Global Managerial Economics
The small and medium-sized enterprises (SMEs) form a crucial part of the U.S. economy. The SMEs create the most jobs in the country; they target the ordinary Americans for employment thus making them a very important component of the economy. Without the SMEs, the economy will bleed millions of jobs, adversely affecting the economy. This is the reasoning behind the drive by President Obama to give this sector newly acquired impetus and promote it to create more jobs for Americans and grow the economy. The target of the National Export Initiative (NEI) is to boost the export capacity of the SMEs in the U.S. by supporting them; the administration reasons that this will result in the creation of two million jobs. The intention is good, but the challenge lie in the operationalization of the policy and ensuring it works in the actual market (Audretsch, 100). The international market and the export market is often dominated by the big corporations with many resources to invest; this makes them strong and gives them the ability to compete with the big corporations that are players in the international market. The SMEs from the U.S. lack, the resources, know how, and the experience to compete with the established world trade players from the Europe Union, China, and India. This is where the Export Promotion Cabinet steps in to help the U.S. SMEs succeed in the competitive export market (Audretsch, 101). The cabinet should take action to remove both foreign and domestic barriers that curtail the SMEs players in the country to participate in the export market. Such barriers give the larger corporations the edge in the market and make it difficult for the SMEs to compete on a level playing field. Some of these barriers include (Mauro and Shah, 23): Domestic Barriers
SMEs have difficulties accessing both trade finance and working capital. This challenge prevents them from financing purchases by foreign companies that might be interested; this means that external buyers prefer suppliers that can extend credit. The support from banks and financial institutions is not good; this makes it hard for the SMEs to obtain the finances they badly need to grow the businesses and expand their operations to include exports. This is the case especially since most of the SMEs are startups and lack enough collateral, banks consider than higher risk compared to the larger corporations (Mauro and Shah, 35). The community banks that might be willing to support the SMEs often lack familiarity with exporting and what it entails. The U.S government regulation poses another challenge to the SMEs prospects of participating in the export market. The process that is involved for a firm to be allowed to make exports is lengthy and cumbersome and involves much paperwork; the process is also costly, taking it out of reach for the SMEs. It is difficult to obtain visas that are crucial in the export business; to bring in potential customers or partners to view the local operations of the firm, or to bring in employees for training. This makes it hard for the SMEs to grow in the business. The tariffs charged on imported intermediate input goods that might be needed by the SMEs for their production are prohibitive (Mauro and Shah, 76). Other domestic barriers include high-transport costs. Port bottlenecks when trying to export and container shortages. The lack of economies of scale within the SMEs limits their export potential. Foreign Barriers
Foreign government regulations play a big role in discouraging SMEs export form the U.S. The various certification, quality, labeling, and design requirements from country to country make it costly for the SMEs to cope financially and, therefore, unable to support their export endeavors. The protection of intellectual property (IP) is not adequate, and so is the enforcement of the IP laws in the international market; the SMEs thus lose their competitive edge...
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