Chapter 3: Export Promotion Services US companies seeking to expand export sales already can draw on governmental networks of domestic and overseas trade specialists, Washington-centered sources of information and assistance, and many state/local and private services. The TPCC in the spirit of reinventing government aims to better coordinate and expand these services to make them more useful to private sector clients. This chapter discusses the strengths and weaknesses of 1) the current domestic network for trade promotion, 2) Washington-based trade promotion services, 3) overseas network, 4) coordination with state export promotion activities, 5) efforts by the US government to play an advocacy role on behalf of US exporters, and 6) efforts to promote environmental technology exports. Each section describes what is already in place, sets goals for improvement, and recommends changes in approach and process to achieve these goals. DOMESTIC FIELD NETWORK The domestic field network that provides export promotion services now consists of a wide range of federal and state government agencies and a variety of private sector providers, including trade associations and chambers of commerce. Each of these entities plays an important role in helping US firms sell abroad. However, there is duplication of effort and a need for greater coordination and leveraging of resources among public and private sector export service providers. The domestic export service network is deficient in two primary respects: (1) domestic export services are not readily available to clients in one centralized place; and (2) trade finance assistance is not fully integrated with information, marketing, and counseling services. To contribute to a more effective export-facilitation network, it is important that the federal government improve the coordination of export services among its agencies. This section gives a brief description of the current role of each of the providers of export promotion services and then describes the steps that the federal government should take to improve the delivery of its services in the field. Federal Government Role: Federal government activities in the field are carried out primarily by the US&FCS, SBA, Eximbank, and USDA. o The US&FCS maintains a national network of 69 export facilitation offices in industrial and commercial centers. District offices provide counseling to export-ready businesses and deliver a wide range of programs and information to facilitate exporting. Since 1990, they have focused their resources solely on export-ready businesses. The Minority Business Development Agency (MBDA), a sister agency of the International Trade Administration (ITA), has a field network of 100 Minority Business Development Centers (MBDCs). These centers serve as points of contacts for small, minority businesses which are in the developmental stage of business planning. MBDCs serve as referral points for nonexport-ready clients who need start-up assistance. o SBA, in conjunction with its Office of International Trade and its more than 100 field offices, promotes sales and joint venture opportunities for American small business goods and services abroad. In addition to a variety of export promotion activities, SBA offers international trade loan guarantee programs, including long-term and working capital financing. SBA also assists small business exporters in locating other export financing sources. o Eximbank, which has five regional offices, offers insurance, loans, and guarantees to assist US exporters in financing the sale of their goods and services to creditworthy overseas purchasers. Eximbank's working capital guarantee program enables private financial institutions to provide necessary capital to produce goods and services for export. Eximbank uses commercial financial institutions, insurance brokers, and city/state partners as delivery systems for its product line. o USDA uses the resources of state departments of agriculture to service exporters at the state and local levels. It provides these departments with export program and service information and coordinates the delivery of export education seminars, trade events, and related information and services. State and Local Government Role: As a result of the dramatic increase in international trade over the last two decades, state governments have made trade promotion an integral component of their economic development programs. States now are major international service providers and significant players in export promotion, collectively spending more than $100 million each year on trade development. States provide a wide range of services, including counseling, market assistance, financing information, financial support in certain cases, evaluation of opportunities, information on markets, and product placements. (See section on State Export Promotion Activities.) In an effort to coordinate and streamline the delivery of export promotion services, several states and federal agencies have begun to co-locate their offices. States and the federal government also have established numerous joint activities, which include co-sponsorship of trade events, seminars, and the constant exchange of trade materials and data. States want the US&FCS district offices to coordinate their activities more closely with state offices in order to use scarce resources more effectively and to avoid duplication. US&FCS has instructed district offices to coordinate their work with their state counterparts, agreeing on actions and responsibilities that each will undertake. Private Sector Role: The private sector provides the full range of export facilitation services. It fills a critical role in export development, although the capabilities, resources, and export orientation of private organizations vary widely from locality to locality. Private sector export service providers include nonprofit business associations and other organizations (e.g., chambers of commerce, trade and industry associations, economic development councils, universities, small business development centers, and those world trade centers organized as nonprofit entities). Nonprofit organizations are generally active in export promotion activities involving export education, basic business assistance, referral to appropriate export service providers, and organization of industry-specific trade events. There is a full range of for-profit direct export service providers (e.g., banks, export management and export trading companies, consulting firms, world trade centers, law firms, and freight consolidation and transportation services). For-profit export service businesses offer a virtually unlimited range of direct business services at market prices. Other public and private nonprofit service providers complement and supplement the services of for-profit businesses, with services oriented particularly to small and intermediate-sized businesses that are not yet prepared for or financially able to afford the generally more sophisticated fully market-priced services. An example of a unique form of private sector trade development activity is that of the Market Development Cooperator Program -- a joint venture of the federal government and the private sector. The program is designed, through a financial grant arrangement, to assist trade associations and nonprofit industry organizations working together with the Commerce Department to develop, maintain, and expand foreign markets for nonagricultural US goods and services. On the international front, our foreign competitor nations, particularly in Western Europe, have been successful in channeling export promotion services through private and quasi-private organizations such as local and regional chambers of commerce, in close cooperation with national government agencies. (See Appendix A for a description of the export promotion activities of five industrial nation competitors.) GOALS 1. Develop a more rational, efficient, and coordinated delivery network through the establishment of one-stop shops. 2. Streamline the federal government's role in export promotion and trade finance. 3. Assure the delivery of consistent, high-quality, export-related information, trade leads, country and sectoral analysis and counseling. 4. Provide guidance and assistance involving export finance strategies, programs, and resources. 5. Assist in matching client needs with the range of available public and private sector export service providers. 6. Support a network of export facilitation services that is competitive with those of US trading partners. RECOMMENDATIONS With a proper client focus, clear export facilitation priorities, cross- training among agencies, and careful coordination with other public and private export service providers, the following recommendations can test, at minimal cost, the ability of the federal government to improve its delivery of export services. 1. Establish one-stop shops to provide local export communities a single point of contact for all federal export promotion and finance programs. One-stop shops will provide the US exporting community with a single point of contact for all federal export promotion and finance programs. Designed to deliver services directly or refer clients to appropriate public and private sector partners, the centers will integrate primarily representatives of the Department of Commerce, SBA, and/or Eximbank. Depending upon site-specific needs and feasibility, efforts will be made to co-locate one-stop shops convenient to or in facilities where private and other public sector partners servicing the exporting community exist. Co-located federal agencies in one-stop shops will focus on assisting export-ready firms in all areas of export promotion and trade finance. A company will be assessed and serviced in accordance with standard criteria determining its stage of export readiness and not on the basis of its size. Among the three co-located federal agencies, the Department of Commerce will be the primary provider of export promotion counseling and services to export-ready firms; SBA will promote and provide export capital and finance counseling; and Eximbank will focus exclusively on trade finance for exporters. Nonexport-ready firms seeking assistance from one-stop shops will be handled by the SBA representative at that location, either through direct counseling and/or referral of the client to appropriate partners from the public and private sectors. SBA's Export Trade Assistance Partnership (ETAP) program is an example of the type of referral program offered nonexport-ready firms. Although not yet available nationwide, this program identifies groups of nonexport-ready businesses and gives them the appropriate personalized training and counseling that culminates in active participation in an international trade show or mission. In markets where one-stop shops are established, all export promotion/finance counseling and programs will be provided by federal agencies in accordance with these guidelines. Consultation with one- stop shops will go far toward eliminating inconsistent or competing federal counseling and/or programs. It is further recommended that by January 1994, one-stop shops be established in Miami, Los Angeles, Chicago, and Baltimore. One of the participating agencies -- US&FCS, SBA, or Eximbank -- will take the lead for each selected pilot site. In recognition that no single design for one-stop shops is likely to work nationally, the TPCC has developed three separate and distinct models to determine the impact of consolidation of federal export- related resources in single sites. These models were discussed at each pilot site with exporters and key local public and private partners. The idea is to test several practical approaches and select the best features for designing and extending one-stop shops to additional sites. The models are as follows. o Model A: Co-locate all of the export-related resources of US&FCS, SBA, and Eximbank into an existing US&FCS district office. o Model B: Relocate and consolidate all export-related resources of US&FCS, SBA, and Eximbank into a world trade center (or comparable facility) with other public and private export service providers. o Model C: Co-locate all of the export-related resources of US&FCS, SBA, and Eximbank at a mutually-agreed upon site, and over a 3-year period shift the approach of the office from one providing direct client services (retailing) to one providing strictly indirect services (wholesaling) via local trade intermediary organizations, such as state offices and private sector providers of export promotion services. Model C will be an attempt to allow one-stop shops to become more fully integrated with other export service providers. The federal government could reduce its involvement in direct client counseling (retailing services) and channel its export information and services increasingly through other public and private sector intermediaries (wholesaling). An intensive training effort covering all appropriate agency employees who will be staffing the one-stop shops will also be conducted. These employees (US&FCS, SBA, and/or Eximbank) will be trained in all aspects of federal export and multi-lateral development bank promotion and financing programs prior to their assignment/participation. Complete and inclusive training is a key element in the one-stop shop concept. As these centers are opened, trained personnel will be available and can be readily positioned to provide assistance. Training demands will be a continuing and ongoing process to upgrade staff knowledge and to take into account staff turnover, various program enhancements, and other changes. As the pilot one-stop shops are being created, the TPCC will review other cities throughout the United States to determine the potential for future sites. Selection will be based primarily upon an analysis of state-by-state export data and other measures of current and projected economic activity as well as substantial input from concerned agencies. The committee aims to identify 10 new sites by June 1994 and establish them in CY 1995. Finally, the one-stop shops will go through a rather rigorous evaluation process including self-assessments, regular field meetings and user surveys. All sites will be evaluated at least on a quarterly and annual basis. These self-assessments will help the TPCC committee evaluate operational start-up issues, concerns, and problems. 