Copyright 2000 eMediaMillWorks, Inc.
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Federal Document Clearing House
Congressional Testimony
May 16, 2000, Tuesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2467 words
HEADLINE:
TESTIMONY May 16, 2000 AIDA ALVAREZ ADMINISTRATOR US SMALL BUSINESS
ADMINISTRATION HOUSE SMALL BUSINESS TAX, FINANCE, AND EXPORTS
CHINA TRADE IMPACT ON SMALL BUSINESS
BODY:
MAY 16,
2000 STATEMENT OF AIDA ALVAREZ ADMINISTRATOR U.S. SMALL BUSINESS ADMINISTRATION
CHINA TRADE IMPACT ON SMALL BUSINESS BEFORE THE SUBCOMMITTEE ON TAX, FINANCE
& EXPORTS Mr. Chairman, Ranking Member McCarthy and distinguished members,
thank you for inviting me to testify today concerning America's small businesses
and trade with China. As this Subcommittee is well aware, the interests of small
business are often overshadowed by other matters in issues of national
importance, such as the China trade debate. But, as this Committee knows well,
small business is big business when it comes to international trade. Some may
disagree on how best to handle our bilateral trade relationship with China, but
I commend all the members of this Subcommittee for recognizing how important the
China market is to small business. Small business is playing an increasingly
important role in our international trade efforts. In just five years, the
number of small business exporters doubled-from 1 12,000 in 1992 to 202,000 in
1997. The most recent export profile prepared by the Department of Commerce also
shows that small business represents: - 97 percent of all exporters -one-third
of the dollar value for all exports, up from 26 percent in 1987 (the value of
small business exports has increased over 300 percent over the past five years)
the most dynamic portions of the export economy - technology, services, and e-
commerce transactions. The benefits of trade are reflected in that fact that
small businesses exporters are: -20 percent more productive than their
non-exporting counterparts -experience2Opercentgreaterjobgrowth -pay wages that
are 15 percent higher on average, and -provide benefits that are I 1 percent
higher on average But the most promising facts about small business trade are
that today about two- thirds of small business exporters are exporting to only
one country, and less than I percent of the nation's 25 million small businesses
are actually involved in trade. Consider the possibilities if we increased this
by just one percentage point. What about U.S. small business and China? - China
is the .l0th largest export market for U.S. small businesses -small business
accounts for 82 percent of all U.S. exporters and 35 percent of all U.S. exports
to China by value, and -from 1992-1997, the number of small businesses that
export to China increased 141 percent To illustrate how American small
businesses are competing and winning in China's marketplace today, I would like
to mention just a couple of examples. Veris, Inc., is a 20-person,
Colorado-based manufacturer of flow sensors for various applications. Exports
make up 50 percent of Veris' sales, with China its biggest overseas market.
Veris' sensors are being used in Beijing to monitor the city's water supply, and
in Hong Kong to monitor combustion air at a coal fired plant that supplies
one-third of Hong Kong's power. Triastoria Trading & Consulting Company,
based in New Jersey, sells oil and gas equipment. Exports to China account for
around 80 percent of the firm's sales, with a dollar value of more than $2
million. The firm employs 13 people, IO of whom are salespeople in China. Even
though we can cite many small business success stories in China, that does not
mean everything has been smooth sailing. What we hear from our small businesses
is that there are continuing problems with a lack of published rules, high
tariffs, requirements to have expensive local partners and requirements to
obtain multiple import and business licenses. Given the size of China's market
and the complaints we have heard, the question today is whether granting
Permanent Normal Trade Relations (PNTR) would
benefit U.S. small businesses. I have been on the road discussing this with
small business owners, and the clear consensus is that PNTR would be a win for
U.S. small business. By granting PNTR, the U.S. government will enable small
businesses to benefit from the many significant trade liberalization commitments
that China has made in its bid to join the World Trade Organization (WTO). We
believe that small business stands to make even larger gains than large
companies because, unlike large firms like Boeing who have had a long- standing
presence in China and the ability to deal directly with the government, small
businesses historically have not had that type of clout. With the Chinese
government lowering barriers and opening up to more "business to business"
contact, we expect that the opportunities for American small businesses will
expand dramatically. Let me highlight just a few of the key aspects of the PNTR
agreement that will help U.S. small business. Under the agreement, China will: -
lower average industrial tariffs of interest to the United States from 24.6
percent to 9.4 percent by 2005 - lower information technology tariffs from 13.3
percent to 0 by 2005-a real key given the large growth in the number of small
businesses involved in information technologies - lower tariffs on key
agricultural products from 31.5 percent to an average of 14.5 percent by
2004-this is important to those small businesses that sell processed foods and
other value-added agricultural products - eliminate the export subsidies that it
provides to its industries in various sectors - eliminate quotas and
quantitative restrictions by 2005 (most are eliminated by 2002) -
eliminatetherequireduseofChinese- govemmentapproved"middlemeW'toselI products in
China. U.S. companies will have the right to import and export, and to have
their own distribution networks in China to sell U.S.-made products directly to
customers in China. This will allow U.S. companies to oversee commission agents'
services, franchising services, transportation, wholesaling, repairs, and
retailing of their products. - allow professionals and service providers to
operate within China in accordance with WTO standards-a real benefit to small
business since many of our accounting , law, and engineering firms doing
business in China are, after all, small businesses - conform its standards and
inspection procedures to WTO norms-a major benefit to small businesses that
cannot afford to hire legions of foreign specialists to unearth the rules -
simplify and make uniform customs and licensing procedures-a move that will
reduce paperwork costs for small businesses significantly, and - expand its
obligation to protect intellectual property while at the same time providing
injured parties access to China's courts and the WTO dispute settlement system
We have looked at the PNTR issue closely. Because China will enter the WTO
regardless of what action the United States takes, our assessment is that we
gain nothing by withholding PNTR from China. To do so would waste the critical
market opening gains negotiated by Ambassador Barshefsky. The loss would be
doubly painful if we cede those gains to other countries. The agreement moves
China in the direction of reform, locking-in an economic reform process that has
faced mounting difficulties and formidable domestic opponents. We should not
underestimate the difficulty for China in implementing these reforms and
overcoming constituencies opposed to them. Granting PNTR is our chance to
support those in China who seek to advance the type of market-oriented economic
reforms we have been pressing China to adopt, while enabling American small
businesses to capitalize on the substantial trade liberalization commitments
China has made. Thank you for the opportunity to appear here today. I would be
happy to answer any questions.
LOAD-DATE: May 20, 2000,
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