A10:
CREATE ELECTRONIC EXPORT ASSISTANCE CENTERS

Imagine this: A small business owner wants to expand her conveying equipment business by selling to the mining industry in Chile. Living far from the nearest U.S. Export Assistance Center (USEAC), she turns to the International Trade Toolkit on the Internet to assess the feasibility of her plans. With the click of the mouse, she learns about Chile's import practices and discovers important unique features of her target market. Next, she moves on to the tutorials that help her evaluate the quality of her business plan and, ultimately, her trade readiness. After receiving satisfactory results, she's ready to tackle a major international trade issue -- financing. She uses the International Trade Toolkit to research trade financing options and to locate specific lenders that meet her needs. She completes the appropriate forms and sends them directly to the lender. The lenders receive her request and use the International Trade Toolkit to establish a credit rating and perform risk analysis to determine if the proposed transactions should be funded. The small business owner has accessed the full range of information and services offered by a U.S. Export Assistance Center -- without leaving her office and without costing the Center an additional dime!

Since 1993, almost one-third of our economic growth is attributable to exports, supporting 1.5 million jobs.¹ Today, one in five manufacturing jobs is linked to exports and studies have shown that workers in export markets earn 13-18 percent more than the average wage paid in non-export markets.² In addition, the U.S. Department of Agriculture reports that agricultural exports support nearly one million additional jobs. The Trade Promotion Coordinating Committee's National Export Strategy annual report makes it clear that the American economy and standard of living have never been more dependent on trade.³

To help achieve national export objectives, U.S. Export Assistance Centers (USEACs) were established jointly by the Small Business Administration (SBA), the Department of Commerce, the Export-Import Bank, and the U.S. Agency for International Development (USAID) to promote the entry of American businesses into exporting. The 1992 Export Enhancement Act, the enabling legislation for the USEACs, created a network of centers to "integrate and make more accessible a range of export services aimed at small to medium-sized export-ready firms." Those firms are the fastest growing part of our economy and are the engine of our future job growth, employing 54 percent of the private workforce and accounting for half of our gross domestic product.⁴ The 17 USEACs provide exporters with information on all U.S. government export promotion and export finance services; assist exporters in identifying which federal programs may be of greatest assistance; and help exporters make contact with those federal programs.

But first-time exporters as well as seasoned international traders need more from their government. They need greater access to trade finance; more functionally driven and less organizationally focused information from federal agencies; tutorials and interactive guidance tools; and user-friendly interfaces to forms and forums.

Frequently, citizens must interact with several government agencies in order to complete a single task. The interaction is often uncoordinated and cumbersome, resulting in several rounds of inquiries and frequent routings from one government employee to another. The USEACs were created as one-stop shops for export assistance to address this problem. However, everyone who needs export assistance can't get to a USEAC and the government can't afford to build and operate additional centers to bring services closer to the exporters. Therefore, the development of a "virtual" USEAC, which would deliver information and services to the business community electronically, provides a convenient and cost-effective solution.

The International Trade Toolkit -- the "virtual" USEAC -- will benefit prospective international trade businesses, customers, lenders, and the government agencies created to serve business in this area. It will help lenders make export loans and supplement the normal credit decisions a lender has to make. Once completed, this tool would help close the export gap by making comprehensive trade finance information available electronically to thousands of SBA lenders across the country and by helping lenders who have neither experience nor international trade departments structure trade deals. Such a tool would also simplify forms for exporting lending -- reducing the time and cost for processing loans.

To develop this concept, the federal government should form partnerships with the private sector and the numerous agencies involved in international trade to design the "virtual" USEAC, a capability that uses information technology and telecommunications tools to provide new and better services for the export customer. Both government and specific industry resources would be more accessible through this electronic model. The Toolkit would significantly expand outreach and improve service delivery, increasing the number of American export firms. It also offers a model of working "smarter" in an era of scarcity and shows the power of effective teamwork.

The business community asked that the government stop drowning them in information. "Make it easy to find what we need and then let us do business," they said. The government's response to this request was the U.S. Business Advisor -- the one-stop electronic link to government for business (http://www.business.gov). The U.S. Business Advisor takes the first step in offering government information and services targeted for the business community via the Internet. The Toolkit would enhance the U.S. Business Advisor and move it another step closer to its vision -- "helping businesses to succeed on their terms."

NEED FOR CHANGE

Today the world is witnessing a true business revolution. Globalization of markets, collapse of traditional organizational structures, and the explosive growth of information technology has changed the way business is conducted. The speed of change is phenomenal. In the seventies, business owners went to the post office to pick up orders. In the eighties, they installed 800 numbers and fax machines. And in the nineties, they added electronic data interchange. The Administration recognizes that "computers and telecommunications are reshaping the basic structure of American enterprise."⁵ Consequently, government must use new technologies to improve its existing products and services and to deliver new ones. Interacting with citizens through electronic commerce, desktop video teleconferencing, and powerful Internet access gives the customer "anytime-anyplace" access to the federal government.