2. Assist the export-ready firms in all areas of export promotion and trade finance. In the short-term, the most effective way to increase the overall level of American exports and thus create new jobs is to focus on companies that are ready to export. The pool of export-ready firms must be constantly replenished. To be considered export-ready, a firm should: o Produce a product or offer a service that is competitive in the US market or is being sold successfully overseas. o Possess the capacity and flexibility to respond to new market opportunities. o Have the appropriate financial resources to support its export objectives. o Understand the export process and have a management team that is committed to the export objective and communicates that message to all its employees. A nonexport-ready firm is one that lacks any one of these characteristics. 3. Expand joint USDA-state department of agriculture outreach efforts and focus on new-to-market small and medium-sized exporters; and improve the USDA information delivery system by enhancing the quality and distribution of statistical trade data to include better state and regional trade information. USDA will focus its efforts through a continuing partnership with state departments of agriculture that conduct export marketing seminars, and actively solicit use of USDA services (e.g., trade leads, shows and missions, statistical trade data, country specific information, market research information, information on transportation/shipping and trade barriers, quality inspection, and use of the agricultural attache network). USDA field networks are expected to solicit exporter input, evaluate ongoing programs to determine their effectiveness, and measure changing customer needs. A more effective automated system should be developed to include information on US companies for prospective foreign buyers, on foreign companies and markets for US exporters, and a list of available export-related market research. 4. Establish a pilot program of private sector networks of export counselors, to be known as trade assistance centers, that would help small businesses overcome obstacles to completing export transactions. Small companies are an important segment of American business, and their needs cannot always be met through one-stop shops or other public and private sector export service providers. The trade assistance centers, which would be run by the private sector, could provide needed services for these companies. The facilities could be staffed by a small group of professionals who possess a full range of exporting expertise. Through a program of matching grants from federal and state sources, these centers would provide technical export services at costs acceptable to small enterprises. Services would include financial services and loan packaging, product modification for selected markets, overseas product and company market research, and assistance in completing transactions. Local networks (including one-stop shops) would refer interested clients to the trade assistance centers, which also would work closely with other local export service providers. The trade assistance centers could offset the costs of their operations through commissions from client export sales. Although companies would become independent of the centers over time, this program would encourage a larger segment of US small businesses to pursue export sales. WASHINGTON-BASED SERVICES Commercial Information BACKGROUND The US government gathers an abundance of commercial information, including market research on industries, subsectors, and products; economic analyses of more than 100 countries; trade leads; and buyer/seller contact information. US exporters, especially small and medium-sized firms, rely extensively on this information, and, in some cases, it is the critical element in securing an export sale. Although several agencies participate in the collection of commercial information, responsibility for obtaining much of this information (which only can be obtained overseas) falls to the Departments of Commerce and Agriculture or State (in those countries where these agencies do not have a presence). Requests by USG agencies for commercial information from the posts are submitted haphazardly and are, in some instances, duplicative. A lack of coordination also hinders the efficient and effective dissemination of commercial information. Frequently the information most needed is buried or lost in a mass of printed material. Customers often are confused and have difficulty accessing the specific information they need. Small and medium-sized firms, in particular, find it difficult to penetrate the vast USG export information bureaucracy to obtain the specific information that they require. The National Trade Data Bank (NTDB), created pursuant to the Omnibus Trade and Competitiveness Act of 1988, is designed to serve as a centralized source of international market research and other information products of the US government. The variety of perspectives and broad coverage of trade topics are NTDB's greatest assets; there is little redundancy and overlap. All agencies do not contribute to the NTDB. The Agriculture Department, for example, has a separate system for information dissemination, but its trade leads are published along with those of the Commerce Department in the Journal of Commerce. NTDB subscriptions are available for the modest cost of $360 per year. Few businesses subscribe, in large part because most do not use CD-ROM technology or because they find the NTDB CD-ROM difficult to use.The public remains generally unaware of the existence of the NTDB, and it is only generally accessible through federal depository libraries or Commerce district offices. Commercial information and information on US government export promotion programs also is disseminated through the Trade Information Center (TIC). The TIC, which responds to more than 1,000 calls a week from US firms, represents a step forward in improving the US business community's access to USG export promotion information. However, the effectiveness of the TIC is being undermined by the proliferation of similar general information hotlines. Too frequently, exporters' calls are bounced around to several different federal offices before the necessary information is provided. To date, the TPCC has fallen short of its objective to create a single referral point for USG export programs. GOALS 1. Expand the distribution of specific and accurate analytic information that meets the needs of the client. 2. Streamline information collection and dissemination. 3. Disseminate information in a more timely fashion. 4. Improve the accessibility of commercial information, especially for small and medium-sized firms. RECOMMENDATIONS 1. Replace more than one dozen country-specific reports currently produced by TPCC agencies with one comprehensive country-specific commercial guide for each country. These guides would incorporate the information needs of all TPCC agencies and would be made available through the NTDB. Clients then would have access to all country information in one place from one source. 2. Initiate a rational system for tasking overseas posts for country commercial information. At the beginning of each year, Commerce would request all TPCC agencies to submit their country information needs to be addressed in the country commercial guides. These requests would be culled to eliminate any duplications and then forwarded to all US embassies, using a standard format for information reporting. The country commercial guide would incorporate in one document information previously reported in economic trends reports, country marketing plans, overseas business reports, and trade and investment barriers reports. This information would be available through the NTDB or in printed form. Ad hoc alert reports, market research reports, or Congressionally mandated reports would not be included. 3. Streamline the collection and dissemination of commercial information contained in the National Trade Data Bank. a. Establish interagency information management guidelines and quality standards to ensure that NTDB contents are accurate, current, timely, relevant, and comprehensive. b. Designate the NTDB as the primary depository of USG trade-related information and require all agencies to provide such information to the NTDB. c. Coordinate agency-specific information dissemination systems and incorporate existing agency-specific databases into the NTDB as it evolves into a user-friendly export counseling tool and trade information resource. d. Increase dramatically marketing dissemination efforts through direct subscriptions and the expanding public-private partner network, which includes NASDA, chambers of commerce, world trade centers, industry associations, SBA, Exim-bank, and more than 800 federal depository libraries. e. Enhance user-friendliness to simplify retrievals and promote usage. This action means improvement in coverage, presentation, and software capabilities to meet the needs of a wide range of NTDB users, including US business, public-private partners, and intermediaries. 4. Expand current distribution of trade leads through outlets such as NTIS, Dialog, Compuserve, and trade associations. Explore ways to link private sector intermediaries and end-users directly with trade leads information from overseas posts. 5. Designate the Trade Information Center (1-800-USA-TRADE), situated in Commerce, as the single TPCC-wide information office that will coordinate existing specialized nonagricultural export information offices. As the initial point of contact for US firms seeking information on US government export promotion and finance programs, the center will direct inquirers to regional, functional, or industry specialists as needed. a. Develop a means to electronically link regional, functional, and industry hotlines/centers with the TIC. b. Share, and combine when possible, TPCC agency databases with the TIC. c. Undertake technical enhancement as the technology becomes practical, to disseminate marketing information and development of an interactive on-line computer link with the private sector. 6. Raise awareness of the Trade Information Center within the US business community. Undertake a major promotional campaign to publicize the services available from the TIC, through trade associations, state and local trade offices, and the business press. 7. Conduct periodic reviews of regional information centers and the business demand for their services, and phase out centers when demand subsides. Trade Events and Seminars BACKGROUND At least eight federal agencies organize and manage more than 200 trade events annually. These events include trade missions 1/; reverse trade missions 1/; trade shows and fairs /2; and trade seminars and conferences 1/. State and local governments and the private sector also devote significant resources to trade events and seminars. Some have questioned the value of the federal government's participation in such activities and expressed skepticism about the effectiveness of certain types of seminars and trade events. For example, some government-sponsored domestic trade seminars have been described as little more than a pep talk for firms that are not really ready to export. Some overseas events are repeated year after year, often bringing the same group of firms back to the same market and not attracting new exporters. The recent interagency TPCC review indicated, however, that the US government does have a legitimate role in the trade promotion event arena. What is needed is a better targeting of US efforts. Domestic activities must be sharply focused, i.e., industry and/or market specific to truly export-ready firms. Overseas events are appropriately undertaken by the USG when they are limited to markets and/or industries that truly need USG support, and when private sector alternatives are not available. The review also revealed that there is considerable overlap and duplication in the US government trade event program. Several different USG agencies organize trade events. However, there is no formalized coordination mechanism to ensure that the US government does not offer duplicative events and that resources are being spent on those events most likely to yield the most exports. No overarching strategy guides trade event decisions. The absence of a central point of coordination also precludes US firms from being able to contact one source to obtain information on all the trade events offered by the US government. GOALS 1. Streamline the USG-sponsored trade event process and direct event resources toward our most promising markets. 