Enterprising entrepreneurs and small businesses have been part of the fabric of America from its earliest days. The historic Trans-Pacific Partnership Agreement, signed by the United States in Auckland, New Zealand last week, advances the competitiveness of America's small and medium-sized enterprises (SMEs) in the 21st century. While a good deal has been written about the TPP's positive impact on American businesses writ large, it is worth shining a spotlight on its benefits for SMEs.
SMEs are a powerful force behind U.S. exports and a locomotive for the overall U.S. economy. In 2012, 97 percent of exporters shipping goods to TPP signatory countries were SMEs. That year, 170,000 SMEs exported nearly $180 billion worth of goods to TPP countries. From 2009-2013, SME exports grew 52.5%, a rate more than five percent higher than large company exports.
Across the board, TPP contains provisions that will save businesses of all sizes time and money by offering fair treatment, more certainty, and transparency in trading within the TPP region that is home to 40% of global GDP and 800 million consumers. And U.S. companies will benefit from the elimination of 18,000 foreign taxes -- in the form of tariffs -- on U.S. goods and services.
But SMEs stand to gain the most from the different ways in which TPP will cut through shipping and other bureaucratic "red tape." The Agreement provides for more efficient and transparent customs procedures, advance rulings on how a product will be treated to prevent surprises at the border, and provisions that enable expedited shipping and reduced paperwork. Why is this important for SMEs? Large companies have the resources to clear bureaucratic hurdles, but small ones do not have that luxury. If the overhead costs of selling to and operating in a market are too high as a result of barriers at the border, small businesses may be left with no choice other than to forego the market altogether.
TPP requires fair and transparent regulatory procedures for product and technical standards that can otherwise entangle small businesses, giving everyone the opportunity to comment on, understand, and adapt to changes in local rules, just as we do in the United States. TPP will help ensure products already tested here and sold into a TPP country do not require wasteful and duplicative testing overseas.
SMEs often encounter formidable challenges when trying to sell to foreign governments. TPP places a preference on the use of the English language, where possible, in publishing government procurement opportunities, making it easier for SMEs to identify opportunities as soon as they are posted. TPP has provisions specifically relating to SMEs in the government procurement process, including publishing information on procurement processes in an online portal so information is available and easy to find.
While TPP's benefits to small businesses are spread throughout the Agreement, it is the first U.S. free trade agreement to include a separate chapter focusing on issues specific to SMEs. TPP will ensure that SMEs have ready access to tailored information: Each country commits to creating a website for SMEs that provides user-friendly information on how they can take advantage of the agreement. These websites will distill relevant information spread out over hundreds of pages of the Agreement, plus additional country-specific information, to fit the needs of small and medium-sized businesses. This will include a description of TPP provisions relevant to SMEs; links to websites for relevant agencies in that TPP country; information on standards and regulations in that TPP country; procedures concerning intellectual property rights, business registration, and taxation; and foreign investment and employment regulations.
Additionally, TPP will create a SME Committee that will review how well SMEs are taking advantage of the benefits of the Agreement and consider ways to further enhance its positive impact.
Taken together, these features will help American small businesses compete and win more business in one of the fastest-growing and economically dynamic regions of the world.