opportunities in government procurement (this was a major initiative of mine when I was the head of the U.S. Small Business Administration), I was especially pleased to see that the USMCA will facilitate the participation of U.S. and Mexican SMEs in government procurement. If passed by Congress, the agreement will leverage technology to encourage the conduct of procurement: a single electronic portal will be created to provide notices of intended procurement. This straightforward step will be a historic leap toward transparency and efficiency for small and medium-sized businesses that are engaging in government procurement.
For businesses of all sizes and types – from manufacturers to farmers and ranchers – free trade opens doors to new markets and new opportunities. New and better-paying jobs are created. By approving the USMCA, Congress can show the small-business community that they understand and appreciate the special role of small business in international trade. It will be a big step for small business, and small-business owners will reward it with their usual, incredible economic contributions: growth, innovation and job creation.