2. Leverage state and local government and private sector resources by increasing their participation in event planning and implementation. RECOMMENDATIONS 1. Reduce the number of trade events organized by the federal government by eliminating duplicative events and encouraging greater participation in the planning of events by states and the private sector. 2. Establish a centralized trade event process to ensure that all proposed events, including those from states and the private sector, are considered at one time for a given year. Only by viewing them together can rational decisions on the number and mix of events be made. Ensure that TPCC agencies assist in the overall trade event schedule, but do not operate their own independent trade event programs. Representatives from those TPCC agencies that conduct events would participate in the event process. They would agree on and develop a unified event program for the year. This process would eliminate duplicative events and themes, ensure proper timing of events, and focus on those industry sectors and overseas markets that offer the best sales potential. Once the TPCC approves a unified event program, federal agencies would encourage state and local entities and private sector providers to become actively involved in organizing the events. 3. Place responsibility for managing all federal trade events, approved by the TPCC Trade Events Board or working group, in one unit in Commerce (or Agriculture, as appropriate). This maximizes efficiency and improves user accessibility by centralizing operations in one location. Commerce (or Agriculture as appropriate) would organize and carry out the events agreed upon by the TPCC board or trade events working group, with input as needed by other agencies. Reverse trade missions coordinated through the TPCC would be organized and carried out by the proposing agency. 4. Use an informational navigation system to guide the planning of programs and events. This system should include basic statistics on US exporting companies (number, size, industry sector, and geographic location) and data on state and local export performance (export value, product composition, and key markets). 5. As a pilot project, announce the TPCC event program in the Federal Register and invite qualified private sector organizers to bid for those events they desire to handle. The qualified organizer (based on TPCC-approved criteria) that would provide the necessary space and services to participants for the lowest cost would be certified to handle the event. The announcement and selection period would last no longer than 60 days after the TPCC approves the event program so that preparation for any event can take place in a timely fashion. 6. Focus limited federal government resources on targeted trade events for truly export-ready firms, rather than on general, motivational conferences. As appropriate, support -- but not directly implement or lead -- local efforts to conduct trade seminars and conferences. STATE EXPORT PROMOTION ACTIVITIES BACKGROUND The Export Enhancement Act requires that the TPCC shall: . . . review efforts by States . . . to promote United States exports and propose means of developing cooperation between State and Federal efforts, including co-location, cost sharing between Federal and State export promotion programs and sharing of market research data. To assess states' role in export promotion and identify ways to improve federal-state cooperation, a number of states that have a variety of export promotion programs were consulted. Information was obtained primarily through contacts with members of state development agencies. The states that were examined were California, Colorado, Florida, Georgia, Maryland, Minnesota, Mississippi, New York, Oklahoma, and Texas. Other sources also were consulted, such as NASDA, which is the national umbrella organization for state development agencies, and the Port Authority of New York and New Jersey. (See box for survey questions.) As a result of the dramatic increase in international trade over the last two decades and the growing need for increased federal assistance, international trade has been accepted as an integral component of state economic development programs. Prior to the mid-1980s, however, neither the states nor the federal government made export promotion one of their priorities. State international offices were originally created to attract foreign investment. Only since the mid-1980s have states shifted their focus from foreign investment to make trade promotion a major economic development priority. As a result, states have developed strong and innovative export promotion programs and have maintained international trade offices as part of their economic development or commerce departments. Today, states are major international trade service providers and significant players in export promotion, collectively spending more than $100 million each year on trade development, of which $20 million is spent to support more than 300 employees in 137 foreign offices. Forty states now maintain offices/representatives in 18 different countries. When US-based employees are included, total state employment in trade development includes more than 900 people worldwide. Although each state's international trade activities are fashioned to meet its distinct needs, states share common objectives. One is to help broaden the state's economic base by creating an awareness of, and demand for, state-produced goods and services, both domestically and abroad. Once markets and demand exist, the primary goal of a state's trade office is to encourage, promote, and assist state-based companies in starting and/or expanding their export activities. Existing State Export Activities State trade and development officials are keenly aware of the needs of the companies within their state. This knowledge enables them to assist companies through each stage of the export process. The range of services provided to companies includes: counseling services, market assistance and financing information, evaluation of opportunities, information on markets, and product placement. States also provide technical assistance, including seminars, conferences, and publications to inform businesses of opportunities overseas. --------------------- Box 12 Survey Questions A series of questions were asked to elicit states' perspectives on export promotion and trade development in a fashion consistent with the Export Enhancement Act. Recommendations for improvement in federal export programs and coordinated federal/state export promotion efforts also were solicited from the states contacted. The survey questions were as follows. 1. What is your state doing to promote international trade and increase exports? 2. Are improvements needed to existing state programs/services? If so, what new programs/services should be added? 3. Are there specific revisions you would make to existing federal trade-related programs? If so, what programs would you eliminate and/or what programs would you add? Why? 4. How do you measure program performance? What are your most successful programs? 5. Could your state use some specific support that it is not currently receiving from the federal government? 6. Does your state's program target specific industry sectors? Should federal and state programs cooperatively target specific industry sectors? 7. Should there be formal coordination between federal and state trade promotion efforts? Should the Department of Commerce implement a permanent federal-state partnership? 8. What could the federal government do to improve coordination with the states? What could the states do to improve coordination with the federal government? 9. What actions could be taken to better clarify the role of state and federal government in export promotion and development efforts? 10. What are the areas of comparative strength and weakness in federal and state program delivery? 11. What can the federal government do differently to help your state in its export promotion and development efforts? 12. Where should the federal government focus its resources? Where should the states focus their resources? 13. Should the federal government expand the availability of trade finance through state channels? Do you have a state finance program? If so, how active is it? 14. Should the federal government serve in a wholesaling capacity while the state and private entities serve in a retail capacity? 15. If the federal government established one-stop shops for export promotion by combining the Commerce Department, Small Business Administration (SBA), and the Export-Import Bank (Eximbank), would this aid your state in its export promotion efforts? Would your state participate in such an organization? ------------------------ States ensure that businesses are aware of trade opportunities by disseminating trade leads generated by in-house research, the Department of Commerce, other overseas US agencies, professional international trade database services, and personal contacts. States also provide information through newsletters and electronic systems. Among the programs that give state companies direct access to potential foreign customers are state-sponsored trade missions and shows. States try to match foreign buyers with in-state companies. These matching programs often are used in conjunction with federal government programs or with state trade promotion efforts, such as trade missions and trade shows. States also have the added ability to bring together entrepreneurs, trade associations, universities, and government officials active in international trade issues, and encourage them to pool their expertise. To provide small businesses with an alternative to federal and private financing, several states have developed their own export finance programs. According to NASDA's 1992 State Export Program Database, 20 states maintain funded and operational export finance programs. These states are Arkansas, California, Connecticut, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New York, Oklahoma, South Carolina, Texas, Virginia, Washington, and Wisconsin. Whether or not a state has its own finance programs, state trade offices usually are equipped to refer exporters to additional sources of financial assistance. Generally, state export finance programs, either directly or with the assistance of federal agencies, furnish pre-shipment guarantees for working capital finance for small companies located in the state. In addition, a number of states provide post-shipment export finance support underwritten by the federal government's export credit insurance program. Pre-shipment guarantees often persuade banks to extend working capital financing to small companies that the banks otherwise would not provide. A few state export finance programs even provide actual loans to businesses. State export finance programs vary in effectiveness and use. For example, California has developed an active program. The California Export Finance Office reports that in its first 6 years of operation it provided about 354 guarantees that accounted for roughly $450 million in exports. Notably, only 7 of the 354 guarantees ended in default. The Texas Department of Commerce has a financial assistance program that is specifically targeted to exporters. The Texas Exporters Loan Fund helps small and medium-sized companies acquire capital by guaranteeing loans made by commercial lenders. Under this program the Texas Department of Commerce may guarantee up to 90 percent of a loan made by an eligible lender. The maximum term of a loan is 1 year, with a minimum of $10,000 and a maximum of $350,000 eligible funding. The City/State Program of Eximbank provides an example of how state and federal finance programs can successfully work together. This program is a partnership designed to encourage financing to state exporters by allowing the states to structure and package loan requests using Eximbank resources. Through this program, the federal government uses the participating states as vehicles to expand company access to Eximbank's