In the effort to boost U.S. exports, Commerce Department officials often note that fewer than 1 percent of businesses in the country sell overseas. Conclusion: To raise exports, expand the number of exporters.
Exports — regardless of the country, its size or its state of development — appear to be the province of large companies that are already successful and grow to dominate and shape trade flows. The study, by World Bank economists Caroline Freund and Martha Denisse Pierola, found a sort of global constant in that regard, with the top 1 percent of exporters accounting for more than half of exports and the top 5 percent accounting for roughly 80 percent of exports.
Though the study analyzed 32 developing nations, other research on the United States and Europe found a similar pattern in the developed world: Big companies grow bigger and export because they are already successful; they don’t become successful and large because they export.
“This holds across countries rich and poor,” Freund said. Exporting “appears to be a natural phenomenon that occurs as you grow,” she said, and investment and other resources fuel the expansion of the most productive firms.
Such findings have implications for national export officials.
The Obama administration is lagging in its drive to double U.S. exports from $1.5 trillion in 2009 to $3 trillion by 2014. Bouncing off the floor of the recession and driven by a flood of world stimulus money, U.S. exports grew briskly through 2010 and 2011. But 2012 was something of a disappointment. Final data won’t be available until February, but American firms will probably turn out to have sold $2.2 trillion of goods and services abroad. That’s a record. It is also less than 5 percent above 2011 — a slowdown in export growth that would leave the administration about $600 billion short of its goal if that pace continues.
Using the administration’s rule of thumb — that each $1 billion in exports supports around 5,000 jobs — that’s 3 million jobs riding on the difference.
Freund and Pierola suggest that to the extent the administration is trying to boost exports by encouraging small and medium-size businesses to branch out internationally, they may be disappointed. Better, they say, to create the best possible investment, tax and regulatory climate for business in general, ensure that the costs involved in exporting are as low as possible, and accept that the best entrepreneurs will find their way overseas as a matter of course.
In a separate presentation to World Bank staff, they suggested that nations would be better off helping their local “superstars” — they mentioned eBay founder Pierre Omidyar and Google’s Sergey Brin — rather than cater to the mom-and-pop shops that might be able to sell their goods or services to a country or two.
“In this town everybody likes to talk about small business, but it is not clear that is the right emphasis,” said J. Bradford Jensen, a professor at Georgetown University’s McDonough School of Business who has analyzed U.S. export patterns. His recommendation: Put more emphasis on existing efforts to persuade China, India and other large developing nations to open trade in their service sector so that U.S. financial, engineering, insurance and other companies can start operating more freely. High-level services are a comparative strength for the United States, where the country runs a trade surplus. Yet the share of services that are exported lags manufacturing.
Dartmouth College researcher Matthew J. Slaughter, in a paper commissioned by the U.S. Council for International Business and the Business Roundtable, offers another alternative: Acknowledge that production of many goods has become global and find ways for U.S. companies to nudge into the supply chains developed by larger companies.
There’s a substantial infrastructure built around helping small and medium-size businesses become exporters — Small Business Administration programs, the Export-Import Bank, commercial service officers in U.S. embassies and programs within the Commerce Department geared toward encouraging first-time exporters and helping with an overseas customer or two others expand into other countries.
A senior Commerce Department official said it would be shortsighted to cut those programs back or redirect resources. Though large companies account for the bulk of U.S. exports, small and medium-sized firms claimed 34 percent of the total in 2010, or about $625 billion spread across roughly 287,000 firms. While the dominance of major players is indisputable, the official said export policy should not be “black or white.”
“It is a false choice,” the official said. “We have to do both — whether it is support smaller or larger companies.”