Small-business owners have long prided themselves on their guts, grit, appetite for innovation, and willingness to take risks, but many of those same entrepreneurs have long felt that their achievements and concerns get scant respect, and less encouragement, from policymakers. Case in point: World Trade Organization ministerial conferences, where the priorities of small and midsize enterprises have seldom seemed more than footnotes on the official agenda. If James Morrison, president of the Small Business Exporters Assn. (SBEA), has any say in the matter, that may be about to change.
Morrison's credentials certainly appear to be in order. The head of the largest and oldest nonprofit organization dedicated exclusively to America's mom-and-pop exporters, he's also a member of the Bush Administration's Advisory Committee on Trade Policy & Negotiation. Now, having just been accredited as one of the 950 representatives of nongovernment organizations approved to attend the WTO's September parley in Cancun, he's eager to project the small-business perspective at a global forum, as he explained to BusinessWeek Online's Lisa Miller. Edited excerpts of their conversation follow:
Q: What are the major concerns you're expecting to raise in Cancun?
A:From a theoretical or technical perspective, there are two ways of looking at trade agreements.... One is what you might call the variable cost to a business, and a typical variable cost is a tariff. It's variable in the sense that the more goods you ship, the more you pay.
There's no inherent disadvantage to being a small business in tariffs. There is a disadvantage to everybody, however -- and it's a major disadvantage: Goods from your country cost more than the goods from everybody else's country.
Where I think the difference lies with small enterprises is in the "fixed costs" barriers. To get into a country, [say] you are required to obtain a license that costs $10,000. For a multinational corporation, that's a nuisance. For a small business, it's a show-stopper. Ten thousand dollars may be more than your margin on the deal. If we're talking about a $60,000 or $80,000 or $100,000 deal, that [extra] $10,000 may be more than you can hope to make. So you won't do it.
Q: Is that one of the major barriers, then, to entrepreneurs taking their business international?
A:There are a bunch of different reasons. One that goes under the general terminology of transparency is whether you can figure out what the rules are -- and whether, once you do figure them out, the rules are going to change without you knowing it. That's a big problem for big companies, but for small companies, it's terrifying. [You] get halfway into a deal and find out about a rule that you never knew about because it was never published. Somebody just tells you, "We forgot to mention that this is one of the rules"
Another case is so-called "customs harmonization," which simply means that the customs procedures in Country X are going to be the same as customs procedures in Country Y. There should be no curve balls: If you understand it here, you're going to understand it there.
Another example of a fixed cost: Some countries have what they call a "physical presence" requirement, meaning that, in effect, you have to open up an office in the country in order to trade there. Again, a Fortune 500 country says, "O.K., we've got to open up an office." For a small business, it's "What? We've got to open up an office? We can't afford to do that!" So I try to emphasize the importance of removal of physical-presence requirements for trading.
Q: What about anti-Americanism. Are small-business exporters (SBEs) running into problems?
A:I haven't heard much of it. I was talking the other day to one of my members who sells a lot of products in Italy, and he was talking about how, on the ride from his hotel to one of his customer's offices, he passed all these anti-American signs painted on walls. And then he gets there, and it's just like old times. [They] sit down, they chat, have a drink, and talk about the goods and services they want to trade. Most business people are in business to make money, not to make statements.
Q: How would you characterize your stance? Very much for free trade?
A:Yes. I believe in fair trade, too. I believe if a country makes a commitment to do something in international trade, we should hold them to that commitment. I'm not a naïf. I understand that there are always people who will want to cheat, and you have to keep your eyes open. But, yes, with that proviso, I do believe in free trade. I do think it's the best thing all the way around.
Q: So how do you react to the antiglobalist argument that freer trade is somehow harming developing countries?
A:Well, why are they trying so hard to have free-trade agreements? Why do I go to these meetings with the South African Customs Union all the time? Because South Africa, Botswana, Namibia, and these countries in southern Africa all want to have a trade agreement with the U.S....and have our companies go over there. The reason is, they think it's in their self-interest. They wouldn't be over here asking for it if they didn't.
Q: So the whole image of multinational corporations forcing their way into other countries is false?
A:Multinational corporations are trying to force their way into other countries, sure. But the other countries for their part are either welcoming those companies or doing what we should be doing, and we don't always do: understand that the best defense is a good offense. If they're coming in here, we'll go over there.
Every time I hear somebody complain about imports -- a business person -- I always say, "What are you exporting these days?" [They reply] "Oh, ooh, well, we don't really export." Well, then, don't complain.
Q: At the WTO meetings, how much influence do you expect to have?
A:Not much, to be honest.... The influence is something that you develop over time. You develop it on the basis of the economic strength of the people you represent but also on the basis of the soundness of your arguments, your ability to persuade others, and your ability to work with other people. And that takes time.
Q: Are there certain groups that will be your natural allies?
A:You can slice it two ways, horizontally and vertically.
Vertically, we're part of the U.S., and our view is going to be that of American businesses. And we're going to be on the same page, probably, with the USTR [U.S. Trade Representative] and most American businesses on an awful lot of issues. There is a horizontal dimension, too, in [that] small-businesss exporters are going to be thinking like small-businesss exporters in other countries, and priorities for us will tend to be priorities in other countries.
Q: Do you have any advice for small businesses dealing with the regulatory environment in foreign trade?
A:One of the things I would say to small businesses is, if you've got an obstacle to your ability to trade in a foreign country...and it's causing a problem for your company, one place to stop is at [the office of] the U.S. Trade Representative. Go there and say, "You know, I'd really like to trade in this country, but they've got this requirement that makes it almost impossible. Could you do something about that?"
I don't want to toot my own horn, but...just drop us a note [at SBEA].... If it's something that I think is important and/or general, I will try to bring it up with USTR myself. If necessary, I'll mention it as a possibility for WTO negotiations.
Edited by Roger Franklin