programs that Eximbank does not have the resources to reach on its own. States also have built extensive networks of local entities to help develop a strong overall strategy toward trade development and to promote international trade. Most states, for example, have established networks with local offices of economic development agencies, small business development centers, world trade centers/associations, chambers of commerce, port authorities, trade education centers, export/trade councils, city governments, and local colleges. These networks ensure greater participation in export promotion efforts at the grassroots level, help share the cost of providing services to exporters, and allow each organization to focus on its respective strengths. Texas, California, and New York are prime examples of states that work closely with local development entities. The Texas Department of Commerce's Texas Marketplace Program, announced in March 1992, works as a cooperative agreement with the 56 small business development centers located throughout the state and offers business counseling and an on- line electronic bulletin board system to Texas businesses. The California World Trade Commission relies on local associations to disseminate region-specific information, organize how-to-export seminars, and maintain trade and program information that is easily accessible to the members of the more than 200 associations. California also uses the Automated Trade Library Service (ATLS), which is an on- line information system that provides trade leads, trade data, and market intelligence, and which is developed through the University of California's system around the state. Any company has local dial-in access to international trade information electronically through ATLS. The involvement of the Port Authority of New York and New Jersey in export promotion provides another example of how state and local governments are helping to promote exports. The Port Authority's services complement state programs. More specifically, the Port Authority runs a public trading company called XPORT, which helps small and medium-sized companies, over an extended period of time, to compete in the international marketplace. XPORT establishes a contractual relationship with its clients which typically lasts for about 3 years. XPORT assists its clients in all aspects of the export process, including finding overseas distributors and buyers; securing financing, insurance, and export licenses; and gathering information. XPORT has assisted more than 400 companies generating more than $150 million in export sales. To keep up with globalization, the Port Authority also maintains offices in London and Tokyo and provides training programs in international trade and finance through its World Trade Institute. Existing State and Federal Cooperation State trade development and federal export agencies have a common objective -- to encourage, promote, and assist US companies in entering and expanding their presence in foreign markets. The synergy between the programs of these state and federal agencies has steadily improved over the years. States have maintained cooperative relationships with federal agencies such as Commerce, Eximbank, SBA, and USAID. The types of cooperative endeavors vary from state to state and among the agencies, but generally involve joint efforts in tracking trade leads, general information dissemination, joint publications, provisions for technical assistance, export financing, and joint sponsorship of trade shows, conferences, and seminars. State trade development agencies rely heavily on federal agencies for information that would be impossible for them to develop themselves given their resources and mandates. Such information includes market research and investment and commercial climate reports. The role of the federal government as an information provider needs to be enhanced. The mandate of the US&FCS is to help US businesses expand sales around the world. Similarly, states have comparable responsibilities to their respective state-based companies. Accordingly, states have indicated that US&FCS district offices should coordinate activities with state offices so that scarce resources could be used more effectively and that duplication of effort could be avoided. The US&FCS's most recent strategic review specifically instructed the district offices to make an agreement with state counterparts specifying a division of labor, including a delineation of specific actions, responsibilities, and strategies for cooperation. Historically, the US&FCS district offices were responsible for many of the same trade promotion activities as the state trade offices -- one- on-one counseling, export seminars, conferences and workshops, and the distribution of trade leads. Today, however, after the strategic review, the district offices' activities are becoming narrower in scope, covering only export-ready exporters, and leaving to the states and other entities the responsibility of identifying and assisting prospective new-to-export and other firms and conducting overseas activities for them. Various types of cooperative arrangements exist between state and federal agencies. At one end of the spectrum are state trade development offices with limited interaction with the federal district offices. Mississippi and Maryland are examples of states with such arrangements. These states rely on independent efforts to accomplish their goals and use federal resources only when necessary. At the other end of the spectrum are the states where offices have co-located with the federal district offices. For example, Oklahoma and the federal district office have established a joint program of international trade development and support by which the export promotion and development programs, resources, and staffs of both agencies work together to accomplish mutual objectives. Oklahoma's overseas offices also complement the work of the US&FCS offices in assisting Oklahoma exporters aboard. The remaining state arrangements fall somewhere in the middle of the spectrum. These state development agencies have not co-located but have a working relationship with their federal counterparts. Florida and New York, for instance, have very good working relationships with their respective district offices. Their joint activities include co- sponsoring of numerous events and seminars and exchange of trade materials and information. Texas, Georgia, and Minnesota have formal cooperative agreements with their respective district offices. This relationship includes effective communication concerning programs, co- sponsoring of events, and joint marketing of numerous projects. California's trade development operation is conducted independently from US&FCS offices, but unlike Mississippi and Maryland, operations are coordinated. Colorado shares the same office suite with the district office and cooperates in sponsoring seminars, conferences, and occasional trade shows. Greater state and federal collaboration is needed urgently in export promotion efforts. The lack of coordination has led to confusion for exporters, duplication of services among federal and state agencies, and gaps in service. Ultimately, exporters are not concerned whether the federal government or their state provides the necessary services. The important point is that these services should be made available on a timely basis to exporters. States have a working knowledge of the needs of their exporting companies but lack the resources of the federal government. However, states often have more effective network and delivery mechanisms than Washington. To aid exporters in a more effective manner, state, local, and federal entities should capitalize on their strengths and pool their extensive resources in a more coordinated fashion. GOAL Create a greatly enhanced communication and coordination system between state and federal agencies. RECOMMENDATIONS The following recommendations to improve federal-state cooperation can be grouped in three basic categories: o General export promotion activities (1-3); o Finance issues (4-5); and o Trade and market information (6). 1. Co-locate state offices with federal district offices when appropriate, including in the one-stop shop pilot program. Co-location enables states and federal entities to work together to accomplish mutual objectives. The TPCC is recommending the establishment of one-stop shops by integrating the activities of federal export service providers. Most states are receptive to becoming partners with the federal agencies and being included in the one-stop shops. A new federal-state partnership would enable states to expand their role as clearinghouses of federal assistance and program information. However, states do not want any cookie-cutter models forced upon them. They want the one-stop shop to simplify the process and not become an added layer of bureaucracy. 2. Create or expand formal lines of communication between state and federal export promotion entities. To implement this recommendation, one person should be designated in each district office as the liaison between state and federal trade offices. If a designated liaison has been assigned, the states should be informed of that person's responsibilities so that state entities can make use of this line of communication. This liaison would provide states with a central location to funnel their concerns, comments, and suggestions. In turn, the states would provide information on their activities to district offices. The use of this permanent line of communication should generate greater coordination of export promotion activities through improved communication lines. State officials and their federal counterparts might find it beneficial to meet on a regular basis (if they do not already) to discuss joint activities or concerns. These arrangements could vary from state to state. 3. Reach cooperative agreements between federal agency field offices and state trade offices that delineate specific joint activities, expected accomplishments, strategic directions, and the responsibilities of the partners. As an example of a similar past agreement, NASDA managed a pilot program from 1987 to 1989 that called for signed MOUs between 18 state trade offices and US&FCS district offices. These MOUs identified specific cooperative activities, identified the parties' respective roles, and committed the parties to regular monitoring and evaluation. More recently, the US&FCS has instructed its district offices to reach agreements with their state counterparts specifying a clear division of labor, including specific activities and responsibilities. 4. Expand and improve Eximbank's City/State Program. This program is an example of how state and federal finance programs can successfully work together and should be expanded to include more than the 26 state and local entities that are current participants. The program is a partnership designed to encourage financing to state exporters by allowing state and local export finance and development agencies to structure and package loan requests using Eximbank's export financing resources. State and local entities offer export counseling and financial assistance to small and medium-sized businesses in their jurisdiction, assist Eximbank in marketing its programs, and do much of the pre- application processing to speed up the turn-around time for acquiring financing. Eximbank provides expedited turn-around time for loan applications that have been packaged by states and cities. If the program is expanded, more exporters will have easier access to finance programs. 5. Create risk co-financing agreements between federal financing agencies (Eximbank and SBA) and qualified state and local finance entities. Implementation of this recommendation would give state and local finance entities a greater role in export finance by increasing their capacity to offer loan guarantees directly to more exporters. The agreements would allow federal finance agencies to share the risks equally with their state and local counterparts or to provide more comprehensive guarantees. (See Chapter 4 for further discussion of and recommendations on enhancing the role of qualified state and local export financing entities.) 