On October 5, 2009, Ambassador Kirk announced that the Office of the United States Trade Representative was launching an initiative aimed at increasing exports by small- and medium-sized firms in the United States. In addition to creating a USTR-wide working group focused on SME issues, Kirk announced that USTR was requesting an investigation by the USITC to better understand how many of America's small- and medium-sized enterprises export now, their role in generating employment and economic activity in the U.S., and how increased trading opportunities might benefit these businesses and their workers. This first USITC report released today covers SME exporting activity. Key findings include:

· SMEs play a crucial role in job creation. Over the last two decades, SMEs have accounted for almost 65 percent of new jobs created in the U.S. Overall they account for half of non-farm U.S. employment.

· Almost 80 percent of American SME employment is within the services sector, compared with 85 percent in larger companies. Firms providing professional, scientific, and technical services account for a larger share of services sector employment within SMEs than in larger firms.

·  American SMEs are leaders in minority and foreign-born employment and opportunity. Small and medium employer firms are more likely to be minority-owned and to employ a foreign-born person than larger firms. 11.6 percent of all employer SMEs are minority owned.

· The roughly 250,000 American SMEs that export merchandise account for nearly 30 percent of U.S. merchandise exports; the SMEs constitute about 97 percent of American merchandise exporters.

· American SME exporters increase employment faster and pay higher wages than non-exporting SME firms. SMEs that export are more skill and capital intensive than those that do not. They deliver on these inputs by demonstrating higher productivity that supports better wages and helps competitiveness.

· However, American SMEs still are not exporting as actively as larger firms. As a share of their overall business, large U.S. firms are getting three times the value from foreign trade that SMEs are. This weak export involvement led to exports accounting for only 3.8 percent of SME GDP in 2004.

· Technological advances (for instance, on the Internet) and government programs are now opening the door to a larger export role for SMEs. In 2008 the NAM found that 13 percent of its SME manufacturers now derive at least 25 percent of their sales from exports, over triple the share of firms in 2001.

· American SMEs are key drivers of innovation, which will be a key to a sustainable U.S. recovery, and increased trade can help the SMEs to take advantage of their innovations. Studies show that American SMEs produce more patents of significance per employee than big firms.

· The largest markets for American SME merchandise exporters were with NAFTA partners Canada and Mexico (just like their large firm counterparts). These markets accounted for more than 30 percent of SME merchandise exports from the United States. The principal SME exports were computers and electrical products, machinery, and chemicals; they also have significant apparel and wood exports.

· American SME merchandise exporters engage more actively with higher-income small markets - including Hong Kong, Switzerland, Australia, and Israel - than they do to emerging markets like China and India.

· Though manufacturers account for almost three quarters of total U.S. merchandise exports, trade by wholesalers is growing fast. Whereas manufacturer exporters are overwhelmingly large firms, SMEs account for 57 percent of wholesaler and other non-manufacturer merchandise exports. This type of trade more than doubled between 1997 and 2007.

· Services now constitute 30 percent of U.S. trade, but the USITC found data on cross-border exports by U.S. SMEs in the services sector to be unavailable. The report instead analyzes the practices of U.S. SMEs operating abroad through foreign affiliates, and suggests that those practices may predict export patterns. Though the success of foreign affiliates is important to U.S. parent companies, foreign investment may not offer the same direct economic and employment benefits for the US economy as cross-border services trade. The forthcoming third USITC study hopes to provide better information on services exports.

· Among U.S. services SMEs operating foreign affiliates, those providing professional, scientific and technical services are the most active and the most profitable. Though it does not yet have supporting data, USITC believes that these are the most important sectors for U.S. SME services exports as well.

· U.S. services SMEs have been most active in establishing foreign affiliates in the markets of our NAFTA partners, the EU, Japan and Korea. USITC believes subsequent data will show these to be the most active markets for cross-border services exports by U.S. SMEs as well.