Written submission of the Global Innovation Forum
Comments Regarding the Distributional Effects of U.S. Trade and
Trade Policy on U.S. Workers Investigation
Investigation Number 332-587
The National Foreign Trade Council Foundation’s Global Innovation Forum (GIF) appreciates the opportunity to submit the following input for the U.S. International Trade Commission (“ITC”) investigation into the “Distributional Effects of U.S. Trade and Trade Policy on U.S. Workers.” These comments follow the request from U.S. Trade Representative Katherine Tai to investigate the potential distributional effects of goods and services trade and trade policy on U.S. workers by skill, wage and salary level, gender, race/ethnicity, age, and income level, especially as they affect underrepresented and underserved communities. 
About the Global Innovation Forum (GIF)
The Global Innovation Forum is a non-profit effort to connect small businesses and policymakers to foster an inclusive policy landscape that enables companies of all sizes to innovate, trade, and engage in the global economy. GIF works with a global network of thousands of small businesses, government officials, civil society, and private sector leaders to deliver actionable insights and impactful programs to emphasize how technology and trade policies can advance resilience and inclusive growth.
As an educational project of the 501(c)(3) National Foreign Trade Council Foundation, GIF connects small businesses and policymakers to bridge the gap between big-picture trade policy and the experiences of entrepreneurs, workers, and people.
Trade Creates and Supports U.S. Jobs
The relationship between trade and growth is unequivocal. Trade creates new, higher-paying jobs, increases the productivity of workers, and encourages critical skills and knowledge transfers. One in five jobs in the United States depended on international trade in 2019—that is 41.5 million American jobs.
With nearly 95 percent of the world’s population and two-thirds of the world’s purchasing power outside of the United States, trade is essential to the continued growth of the American economy and job creation. While exports create jobs by generating new business for U.S. manufacturers and service providers, imports also support U.S. jobs and help keep costs low for American consumers, increasing the buying power of the average American household by about $18,000 annually.  Collectively, two-way trade supports more than 28 million U.S jobs that provide middle-class income and an estimated 15 million jobs are held by minority workers. Not only does trade create jobs, but it also creates high-paying jobs—with export-dependent industries paying about 16 percent more than jobs in less export-dependent industries. 
Trade Benefits Small Business
Of the 288,063 U.S. exporting businesses, 96.5 percent are small businesses. U.S. small businesses that engage in international trade not only grow faster but are also 8.5 percent less likely to go out of business than non-exporting companies.
In addition to exporting themselves, thousands of U.S. small businesses export indirectly when they sell their goods and services to larger U.S. enterprises. The impact of larger U.S. exporters extends beyond their individual revenue and employment and on to the smaller enterprises that make up their supply chains. These small companies are a critical component of the overall impact exporters have on the U.S. economy. For example, in April 2021, FedEx had 166,000 direct vendors in the United States, employing more than 6.1 million people and generating an estimated combined $115 billion in annual revenue.
With their total direct and indirect export activity, U.S. small businesses account for over 40 percent of U.S. exports.
Trade Benefits Underserved Small Businesses
Small business owners from underserved communities are uniquely positioned to benefit from trade. When these firms export, they experience on average more benefits than their non-exporting counterparts.
The Impact of Women-Owned Businesses & Trade
Trade has the power to be a crucial tool for women’s empowerment and gender equity—dramatically improving local communities, creating new jobs, enhancing consumer choice, and decreasing inequality.
For example, Bessie Schwarz and her co-founder Beth Tellman lead Cloud to Street, a platform for monitoring, mapping, and analyzing floods and flood risk around the world for climate-vulnerable communities. The founders use global satellites and remote sensing AI to export their services and aid over 18 governments and insurers, representing 169 countries. Based in New York, Cloud to Street employs a team that is more than 50 percent female, with women making up 75 percent of the leadership team.
Women-owned small businesses that export pay more, are more productive, employ more workers and report higher than average sales. Exporting women-owned businesses:
- Employ an average of 42 people compared to the average of eight employees of their non-exporting counterparts;
- Report 1.6 times higher than the average pay at non-exporting women-owned businesses;
- Are 1.2 times more productive on average than male-owned business exporters and 3.5 times more productive than women-owned businesses that do not export; and
- Average $16.3 million in sales compared to $816,000 for non-exporting women-owned businesses.