6. Improve the accuracy, acquisition, and dissemination of trade- related information. States rely on federal trade data and information when dealing with international trade. The overwhelming majority of states stress the need for improvement in the acquisition and dissemination of trade- related information, such as trade leads, market information, and export data. In general, states emphasized the need for trade intelligence to be more current, more accurate, and more widely available to US businesses. The collection and distribution of trade leads by the Commerce Department's Trade Opportunities Program (TOP) is an important service provided to prospective exporters. TOP is designed to provide US companies with high-quality leads on private and public sector tenders in overseas markets. States have overwhelmingly agreed that TOP needs to be improved. The federal government needs to deliver trade leads to more exporters more quickly. The National Trade Data Bank (NTDB) is a centralized source of international market research and data. States stress the need for improvement in the quality and timeliness of the information in the NTDB. For example, the NTDB is limited in its supply of industry and subsector analyses, which are of great use to exporters. States also stress the need for a marketing campaign to promote the NTDB and make it more accessible to end-users. States should play a central role in this marketing effort because of their close relationships with exporters and their need for international market data. (See section on Washington- Based Services for further discussion of and recommendations on the NTDB.) States agree that there is a need to coordinate and strengthen the access to and distribution of information on foreign businesses, including trade leads that are collected by federal agencies, and to integrate these efforts with in-place state systems. Current collaboration among state/federal/private agencies is inconsistent, and information that is gathered is insufficiently shared. This disarray obstructs the efficient operation of all export assistance agencies. If state and federal offices are co-located and their cooperation is enhanced, states would be able to share in and have access to the national data that they need. OVERSEAS NETWORK BACKGROUND The overseas network is an integral part of the USG export promotion network. The role of the US mission abroad is to identify projects and market opportunities, conduct market research, provide export counseling, assist in making government and private sector contacts, and provide high-level advocacy. The United States now delivers commercial services to US business at 170 missions abroad. Although all USG agencies on the mission's country team contribute to our commercial efforts, Commerce, Agriculture, and State provide most US export promotion services. Commerce's US&FCS is present in 70 countries, which comprise 94 percent of the world market for US manufactured exports. State Department economic officers are present in all of those countries and are responsible for the commercial function in the 100 countries without US&FCS offices that comprise the remaining 6 percent of the world market for manufactured exports. USDA's overseas presence includes 79 offices covering about 120 countries. These offices include 12 agricultural trade offices that have co-located in the USDA facilities 15 nonprofit commodity associations representing US export interests in each. Agricultural products account for about 10 percent of total US exports. In addition to USG trade promotion activities (see table), 40 states have a total of 300 trade promotion personnel in 137 offices located in 18 countries. @@@@@@Table found on page 28@@@@@@@ Historically, US missions have placed more emphasis on political and national security concerns than on commercial interests. Compared with its foreign competition, the United States has fewer staff resources dedicated to export promotion and trade development. A 1990 comparison of export promotion staff in major competitor countries reveals that the United States has 1.56 persons for every $1 billion in exports, compared with 8.05 persons in the United Kingdom, 5.87 in France, and 2.28 in Germany (see chart, p. 2). Since the end of the Cold War, there has been widespread and growing recognition of the need to upgrade US economic and commercial priorities and efforts abroad. Simply put, our competitiveness and exports overseas have assumed equal or greater importance in many areas of the world than the political/military concerns that have traditionally dominated our thinking. Recognizing President Clinton's priorities to increase exponentially our successes in all areas of export . . . and . . . build export markets abroad requires imaginative and demonstrative vision to increase US export sales and strengthen our competitive position. Although much has been done to assist US businesses, the USG now must assign top priority to mission export promotion efforts and find ways to do more, particularly for small and medium-sized US companies. Many US missions have adopted a more aggressive approach to assisting US business. The challenge facing us is to bring all US missions to a common high standard in trade promotion activities, thereby allowing the United States to compete more successfully with countries that have adopted more active programs. GOALS The US government needs to: o Create a concise and well-coordinated strategic plan for each foreign country. Missions need to aggressively identify and pursue major projects and trade opportunities that would help increase the amount of US export sales. They also should monitor the effectiveness of their trade development and export promotion activities. o Enhance trade promotion coordination among the agencies. The Departments of State, Commerce, and Agriculture have the primary responsibility for providing export promotion programs. However, many other agencies also support US trade interests. Traditionally, agencies have managed export promotion programs with their own mandates foremost in mind. Better coordination will lead to enhanced results. o Within existing resource constraints, allocate resources for overseas counseling to key target markets. o Increase communication between the foreign and domestic fields and Washington. Mission sections should be encouraged to highlight commercial leads in their reporting. Some agencies at the overseas missions now use communication equipment that is incompatible with Washington and domestic field offices. Such technical problems limit the distribution of valuable commercial information among agencies and to all potential clients. o Provide more coordinated and consistent training programs among USG agencies. Several agencies have developed their own training programs, which have created duplication and inconsistencies among products and services delivered to US exporters. Although training programs have been expanded in recent years, there is a need to provide a more coordinated trade development training program for export promotion personnel. o Cooperate more with the private sector and state/local government. Overseas missions need to fully develop opportunities to involve US private sector partners, industry associations, American chambers of commerce (AMCHAMS), state and local government agencies, and in- country business groups. Although there is generally a satisfactory level of cooperation between state offices overseas and US missions, there is still room for closer coordination of mission and state government commercial plans. o Establish performance measures that adequately assess the value of promotion activities. There is now no uniform process of quantified goal setting, results measurement, analysis, and sharing of results, and such a process should be established. PRIORITIES 1. Develop a well-integrated and streamlined Country Team approach to export promotion, which ensures that all members on the Country Team understand their roles and the mission's goals. 2. Identify and quantify export levels; develop a strategic commercial plan to reach those goals; and work with energy, flexibility, and imagination to implement those plans. 3. Improve information gathering, reporting, and distribution to ensure that the information reported to Washington and distributed will help US business compete in the world's markets. 4. Provide better financial information and assistance. 5. Develop systems, wherever feasible, to measure export promotion results and identify specific needs for improvement, adjusting export promotion strategies accordingly. 6. Increase Foreign Service National responsibilities in US&FCS offices and develop a regional approach to FSN assignments. 7. Coordinate more effectively trade development and export promotion activities with state offices. 8. Assist US business in winning more major projects and procurement opportunities overseas. 9. Train officers and export promotion personnel more effectively. RECOMMENDATIONS The primary foreign commercial challenge can and will be met by US private enterprise. However, the overseas network now must gear up to meet a new challenge. The United States must raise trade development and export promotion assistance at all our overseas missions to a common high standard. The following recommendations are designed to achieve this end. 1. Create a commercial strategic plan for each country with significant market potential that is cleared by the Country Team and approved by the Ambassador and that links the overall Mission Program Plan and the former Country Marketing Plan. 5/ Such a document would strengthen overseas export promotion services by ensuring that: o Missions take a coordinated interagency approach to commercial planning. o All officers in our overseas missions fully understand the top priority attached to export growth and develop a heightened export mentality. o The full Country Team's resources are appropriately marshalled in pursuit of our high-priority trade objectives. o Improved trade information collection, advocacy, leveraging, and matching of US suppliers and foreign buyers, plus increased demand for US products, would become Embassy-wide objectives. The plan's primary components would include: o An overall assessment of the commercial prospects and major commercial issues faced by US business in the host market. This assessment would address attitudes toward US and foreign business, trade and investment obstacles and issues, the competitive environment, and best trade and investment prospects and opportunities. o A quantified statement of goals and objectives incorporating basic economic assumptions. o A marketing strategy describing interagency efforts to achieve goals. The strategic plan would identify information needs; schedule a timetable of activities; outline anticipated USG advocacy requirements; recommend official financial support; allocate responsibilities for commercial promotion among all elements of overseas missions; and incorporate plans for public relations and special events (e.g., trade events). In addition to the strategic plan, missions also will be asked to develop performance measurements and assessments of achievements, analyze results, and incorporate lessons learned and results into the next year's planning cycle. As the mission's chief commercial proponent, the Ambassador will be responsible for overall direction of these efforts. The senior officers of the Departments of Commerce and Agriculture will be the country team's senior advisors in their areas and will coordinate the support of all agencies for mission trade activities, including development of the strategic and country marketing plans. Where Commerce and Agriculture are not represented, State Department officers, working with all agencies, will assume these responsibilities. Mission plans from around the world not only will be useful to promote trade in individual countries, but also will be designed to drive regional and global strategic planning in Washington. 2. Enhance the role of the Country Team in commercial activities. The Country Team concept -- in which the heads of all agencies at post coordinate their efforts to achieve a defined goal -- is a proven instrument for ensuring maximum mission-wide participation and optimal results across the board. All missions should use the Country Team more effectively for commercial purposes. Missions may wish to create a mission core commercial group, chaired by the Senior Commercial Officer and including other trade-related agencies at post, under the overall direction of the Ambassador, to plan and prepare the annual strategic planning document. In accord with increased commercial priorities, the country team mechanism should be employed worldwide to serve these interests and to ensure that: o Goals and plans are understood and contributed to by all. o All mission agencies and sections participate and contribute appropriately to the commercial effort. o Commercial information is widely shared and built upon. o Synergistic benefits are captured. All USG agencies that are not members of the Country Team (i.e., agencies based out of the country) should coordinate any new trade development and export promotion initiative with the mission's Ambassador and Country Team. 3. Promote the United States as a country that produces quality products. USIA should promote US exports abroad through its Worldnet interactives, speakers, wireless file articles, VOA broadcasts, teleconferences, and magazine articles, by explaining US trade policy, the high productivity of the US workplace and the quality of products it produces, technology and various aspects of the US free enterprise system, and US standards and procedures, and by facilitating export promotion efforts. 