Nearly all US states posted triple-digit export growth to China in 2010, and exports performed well in the first quarter of 2011.Overall US exports to China rose rapidly in 2010, increasing 32 percent over 2009, when exports dipped slightly because of the recession. According to a recent report by the US-China Business Council (USCBC), publisher of the CBR, exports to China are a vital part of the US economic recovery. China remains the third-largest US export market. Only Canada and Mexico—both of which have free-trade agreements with the United States—buy more US goods. China was the fastest-growing export market among the top five US export destinations last year, and total US exports to China reached $91.9 billion in 2010, up 468 percent since 2000. US exports to the rest of the world increased 55 percent over the same period. Since 2000, US exports to China have risen faster than exports to any other market.
The top five US exports in 2010 were computers and electronics, crops, chemicals, transportation equipment, and non-electrical machinery. The top five states exporting to China—California, Washington, Texas, Louisiana, and Oregon—primarily exported these goods.
More states are increasing exports to China, with 47 states registering triple-digit growth in exports to China since 2000 (see US State Exports to China). Though the top three states produce roughly one-third of US exports to China, nearly half of US states exported more than $1 billion in manufactured and agricultural goods to China in 2010. Thirty states now count China as one of their top three export markets. Some of the top 15 state exporters are states not usually thought to benefit from trade with China, such as Michigan, New York, North Carolina, Ohio, Pennsylvania, South Carolina, and Tennessee.
The China market also offers significant opportunity for US small and medium-sized enterprises (SMEs). According to the US Department of Commerce’s Census Bureau, American SMEs—businesses with fewer than 500 employees—exported $22.6 billion worth of goods, or roughly 34.5 percent of all US exports to China in 2009 (see Breaking Down Barriers for Small Business Exports).
Despite rapid increases in US exports to China, US products made up just 7 percent of PRC imports in 2010, down from 10 percent in 2000. Japan, the European Union, South Korea, and Taiwan exported more goods to China than the United States last year.
US exports to China in the first quarter of 2011 increased 23 percent year on year to reach $26 billion, the second-highest quarterly performance for US exports to China. This number could reach roughly $115 billion by the end of 2011. Agricultural products were the top export to China, with computers and electronics, chemicals, non-electrical machinery, and waste and scrap rounding out the top five exports in the first quarter of 2011.
All 2010 data used in the USCBC study came from the US Census Bureau. For each of the 50 states, the report tracked the annual volume of exports to China over the past 11 years, 2000-10 growth in exports to China, 2000-10 growth in exports to the rest of the world, top five export markets, and top five exports to China. The complete report is available on the USCBC website. USCBC will release a report on US exports to China by congressional district this summer.
Breaking Down Barriers for Small Business Exports
Small businesses made up 97 percent of all US companies that exported goods and services abroad in 2009, but they only generated roughly one-third of all export revenue, according to the US Census Bureau. The US government is looking to boost small business exports with the National Export Initiative (NEI)—an initiative started in January 2010 by US President Barack Obama—which aims to double US exports and create millions of jobs in the United States by the end of 2014.
“To double exports we need to increase the number of small business exporters,” said Richard Ginsburg, an international trade specialist with the US Small Business Administration (SBA). Fifty-eight percent of roughly 250,000 US small and medium-sized enterprise (SME) exporters ship to just one market. Ginsburg says one of the key goals of NEI is to help those firms ship to multiple markets.
China has been a growing market for American SMEs—companies with fewer than 500 employees. According to the US International Trade Administration, the number of American SMEs exporting to China increased by 776 percent from 1992 to 2009. But there is still room for growth. Though China is the third-largest market for SME exports, only 10.2 percent of American SME exporters shipped goods to China in 2009.
US Export Assistance Centers
Of the 20 US government agencies involved in export assistance, SBA specifically aims to increase the number of small business exporters through programs delivered through US Export Assistance Centers. Senior SBA trade and finance specialists—along with employees from the US Commercial Service and the US Export-Import (Ex-Im) Bank—staff 20 of more than 100 US Export Assistance Centers in metropolitan areas around the country. The centers help “export-ready” companies begin to export or expand to new markets abroad by providing counseling, training, export insurance and loans to these businesses; conducting market research; and facilitating contracts between US exporters and foreign buyers.
Ginsburg says small business owners usually approach an Export Assistance Center when they want to make a deal with a foreign buyer or when they receive an order from a foreign buyer and have never exported before. The centers can help companies understand payment terms and conditions, help them handle logistics such as shipping, and refer them to translators. These transactions are often simple when doing business in the United States, but they can be complicated when crossing international borders.
Counseling, outreach, and loan programs help break down what Ginsburg calls the “psychological trade barriers” that prevent small businesses from exporting. “There are people who feel they can lose their business if they export,” Ginsburg says. “The risks are so much more than shipping across town or across the state or across the country.” For example, small business owners sometimes fear that they will not be able to collect payments from overseas buyers.
Companies that want to export face barriers such as language and lack of knowledge of the foreign regulatory environment, and—specifically for businesses exporting to China—fear of intellectual property rights infringement, Ginsburg says.
Export loans for small businesses
In addition to counseling and training, SBA guarantees loans of up to $5 million, while the Ex-Im Bank provides export financing for amounts over $5 million. “It’s a success story for SBA when we’re working with a small business exporter and they outgrow the small loan amount and need more than the $5 million SBA threshold,” Ginsburg says.
SBA runs four loan programs for small business exporters: the Export Express Program, Export Working Capital Program, International Trade Loan Program, and SBA and Ex-Im Bank Co-Guarantee Program. The Export Express Program, formerly a pilot program, was made permanent in 2010 with the passage of the Small Business Jobs Act of 2010 to support the NEI goal of increasing small business exports. The program aims to streamline the export loan process for small businesses. SMEs that have been operating for at least 12 months can receive up to $500,000 to finance export activities, such as participating in foreign trade shows, purchasing equipment, and translating product literature. The law also permanently increased loan limits on export working capital and international trade loans.
Companies can obtain more information on export loans from the nearest Export Assistance Center and apply directly for loans through SBA lenders. Visit www.export.gov/eac to contact the nearest center or www.sba.gov/content/us-export-assistance-centers for a list of centers with SBA representatives.