By entering new markets, Florida-based Caribu, an innovative app and educational platform, grew its business tenfold in less than a year, soon adding more than half a million users. Now, CEO Maxeme Tuchman uses cloud-based tools to enable the company to share its services with customers in more than 200 countries and territories—making up 30% of Caribu’s total sales.
The Impact of Minority-Owned Businesses & Trade
Minority-owned businesses directly contribute to the U.S. economy and are responsible for the creation of millions of U.S. jobs.
Global Air Media, an FAA licensed drone consultation and education enterprise based in Maryland, has successfully exported to nine countries throughout Africa. Co-founder Eno Umoh credits his start in international trade to the export promotion programs that he has leveraged throughout his entrepreneurial journey, including the U.S. Department of Commerce’s International Partner Search and Gold Key Services. In addition to drone consultations, Umoh has also used his global reach to advance workforce development efforts by training over 6,000 students through drone and STEM workshops.
Exporting minority-owned enterprises:
- Employ 21 workers on average, compared to seven workers employed by minority-owned non-exporters;
- Are 3.3 times more productive than minority-owned non-exporters;
- Average $7.4 million in receipts, compared to $141,776 for minority-owned non-exporting firms;
- Export 14.4 percent of total receipts compared to 5.4 percent of total receipts for non-minority-owned exporters;
- Are two times more likely to export than non-minority-owned businesses; and
- Are six times more likely to conduct business in a language other than English and three times more likely to generate 100 percent of their revenues from exporting compared to non-minority-owned firms, regardless of size.
During the pandemic, black-owned businesses relied on global markets for an average of 45 percent more revenue than white-owned businesses according to one survey of small businesses.
Marjani Beauty, a Washington, DC-based cosmetics boutique curated for women of color, was able to sustain and grow its business during the pandemic by scaling up e-commerce operations and selling to customers around the globe. Founder Kimberly Smith emphasized that there are still challenges to accessing the benefits of global markets. “It needs to be easier for people to learn and understand the “how-tos” of exporting.” Smith also shared that “[the pandemic has been a] learning process and a wake-up call for everyone to understand how best to support small businesses and businesses that are black and brown-owned.”
Even with the opportunities that trade enables, there is more to be done to ensure that underserved communities, workers, and business owners can access the benefits of trade. For underserved businesses, barriers to the benefits of trade can fall into two categories—barriers at the border, and barriers beyond the border.
Many small businesses are faced with traditional trade challenges such as tariffs and nontariff measures (NTMs), but often the burdens are accentuated for women and minority-owned businesses. Challenges beyond the border are equally as important.
It is crucial to differentiate disparities where the main constraints to growth are the result of trade policies and where barriers at the domestic level must be addressed.
Barriers at the Border
According to a study by the U.S. International Trade Commission, there is a significant imbalance in the tariff burden across genders. For example, apparel products represent approximately 75 percent of the total tariff burden on U.S. households with 66 percent of the tariff burden being from women’s apparel products. “In 2015, the tariff burden for U.S. households on women’s apparel was $2.77 billion more than on men’s clothing. This gender gap grew about 11% in real terms between 2006 and 2016.”
Both tariffs and nontariff measures are more burdensome to small businesses than to larger firms. As business owners engaged in trade, underserved businesses can be disproportionately affected by NTMs like technical trade regulations due to the high cost associated with burdensome customs and bureaucratic procedures. In a national survey, small business owners listed their top export barriers as foreign regulations, tariffs and customs procedures, payment collection, company resources, and risk and infrastructure.
Dr. Wei-Shin Lai, co-founder of Pennsylvania -based AcousticSheep, noted that minimizing paperwork and not having to pay duties on packages under a certain value is tremendously valuable for a small business. Since being founded in 2007, the company has sold well over one million pairs of headphones.
“About one-third of our sales are international—we have distribution relationships with over 30 countries around the world, and through our website, we sell and ship directly to consumers around the world. We have sold to all seven continents, even Antarctica,” she shared. But the outdated procedures and red tape in trade facilitation can be a barrier to entry for some small firms. Dr. Lai encouraged the use of digital tools to helping to combat the challenges in place. “It’s good practice to leverage technology because it’s really necessary to be competitive globally.”
It was estimated that improving market access would boost small business export sales by over 14% over the next three years, ultimately growing U.S. economic output by $81 billion and adding 900,000 American jobs.
Barriers Beyond the Border
Many domestic constraints limit underserved businesses from participating fully in trade. Insufficient access to resources that could help them play a bigger role in trade put these businesses at a disadvantage, including access to capital, information, and networks.