4. Improve the collection and dissemination of market research and country-specific information. Missions should highlight commercial information in political, economic, and military reports, and emphasize commercial and agricultural reporting. On a more technical level, missions should establish interagency electronic mail connections at missions and in Washington in an effort to maximize the utilization of resources. 5. Enhance the role and responsibilities of Foreign Service Nationals in countries where there are no US&FCS officers. a. Adopt a US&FCS regional strategy to address scarcity of resources by creating regional US&FCS offices and assigning US&FCS Foreign Service nationals to missions served by US&FCS regional posts. b. Assess job requirements of FSNs and develop training courses that reflect the duties of FSNs at missions without US&FCS officers. c. Assess FSN classification procedures to assure that regional and management responsibilities are correctly reflected in position classification and wage scales. 6. Develop a comprehensive and consistent training program for export promotion personnel at each stage of personnel development. The Foreign Service Institute, which will become the National Foreign Affairs Training Center (NFATC), has initiated diplomacy for global competitiveness as a central organizing theme that will run like a thread through all its courses. NFATC is encouraged to expand the number of TPCC agencies in the design and development of the curriculum; and to expand training in export promotion, trade development, and trade finance. The flow of information on the availability of training programs that support trade promotion will be improved. The private sector will be involved by forming public/private partnerships to promote US trade promotion training. This approach will enable NFATC to train USG personnel in making the operational connection between what is done overseas and the needs of the US business community. All TPCC agencies are encouraged to: a. Promote interagency exchange assignments for trade promotion personnel, including domestic assignments to US&FCS district offices, as well as executive exchange assignments to the private sector. b. Provide advanced management training for federal senior personnel at institutions and universities (e.g. Federal Executive Institute, Public Policy Education Program for Government Executives at the Brookings Institution, USDA Graduate School). c. Enroll trade promotion personnel in Commerce's regional business counseling, export promotion assistance, and overseas market research training programs. d. Participate in regional training programs in international trade finance for all US trade promotion personnel overseas, with the coordination of Commerce and Eximbank. e. Expand training opportunities for FSNs who support trade promotion operations, including increasing the number of FSNs enrolled in the Commerce Department's Introductory Commercial Correspondence Course. 7. Expand contacts and develop training programs with private sector organizations and associations to improve the exchange of information between federal trade promotion personnel and US exporters overseas. Initiatives should include efforts to: a. Encourage private sector organizations, especially high-tech industries, to provide and sponsor training programs for trade promotion personnel, including Foreign Service nationals. b. Develop greater contact with executive-level personnel in private sector groups and associations along the model of the Business Council of International Understanding (BCIU). c. Explore ways to increase cooperation among NFATC, San Diego, trade associations, and state/local governments in providing training in trade finance and development and export promotion. 8. Develop and implement a regular mechanism for evaluating performance measures. The Strategic Commercial Plan should provide a basis for assessing the contribution made by the post during the year. It should describe specific accomplishments and the means established by the post to document and track accomplishments. As a corollary to the strategic plan, there should be a year-end quantified evaluation by the domestic field, the overseas mission, and Washington to incorporate the performance results and a variance analysis into the next year's planning cycle. 9. Upgrade the mission's awareness and knowledge of USG agencies and private sector financial needs and requirements, and improve the mission's ability to report and make useful recommendations to Washington. Mission members should be more knowledgeable about the trade financing programs that are available and willing to coordinate and focus their recommendations to Washington agencies and US exporters regarding the best finance programs available for given export opportunities. The following recommendations are designed to increase US businesses' access to USG financial resources: a. Improve Washington agencies' guidance to missions regarding trade and project financing available to US businesses. b. Expand mission reporting on alternate sources of trade financing (i.e., international banks, multilateral development banks, and third-country financing sources). c. Develop regional training programs in international trade finance, which would be available to all trade promotion personnel assigned overseas. Commerce and Eximbank should coordinate this effort. 10. States for consultations with the business community, and brief/update TPCC representatives on mission activities. The visits would help bridge the communications gap between private sector companies and USG agencies and convince US firms to expand overseas. Both business and governmental organizational support and funding should be sought for these visits. The purpose of these visits can range from creating an awareness of general opportunities to discussing specific strategies. 11. Coordinate mission trade promotion activities with state development offices located overseas. Missions should be encouraged to use the resources available from these state development offices and to expand their contacts with such groups. USG agencies should encourage state development offices to coordinate their activities with the overseas missions by initiating pilot programs, such as the proposed NASDA program to place state representatives in selected overseas locations. ADVOCACY BACKGROUND In this context, advocacy is the support provided by governments to their firms to create and take advantage of overseas market opportunities. Historically, the use of advocacy as an export promotion tool by the US government has largely been on an ad hoc, if asked basis. But a review of a small sample of 26 cases dating back to 1987 indicates that the potential for increasing exports through a more intensive and organized advocacy system could be substantial. The review showed that where the US government supported US bidders encountering aggressive foreign government lobbying or questionable competitive practices in bidding for international contracts, US firms were awarded contracts in 70 percent of the cases (just for these 26 instances). This resulted in about $5 billion dollars worth of business. Using the rule of thumb that every $1 billion of exports creates almost 20,000 jobs, these actions led to 100,000 new jobs. The governments of our strongest international competitors are aggressive advocates for their firms' efforts to win foreign project or procurement contracts. These governments rank such export support among their highest foreign policy objectives and use all possible means of leverage, including military sales, political support, and financial pressure, to achieve their national economic goals. Common advocacy techniques of competitor nations include visits by high- level government officials, coupled with attractive financial packages including concessional loans and tied-aid grant elements. These countries' advocacy efforts have focused on key high-tech industries (e.g., telecommunications, environmental protection) in that group of high-growth, newly industrialized countries that offer the greatest long-term commercial opportunities, e.g., Association of Southeast Asian Nations (ASEAN) countries and China. Below is a sample of some of the advocacy practices of various competitor nations: Japan: The government has stated that it no longer engages in the practice of advocacy. Through administrative guidance, the Japanese government led a strong exporting drive for decades that advanced Japanese entry into foreign markets, while protecting the domestic market from foreign competition. The government since has eliminated overt support programs for Japanese exporters. Implicit support of Japanese exporting firms continues, however. In one instance, Tokyo asked the government of Indonesia to award a telecommunications digital switching project to NEC instead of AT&T, citing Japanese aid to Indonesia. The panel charged with evaluating the bids recommended AT&T. Top US officials, including President Bush, intervened to support the AT&T bid. Indonesia decided to split the contract between NEC and AT&T. Germany: Advocacy by high-ranking German government officials on behalf of German companies is used occasionally in bilateral relations on a political level. In most cases, advocacy is not company-specific, but of a more general nature stressing the high technology and superior standards of German products. However, strong ties exist between the German avionics and aerospace industries and the Economics Ministry. Germany is often a participant in European consortia of manufacturers, which are favored in EC contracts. United Kingdom: All British officials (including the Royal Family and prime minister) who either travel abroad or meet with overseas visitors, actively pursue the role of trade advocates as a normal part of their official duties. High-level state visits often coincide with major trade promotion efforts in targeted markets. For example, a state visit by Prince Charles and the Princess of Wales to Seoul in November 1992 coincided with the biggest concentration of British business events ever held in South Korea. Moreover, direct intervention by the prime minister on behalf of British companies involved in specific bids is not un-usual. For example, both the Prime Minister and Foreign Secretary successfully lobbied the Saudi government to award large portions of the Al Yamama defense contracts to UK firms. A former Prime Minister intervened with the Turkish government in support of a British firm's bid for a bridge construction contract. France: France is an aggressive practitioner of advocacy on behalf of its firms in obtaining foreign contracts. The French President and cabinet officials successfully urged the Turkish government to award the $300 million TURKSAT project to the French company Aerospatiale. In another example, the French Industry and Foreign Trade Minister strongly urged the government of Morocco to purchase Airbus A320 aircraft rather than similar Boeing or McDonnell Douglas aircraft. The US government made a representation objecting to the French advocacy practice in this case. In January 1993, Royal Air Maroc signed a contract with Boeing for twelve 737s valued at $525 million. Canada: The federal government, through the Department of External Affairs and International Trade Canada (EAITC), uses advocacy in its export promotion efforts. Trade commissioners located abroad intervene in trade disputes and assist Canadian companies in gaining equal access to foreign contracts. The department also has intervened in export promotion activities abroad where it feels the political situation is detrimental to trade promotion. The federal government restricts its use of advocacy for export promotion to Canadian corporations that have a minimum of 50 percent Canadian-resident ownership, or that provide substantial employment in Canada. Italy: The Italian government frequently employs government-to- government presentations on behalf of its companies. Typically, the government advocates on behalf of firms attempting large projects (e.g., construction). The government also acts on behalf of particular industries. For example, in an effort to curb Chinese silk exports, the Italian government recently urged China to favor the Italian Como silk industry. United States: The US government, by contrast, has used advocacy largely as a reactive export promotion tool. This limited advocacy has had some interagency coordination, but it has been inconsistent. Decisions regarding when and how to provide advocacy are not based on any overarching USG commercial strategy. Currently, because there exists no information network or method for prioritizing action across relevant agencies, numerous opportunities are lost where USG advocacy could be decisive in enhancing US firms' competitiveness. Furthermore, advocacy by high-level US leaders has been exceedingly rare compared with foreign competitors. While ambassadorial-level advocacy is certainly useful and important, the United States often is outgunned by Cabinet-level officials or even heads of state of other