The International Trade Toolkit will help business development professionals and trade specialists around the country (in 17 USEACs, 950 Small Business Development Centers, 37 Business Information Centers, and 52 District Export Councils) be more effective and productive in advising businesses on trade matters. Upon completion, the Toolkit will be able to provide both a first time exporter/importer, as well as a seasoned international trade company, with a variety of information, ranging from banking and finance, export and import regulations, marketing, government affairs, research, and contacts, to logistics/freight forwarding. The international trader, unknowingly perhaps, will be served by the Departments of Commerce, State, Treasury, and Agriculture; the SBA; the Export-Import Bank; USAID; the Trade Information Center; and the Bureau of Export Administration, all without making a phone call or walking through a single door.

ACTIONS

1. Build a Virtual Export Assistance Center.

The Government Information Technology Services (GITS) Board should charter an interagency, intergovernmental team by March 1997 to construct the logical design and implement the technical architecture for an interactive international trade assistance site on the Internet. The team should include members from the four agencies managing the USEAC (SBA, Department of Commerce, USAID, and the Export-Import Bank), as well as from the Departments of Agriculture, Treasury, and State, and state governments. Private sector partnerships will be instrumental in designing the appropriate categories for the Center and developing the technical architecture. Thus, the Small Business Development Center network should serve as a laboratory for business input and focus group sessions.

The International Trade Toolkit's design logic will help business in three major areas: trade readiness, trade promotion, and trade financing. Through a series of query- and form-driven screens, the potential international trader will be able to examine requirements to enter the international trade market, evaluate potential for success, investigate the risks inherent in a particular venture, perform appropriate market research, and develop international business and marketing plans. The Toolkit will also help businesses set pricing strategies, find trade leads and respond to potential deals, and prepare proforma documentation. Once completed, the Toolkit will contain a comprehensive trade finance module that will assist business owners in finding the proper financing, and assist lenders, who might not otherwise venture into trade financing, to structure deals. Ultimately, the business owner will be able to apply on-line for financial arrangements and ensure the successful completion of the transaction.

2. Develop a tool to increase access to trade finance information and services, as part of the International Trade Toolkit.

Over the past two years, SBA and the Export-Import Bank have worked with about 200 lenders to guarantee loans to about 500 small and medium-sized businesses on a yearly basis.⁶ In 1996, the Foreign Agricultural Service guaranteed $3.2 billion worth of agricultural exports. Although this represents a dramatic increase over previous years, there still remains an export gap. Many potential exporters remain without access to export financing and many lenders are not knowledgeable of trade financing processes.

This export gap exists primarily because of the structure, culture, and history of the United States' banking system. Banks engaged in export finance tend to be the large "money-center" institutions, foreign banks, and "super-regional" banks. Most trade finance leaders finance transactions that are larger than those of the typical small business. Export deals for small businesses usually range from $30,000 to $300,000 and have very high processing costs.⁷ Many small lenders do not have the capacity to handle international deals and large banks do not have the capacity to handle small transactions. The result: only 200 banks, of an approximate 9,000, handle export transactions for small businesses.

A major obstacle to providing trade finance for many banks is the lack of knowledge and expertise in evaluating foreign risk elements in an overseas transaction. The International Trade Toolkit team should work with SBA to develop a tool that performs international risk analysis of the foreign companies, foreign lenders, and the foreign countries as applicable to the transaction. The SBA is conducting a pilot project with its largest lenders to develop an electronic lending system, which will allow the SBA to increase the number of annual loans above the current figure of 60,000, using fewer employees. This system has many capabilities that can be used in the toolkit.

If feasible, the tool should provide a "yes or no" determination of whether the international risk of an exporter's transaction is eligible for a guarantee. Information about the transaction should be entered on-line. A "yes or no" response would be given back to the lender derived from an analysis of the appropriate ratings provided by the rating service and the lender would be advised of the acceptability of the transaction risk to SBA. A "no" answer can be used by the USEAC, the lender, and the exporter to restructure the transaction to reach a favorable outcome. Such a tool would provide an incentive and means for lenders, especially those without in-house trade finance expertise, to loan export working capital. Furthermore, it would increase the communications capability between the USEAC and the lenders.

3. Establish a test plan and a nationwide rollout schedule for the International Trade Toolkit.

By April 1997, the team should establish a test plan and rollout schedule. A prototype system that can be shown to the business community for further development and refinement should be developed by July 1997. User and focus groups should be convened to bring the customer into the core development effort.

ENDNOTES

^1. Department of Commerce, National Export Strategy, "Letters for President Clinton," October 1996.

^2. Department of Commerce, National Export Strategy, "Letters for President Clinton," October 1996, page 8.

^3. Department of Commerce, "Implementation of the National Export Strategy," III. Executive Summary (Internet site @ TA.doc.gov), October 1995.

^4. Department of Commerce, National Export Study, October 1996, page 17.

^5. Vice President Albert Gore, Jr., Reengineering Through Information Technology (Washington, DC; U.S. Government Printing Office, 1993), page 1.

^6. Internal SBA working paper on Export Working Capital Program and Export Express, December 1996, page 2.

^7. Ibid., Program description for Export Express, December 1996.