Inadequate access to financial capital is a significant limitation for the growth of women and minority-owned businesses. In 2020, only 2.3 percent of venture capital funding went to women-led businesses. Professional networks can help firms connect with new opportunities, improve access to debt and equity financing, and provide useful advice and support. Still, women and minority-owned businesses often are cut off from business networks—which can help firms connect with new opportunities, improve access to debt and equity financing, and provide useful advice and support—even though they might benefit the most from access to them. Further, women entrepreneurs often call out cultural and societal challenges to owning a business including the gender gap in household work and balancing responsibilities between home and work.
By addressing barriers and supporting small businesses through domestic policies, the Administration can help unlock the growth and opportunities that trade provides.
Unlocking Trade Growth and Opportunity with Digital Technologies
The internet has made it easier than ever before for small businesses to reach beyond their local markets and find global customers efficiently. A recent study surveyed U.S. small businesses and found that 92% that export use digital tools such as online payment processing tools, online productivity tools, e-commerce websites, and online marketing.
Women and minority-owned businesses in particular can benefit from greater access to digitally-enabled tools and e-commerce resources provided by both the private and public sectors. Investments in digital technologies can advance opportunities and enhance the gains of underserved businesses from trade by facilitating their access to finance and education, increasing demand for skills, and removing trade barriers. Particularly during the pandemic, internet platforms connected small businesses with new opportunities to offer their products and services globally.
For example, the Deering Banjo Company has grown from a small California operation into the largest manufacturer of banjos in the United States. Exports of their high-quality instruments now comprise nearly one-third of total sales. CEO Jamie Deering outlined how digital tools have become increasingly central to reaching a global audience. Throughout the pandemic, with canceled conventions and concerts, Deering Banjo relied nearly exclusively on digital platforms like YouTube and social media to share tutorials, foster personal connections and showcase music livestreams to support their community of artists and banjo enthusiasts.
During the pandemic, AnaOno, a creator of inclusive intimates for women going through breast cancer, took to social media to remind its global community that they are not alone, and to sell direct-to-consumer via e-commerce tools. Founder Dana Donofree observed to policymakers: “We need to ask, ‘how do we cross borders through commerce while making it accessible?’ Products are being made around the world, so they need to be accessible in a global commerce strategy instead of thinking country-specific. I think that that would help small businesses, global growth, and access.”
To help eliminate structural barriers to equality and economic opportunity, and advance the Biden administration’s efforts to promote democracy and respect for human rights domestically and around the world, the United States government should:
- Create and expand public-private partnerships focused on increasing opportunities and capacity building for women and minority-owned small businesses. The private sector and policymakers should work together to create an inclusive framework to help underserved entrepreneurs develop technical skills, access capital sources, increase financial literacy, and connect with mentors and local expansion partners.
- Promote targeted and inclusive trade promotion programs. By delivering cohort-based export and digital skills training programs, governments can advance underserved communities across the region, including by equipping such small businesses with tools, information, and skills that ensure digital competitiveness and participation in international markets. Further, efforts should also emphasize digital skills building to advance the use of exporting technologies, enabling small businesses to reach their full digital and global potential.
- Promote financial inclusion and address demographic gaps in e-commerce digital trade. Policies should advance the adoption of digital payments and increase the acceptance of broader digital financial services, thus enabling underserved communities to benefit from more digital trade opportunities.
- Pursue simplified trade facilitation procedures and tangible reforms that help enable digital trade. These efforts should include initiatives to reduce administrative burdens and costs, and permit electronic transactions for digitally enabled businesses.
- Improve digital and physical connectivity in underserved areas through ICT. Advancing initiatives to modernize digital connectivity and infrastructure investment through public-private partnerships would disproportionately benefit underserved businesses and communities.
- Raise awareness among underserved communities about opportunities in trade. Digital trade provides entrepreneurs with new business opportunities around the world. However, there is a lack of awareness amongst small businesses about the potential opportunities of doing business cross-border and through e-commerce. Further, there is even greater unfamiliarity regarding the public and private sector resources available to support entrepreneurs’ global aspirations.
Small women, and minority-owned businesses that export generate greater economic activity than their non-exporting counterparts, but they also face greater obstacles. Helping companies to overcome challenges that deter exporting is a critical element of addressing the distributive effects of trade. Thank you for the opportunity to comment.
Global Innovation Forum
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