nations. USG advocacy activities generally are undertaken at the request of a US company, often after it has encountered problems with the purchasing country, or even after the company has lost the sale or the bids have closed. Advocacy must be a two-way street between the US Government and the business community. If firms seek USG assistance early, advocacy efforts will be most successful. Thirty years ago, US business dominated world markets and did not need government support to succeed. With the rise of powerful Asian and European firms that have the aggressive backing of their governments, the ability of US firms to access and compete successfully, particularly in key sectors of critical growth markets, has been challenged. Priority major projects and procurement contracts constitute immense export market opportunities, not only for large US firms but for many that are small and medium-sized. In fact, a large number and variety of smaller American companies, acting as suppliers or participants in consortia, often benefit the most from major overseas infrastructure and other contracts. However, the limitations of the current advocacy process adversely affect the ability of US companies to compete in the face of aggressive foreign government advocacy. This has long- and short-term negative effects on the US economy. GOAL The goal of improved advocacy is, consistent with US interests and objectives, to provide appropriate US government support to large as well as small and medium-sized US firms as they face foreign competitors who are aggressively backed by their governments. The Administration will establish a strategically focused interagency TPCC Advocacy Coordinating Network, led by the Secretary of Commerce. The Network will cooperate closely with US business and labor to take a forward planning approach, seeking to use fully the power and influence of the US government in supporting American companies competing for overseas contracts, particularly in winning priority project and procurement contracts that support US jobs. This network, through strategic planning and decision-making based on an agreed-upon set of criteria, will prioritize USG advocacy activities in order to achieve a maximum increase in exports to critical markets in key sectors and maximize job creation for American workers. It will ensure that all available USG means for enhancing advocacy effectiveness are employed in a consistent and coordinated fashion, in close cooperation with the private sector. This will strengthen firms' market presence in key sectors of critical growth markets. RECOMMENDATION Establish the TPCC Advocacy Coordinating Network, chaired by the Secretary of Commerce or his delegate, to develop an effective system of aggressive advocacy in close coordination with the private sector and within the context of overall US foreign policy. Network agencies will be Commerce, NEC, Energy, State, OPIC, Transportation, Eximbank, USTR, TDA, USAID, Treasury, Labor, and Defense. The Department of Commerce will act as the central contact point, through an office in the International Trade Administration designated by the Secretary. A small staff will be dedicated to advocacy-related activities. Each Network agency will designate one primary TPCC contact point for advocacy-related activities. All relevant parts of each agency should work through their agency contact when working with others in the Network, particularly for time-sensitive issues. It is important that agency contacts be able to access the highest levels of their agencies when necessary for quick response to advocacy requests. The mandate of the Network will include the following: a. Strategic Planning: This will involve developing a set of agreed- upon criteria to guide decision-making and set priorities, based on the information below. Projects will then be evaluated by the appropriate agencies for potential feasibility funding, financing, or other services or action to assist US companies. Setting criteria to guide prioritization and decision-making is a critical step. Criteria to be used for advocacy-related decisions must logically be connected to larger TPCC objectives and resource allocation criteria. The operations of agencies involved, in particular those of financing agencies (Eximbank, TDA, OPIC), will be affected by the priorities established through this process. For example, staff and financial resources as well as research capabilities must be oriented toward higher priority projects. b. Information Gathering: New and existing information will be gathered on projects and possible project opportunities that concern US companies in order to determine who the competition is and how they are approaching the project, including analyzing unfair trade practices and identifying which projects are likely to require US advocacy. Information-gathering and analysis required by the advocacy Network will draw largely on agencies' existing sources and means -- particularly the overseas offices of Commerce, State, and USAID. The strategic commercial plan (see Overseas Network section) to be developed by embassies overseas will be a key source of information to be used in the strategic planning process for advocacy. Project-specific information will be gathered into an advocacy database at Commerce. c. Needs Assessments: For promising sectors (determined through the strategic planning process) relevant agencies should also consider providing technical assistance to help countries with project preparation and pre-feasibility work. This could be done through feasibility studies or reverse trade missions where key host country officials and technicians visit the US to explore US technology and capabilities. d. Financing: Following from the strategic planning process, and based on the selection criteria and data analysis, targeted projects worldwide should be reviewed by relevant agencies to ensure the best way to apply available US financing. The efforts of all US financing institutions should take into account the financing available through the multilateral development banks. e. High-level Advocacy Contacts: This network, through the Commerce contact point, will act as a strike force that will react quickly to calls for personal cabinet and higher level advocacy activity. f. Performance Measures: The TPCC will report to the Secretary of Commerce annually on the effectiveness of USG advocacy efforts, using agreed upon quantitative performance measures that track actual results in terms of increased exports and contracts won by US suppliers. ENVIRONMENTAL TECHNOLOGIES EXPORTS BACKGROUND Process This section is the product of the TPCC Environmental Trade Working Group, mandated by Section 2313 of the Export Enhancement Act of 1992. The President, in his Earth Day speech, also ordered that an interagency group, including DOC, DOE, and EPA, assess current environmental technologies and develop a strategic plan to enhance competitiveness of the industry; this report is expected in mid-October. The two groups have worked closely together, and the mid-October report will provide detail on policy recommendations and implementation issues consistent with the framework established by the TPCC Environmental Trade Working Group. Critical Role of Technology Development in Trade Competitiveness Sustained technology development is a key to successful export promotion and international trade competitiveness. As President Clinton said, by working in partnership with industry and international organizations, and by encouraging both continued technology development and trade competitiveness, America can maintain our lead in the world economy by taking the lead to preserve the world environment. Technological progress also will generate private sector growth and high-skill, high-wage jobs into the next century. It is a cornerstone of sustained job creation. Spurring technology development is a core policy goal for this Administration, and a focused and successful technology policy is critical to effective trade policy. The USG has significant technology and R&D resources. The Departments of Defense, Energy, and Commerce, NASA, and the EPA are notable centers of an extremely broad array of activities aimed at advanced technology development. In the past, these resources were largely uncoordinated, or only partly focused on specific -- principally national security- related -- issues. This Administration believes that better coordinating these resources can enhance their role in strengthening the technological base of US industry and make a large contribution to the international competitiveness of American manufacturing and service industries now and in the future. This new technology policy has several strands. First, it focuses on the development of precompetitive technologies applicable to civilian industries. Second, it stresses easing the transfer of technology and research to private industry. Partnership and collaboration between the private and public sectors -- in the form of partnerships, consortia, grants, or ongoing dialogue -- are all important components of this technology transfer. Another key strand is regulatory revision to both streamline and ease the transfer of technology and to remove barriers to private sector trade development. The new technology policy represents a major investment in the development and dissemination of new civilian technologies that will pay dividends well into the 21st century. Through technology, US industry can improve its international competitiveness and continue to assert global industrial leadership. Environmental Technologies Industry The market for environmental goods, services, and technologies is one of the most attractive arenas of USG focus to enhance our international competitiveness and export performance. This industry is a technology- driven one which will create high-wage jobs in the years ahead. It is a prime example of the positive connection among trade, technology, environment, and the business community. Any industry discussion is hampered by both definitional and data issues. The range of environmental technologies is broad and often cross-functional; it includes equipment and services. Key technologies include pollution control, pollution avoidance (i.e., clean technologies), monitoring and assessment, infrastructure projects devoted to environmental objectives, and clean up and remediation. Estimates of the current and potential world market for the environmental services industry vary from $350 billion to $380 billion in 1992, and it is estimated that worldwide spending on environmental protection could be as high as $590 billion in the year 2000 (high compound annual real growth of 6.7 percent). The US environmental goods and services industry is a significant net exporter, principally of services. Estimates of the US industry trade surplus in 1991 range from $1.1 billion (goods only) to $4 billion (goods and services). US environmental technology trade is rapidly growing; between 1989 and 1991 exports grew 75 percent; imports, 45 percent. Demand and market characteristics vary greatly from country to country. A country's demand for environmental technologies is a function, in part, of its level of development. Developed countries have mature regulatory and enforcement regimes, and currently comprise the bulk of the market; the United States leads with 35 percent of the global environmental products market, followed by Western Europe at 25 percent, and Japan at 5 percent. Middle-income countries generally have some regulatory mechanisms in place, with an emerging environmental industry and technical capability. Less developed countries lack regulatory regimes, in-country financial capabilities, or industry/technical capabilities. The market for environmentally useful technology is different because, unlike other markets where demand is driven by consumer preferences, environmental technologies are primarily driven by the government. Applicable regulations drive the required performance of environmental technologies along with selected local or regional use-based considerations. The highest future growth is expected in developing and middle-income markets. Pacific Rim countries are expected to double expenditures on environmental technologies by 2000. Similar growth is expected in Mexico and Latin America. The majority of these countries' short-term needs are for low-technology projects in solid waste management, water delivery and treatment, and air pollution control. Middle-income markets like Mexico have greater demand for more sophisticated products and services (e.g., monitoring and consulting). The US environmental technologies industry is highly differentiated by size and technology with little reliable data on its structure. Regional considerations are also important; California has the largest concentration of the industry ($19.3 billion sales in 1991), followed by Texas ($8.6 billion), and New York ($8.1 billion). The US industry faces significant international competition, especially from Germany and Japan but also