Shop Talk

Small businesses pulled into conversation on international trade negotiations

Spools of thread lined up at Stitch Gold in Cary on Feb. 4, 2015.
Spools of thread lined up at Stitch Gold in Cary on Feb. 4, 2015.

Each time Stitch Golf packs up a direct order of its leather or knit golf club covers and other goods for unfamiliar destinations, President Charlie Burgwyn knows the company is taking a little bit of gamble.

If he charges $50 for shipping and it ends up being more than that, the Cary-based company will have to eat the costs.

“In some scenarios, we are almost taking a guess,” he said.

Other challenges Stitch Golf and other small companies face when exporting goods include regulations that vary by country and fluctuate over time and delays in delivery. That doesn’t even include complicated initial regulations that serve as expensive and time consuming barriers to entry.

More and more small businesses are venturing into the confusing world of international sales as the Internet has broadened the exporting category to include companies with online shopping carts or marketplaces on platforms such as eBay and Amazon.

That expansion is one of the reasons why small businesses are being included in the ongoing discussions on international trade agreements and the related fast-track authority that President Barack Obama is seeking.

Critics argue that free trade agreements could increase competition for small businesses and export American jobs while helping big companies and banks boost their bottom lines.

Proponents are emphasizing it as an opportunity for companies to sell more products and services abroad and hire more employees at home.

Moving agreements forward

Last month, the advocacy organization National Small Business Association participated in a White House Business Council Trade Fly-In.

U.S. Secretary of Commerce Penny Pritzker, U.S. Small Business Administration Administrator Maria Contreras-Sweet and Chairman and President of the Export-Import Bank Fred Hochberg joined the roundtable discussion on how small companies could benefit from two international trade agreements that the Obama administration is currently negotiating. Small business inclusion and consideration in such deals is unprecedented, Contreras-Sweet has said.

“Those two agreements would cover 60 percent of American exports and 84 percent of foreign direct investment, both expanding some existing trade agreements and creating opportunities for free trade with more countries,” according to a National Small Business Association blog post on the event.

Those two agreements include:

• Trans-Pacific Partnership, which includes Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. As a group, these countries are the U.S.’s largest goods and services export market, which totaled $698 billion in 2013 and represented 44 percent of total U.S. goods exports.

• Transatlantic Trade and Investment Partnership with members of the European Union, which includes 28 member states. U.S. goods and private services exports to the EU totaled $471 billion in 2013.

To move the agreements forward, Obama is asking members of Congress to approve a fast-track or “trade promotion authority” that would allow his administration to negotiate the agreements that members of Congress can vote up or down but not amend.

Tom Grennes, an economics professor at N.C. State University, said that historically, presidents have received such authority before they enter into international trade negotiations. Obama is now increasing efforts to obtain the permission after the negotiations have been ongoing for years.

“So it is awkward,” Grennes said.

Seeking input

One of the reasons for the delay in the request, Grennes said, is opposition within the Democratic Party.

Robert B. Reich, professor of public policy at the University of California at Berkeley and former secretary of labor in the Clinton administration, expressed a number of concerns in a recently released video entitled “The Worst Trade Deal You Never Heard Of,” which refers to the Trans-Pacific Partnership.

Reich described it as one of the biggest trade deals in history.

“Yet it has been devised in secret,” he said. “Lobbyists from America’s biggest corporations and Wall Street’s biggest banks have been involved, but not the American public.”

Reich argued that the deal would allow the pharmaceutical industry to get stronger patents delaying cheaper generic versions of drugs. The agreement, he said, could also allow big corporations to utilize a system in which they can challenge U.S. environmental, safety and consumer-protection regulations that they contend unfairly diminish their products and outsource even more jobs abroad.

Reich described the proposed agreement as a “Trojan horse” that allows big organizations to limit “laws that get in the way of their profits.”

Meanwhile, the Obama administration and trade supporters, which includes some key Republican leaders, indicate they are seeking input from a variety of stakeholders, including small businesses. The trade agreements, supporters argue, will make it easier for small business owners to increase and diversify their revenue.

A FedEx-backed report “Big Opportunities for Small Business” on the Transatlantic trade agreement was recently released by international think tank the Atlantic Council.

The report stresses the importance of small-business owners paying attention to the conversation about the European Union agreement, which it described as “critical” for small and medium business that struggle with administrative, legal and administrative barriers.

Out of the about 23 million small and medium businesses, only about 1.3 percent were importing in 2011 and only a half a percent exported to the European Union.

Statistics within the report indicate that U.S. medium and small firms that were exporting between 2005 and 2009 increased their revenue by 37 percent, while businesses that only focused on the domestic market contracted by 7 percent.

Bob Adams owns the Wake Forest-based Better Deals 123, which sells new and refurbished consumer electronics, such as cell phones. About 60 percent of his revenue comes from eBay transactions, which includes about 10 percent from sales to areas outside of the U.S.

Adams is one of the about 100 small-business owners who signed a letter sent to Obama commending him for the commitments he made to advocating for the free trade agreements in his State of the Union address earlier this year.

The letter points out that more than 90 percent of the U.S. businesses using the eBay marketplace are exporting their products to other countries. On average, the companies export to about 30 countries.

“Our businesses serve as proof points that the ‘face of trade’ is evolving and becoming more inclusive,” the eBay letter states.