from newly industrializing countries. While the US leads in some segments, clear-cut American leadership in this worldwide industry is by no means obvious. The OECD, for example, asserts that Germany leads in air pollution control technology, Japan in water treatment, and the United States in remediation technology. Many other countries, including major competitors, have government-run or funded programs to enhance their exports of environmental goods, services, and technologies. These programs range from direct subsidies for trade fair participation (Germany) to substantial funds for long- term environmental protection which may indirectly assist the national industry (Japan). Some sets of country programs appear to be considerably more aggressive and extensive than existing USG involvement. USG programs encompass a range of market development and market assessment efforts, as well as export promotion activities to directly support environmental technology exports. Also, a number of other regulatory and technology development programs probably indirectly relate to export competitiveness. Major programs by department are as follows. Commerce Department: Export promotion activities consist of export counseling, market information and trade leads, financing, and technical assistance. All of these aim to provide potential exporters with different types of information and support. Most programs are part of more general export promotion activities not restricted to environmental technologies. In addition, NIST and NOAA have substantial technological expertise, and NIST in particular has a major role in environmental technology development. NIST has expertise in pollution avoidance technologies integrated into industrial processes, and the Manufacturing Technology Center to disseminate technology. In atmospheric and oceanic sciences NOAA is heavily involved in environmental technology development. Environmental Protection Agency: EPA addresses issues of technology cooperation with other countries, environmental technology development, training, and technology demonstration. Many of these programs indirectly help US businesses with export promotion. Such programs include EPA-conducted training workshops and conferences, technology testing, data bases, clearinghouses and information centers, and bilateral and multilateral cooperative agreements between EPA and other organizations. Other EPA programs primarily develop demand in potential export markets by identifying, anticipating, creating, and responding to emerging overseas needs for existing and future products. EPA consults with and advises other countries in establishing their environmental regulatory and testing standards and protocols. The form and content of these standards often substantially affect the international competitiveness of US environmental technology goods and services. Another aspect of EPA activity with implications for competitiveness is the setting of US regulatory standards. The form and content of US regulatory standards may have a substantial effect upon the rate and shape of environmental technology development and the structure of the US environmental industry, and thus indirectly influence US export competitiveness. To date, however, the impact of domestic regulation on international competitiveness has not been fully addressed. Export-Import Bank and OPIC: Eximbank offers loans, guarantees, and insurance to support the sale of US goods and services overseas. OPIC provides loans, guarantees, and insurance to support US foreign direct investment in developing markets. Both agencies place increased emphasis on environmental activities. Energy Department: DOE focuses on energy exports, and leads the Committee on Renewable Energy Commerce and Trade (CORECT), a public- private working group to promote US energy products and services internationally. DOE also holds trade missions and conferences to promote the energy sector. USAID and Multilateral Development Banks: They play a significant role in overall market development in developing countries. In addition, USAID has programs involving technical assistance, training, and policy advice to encourage developing countries to open their economies to international trade and investment, thereby creating new opportunities for US business. USAID is the lead in the multi-agency US-ASIA Environmental Partnership, a program designed to protect Asia's environment and promote economic development. The World Bank and the regional multilateral development banks (MDBs) are now a major source of financing for environmental projects. In 1992, these banks loaned around $3 billion for environmentally related projects. In addition, multilateral agencies and funds are increasingly active in environmental technologies. The Global Environment Fund (GEF), jointly administered by the UN and the World Bank, is designed to assist less- developed countries deal with the added costs of addressing global environmental issues. Through a variety of techniques (e.g., financing of prefeasibility studies by a specific country) some countries attempt to gain competitive advantage for their environmental technologies industries in bidding for the funded projects. These are the principal department and agency involvements. Other departments with some involvement include TDA, SBA, USTR, and Labor. The US Trade Representative, for instance, is concerned with market access and international standards and regulatory regimes, both of which have a substantial potential effect on US environmental technology exports. The Department of Labor, through the Occupational Safety and Health Administration and the International Labor Organization, is involved in establishing international standards to protect workers from environmental dangers. ISSUES While a range of programs support environmental technology exports, generally the federal government does not coordinate the development and diffusion of technology, assistance to the private sector during the commercialization stage of business development, or export assistance programs. Specific problems include: o There exist conflicting or uncoordinated policies toward developing and middle-income markets, which will have the greatest growth over the next decade and represent significant future export opportunities. The needs of such markets are different from those of established markets because they require long-term market development that may not pay back in the short run. Key issues include the appropriate role of development assistance in favoring US commercial interests (e.g., tied aid), investment in training, financing of demonstration projects, and establishing regulatory and testing protocols favorable to US industry. o Much of the industry consists of small and medium-sized firms that either are unaware that financing support is available or, because of the perceived higher risks associated with projects in this industry, find that private financing is less available. Although both agencies have instituted aggressive efforts to widely inform and educate the environmental technology industry and banking community about USG financing support, each has limited resources with which to reach this broad constituency. (See Export Financing in Chapter 4.) o Export promotion activities are poorly coordinated. This issue appears particularly acute for middle-income countries, where environmental technology markets already exist and are growing rapidly. DOC, EPA, and DOE activities support exports, including trade missions, data bases, and demonstration projects. o No government agencies have targeted or identified the most attractive export promotion opportunities. o The extensive range of technology development support programs -- particularly at DOE and EPA -- exists outside the trade and export purview. EPA and DOE cooperate with industry and universities to develop new and innovative environmental technologies with little consideration of export potential. o The implications of US regulatory standards for US export performance are poorly understood. Some observers assert that specific point source standards have limited the development of US-based environmental technology. o US participation in international standards setting and multinational environmental treaties is poorly coordinated with trade and competitiveness considerations. US export competitiveness can be enhanced through international regulatory or testing protocols that follow US form or that match technologies where US industry dominates (e.g., certain types of continuous monitoring). (See Product Standards and Certification in Chapter 5.) o No data exists for tracking and understanding the industry. Domestic data is lacking because of the absence of any single Standard Industrial Code (reflecting in part the dual-use nature of much of the industry); trade data is inadequate because of similar shortcomings in the international trade classification system. It is unclear to what extent this lack of data is perceived as a problem by the industry. o There is no single coherent source of information available to the public about the range of government activities in environmental technologies or industry data collected by the government. o At virtually all USG agencies there is a lack of knowledge of existing programs relating to environmental technologies. o Small firms that are new to exporting comprise much of the industry. This sector must be addressed in order to enhance export performance. Although this challenge is not sector specific, the environmental technologies sector may be a good case study for developing effective policy. GOALS The environmental technology industry represents a unique opportunity. The US market is the world's largest, and American industry is a leading force in global markets and in many technologies. The US government must develop a coordinated and focused set of programs and policies targeted to achieve: 1. Short-term growth of US environmental exports through targeted advocacy programs. 2. Longer-term growth of US environmental exports through market development that targets exports to developing country and middle- income markets. 3. Continued development of new environmental technologies and the application of existing technologies to new markets, for use in US and other markets. 4. An integrated and targeted approach to export promotion for newly industrializing and advanced markets in which all agencies understand their roles and responsibilities. Such an approach needs to prioritize its objectives and establish measurable performance standards. Financing availability must be provided. 5. Identification of the types and forms of data needed for effective USG policy formulation and measurement and for dissemination to US industry to assist in export activities. Using both USG and private sources, help close this information gap. 6. Integration of US participation in international standards setting and environmental treaties to include consideration of the effect on domestic export competitiveness. In addition, these goals must be achieved while: o Establishing clearly defined program accountability and performance standards. o Continuously upgrading USG program and personnel capabilities to support the environmental technologies industries. o Advancing the environmental goals established in Agenda 21 by the UN Conference on Environment and Development and in other international environmental agreements. 7. Assistance to US firms in incorporating MDB and Global Environment Facility financing into the export financing strategies of US environmental firms. NEXT STEPS Consistent with the framework of problem identification and goals established here, a set of detailed policy and implementation recommendations will be outlined in the mid-October report of the interagency group established by the President's Earth Day speech. This group will continue to work closely with the TPCC Environmental Trade Working Group. ________________________ 1/ Business groups, usually organized from within one industry, that visit one or more countries to meet potential business partners (agencies, distributors, etc.) to negotiate business arrangements or explore business opportunities. 2/ Invitations to groups of foreign private sector and government officials to visit the United States to receive technical assistance and view US technologies and systems, for the purpose of promoting the sale of American products and services to those officials/countries. 3/ Large exhibitions in foreign countries where companies display their products and potential business partners. 4/ These are usually held domestically and typically address the how to of exporting. 5/ The Mission Program Plan is the Department of State's annual plan for each overseas mission that describes goals and objectives, and the strategies for attaining them. The Country Marketing Plan is the Department of Commerce document that is used on a country-by-country basis providing background and best prospects information for expanding US exports to the host country.