Recent Trends in Easaxport Promotions

Recent Trends in Export Promotions.... Williamson, Kshetri and Wilkinson

RECENT TRENDS IN EXPORT PROMOTIONSIN THE UNITED STATES

NICHOLAS C. WILLIAMSON, University of North Carolina at GreensboroNIR B. KSHETRI, University of North Carolina at GreensboroTIMOTHY J. WILKINSON, Montana State University Billings

There is significant variation in opinion regarding benefits stemming from the use of exportpromotion. While promotional strategies are frequently condemned in the press as violations ofglobal trade rules and are sharply criticized by some anti-poverty campaigners, governments acrossthe world have utilized and benefitted from numerous and varied approaches to export promotion.This paper provides an overview of" export promotion efforts, with particular emphasis on acomparison of the United States to the European Union. Issues explored include the gap betweenexport promotion efforts and desired outcomes, WTO promotional efforts, and several recent trendsin export promotion.

THE NATIONAL EXPORT INITIATIVE

The National Export Initiative (NEI), signedinto existence by President Obama on March11, 2010, by way of Executive Order 12870,can be viewed as the largest and most complexexport promotion endeavor that has beenpursued by the government of any country inhistory. The NEI established the ExportPromotion Cabinet to enhance the assistancegiven to U.S. companies, particularly small-and medixun-sized enterprises (SMEs) and hasas its main objective Ihe doubling of U. S.exports over the time period designated by thesigning of the Initiative. The NEI providestangible proof of the emerging importance ofexporting to the health of the U. S. economy.This Initiative represents the very first time thata sitting President of the United States hasmobilized the resources of the United StatesGovernment at the level of the NEI in supportof a single business activity: exporting.

However, experience has shown that goodintentions and the dedication of significantresources by the Federal Government to exportpromotional activities have not always broughtabout desired results. For example, the

The Maiketmg Management JovanalVolume 21, Issue 2, Pages 153-166Copyright O 2011, The Maiketmg Management AssociationAll rights of reproduction in any fonn reserved

Government Accountability Office (GAO)identified several chronic problem areasregarding export promotion efforts of the 20agencies that are part of the Cabinet-level TradePromotion Coordinating Committee (TPCC) ofthe Federal Government (Intemational Trade2009). Lack of coordination among agenciesand inadequate performance monitoringregarding the outcomes of export promotionalactivities are among the more notableidentified areas of deficiency. The GAO reportmade repeated and in-depth references to theexport promotion practices of foreign countrygovernments as being implicitly worthy ofconsideration for adoption by the U. S.Government.

Hirsch (2011) provides a supportingperspective in the following:

So the president may have to go beyondconventional thinking, beginning with themyth of a 'fiat world' of equalizedcompetition—and devise new ways to tumthe globalized markets to U. S. advantage.As the Chinese, the Germans, and theJapanese, among others, have shownthrough largely successfiil programs ofexport promotion and subsidies, the world oftmly fi-ee trade doesn't exist. Washingtonneeds to do far more than file complaints tothe World Trade Organization, (p. 1)

153 Marketing Management Journal, Fall 2011

Recent Trends in Export Promotions Williamson, Kshetri and Wilkinson

We now provide a brief introduction intoperspectives concerning the nature and efficacyof export promotional activities in differentparts of the world.

EXPORT PROMOTIONIN THE WORLD ECONOMY

There is significant variation in opinionregarding benefits stemming from the use ofexport promotion. While promotional strategiesare frequently condemned in the press asviolations of global trade mies and are sharplycriticized by some anti-poverty campaigners(Cronin 2007; Scott 2001), governments haveutilized and benefitted from numerous andvaried approaches to export promotion. Thebasic idea is simple: Outside support, especiallyfrom the government of a country, can helpdomestic companies tap their export marketpotential (Dichtl, Koeghnayr and Mueller 1990)and thereby enhance economic growth. The"Asian Tigers" - Hong Kong, South Korea,Singapore, and Taiwan - are remarkableexamples of economies that have achieved ahigh level of economic growth primarilythrough export promotion (Rondinelli 1987;Rondinelli and Burpitt 2000). Exportpromotion strategies have been employed byalmost all governments in industrializedeconomies (Washington Advocacy 1995; deKoning and Snijders 1992; Dichtl Koeghnayrand Mueller 1990) as well as developingeconomies in Asia and Latin America(Rondinelli 1987; Rondinelli and Burpitt 2000).

Government export promotion strategies comein "all shapes and sizes". First, nations differwidely in terms of the resources devoted toexport promotion initiatives. Compared topoorer economies, more prosperous coimtriestend to have more export promotion programsin place (de Koning and Snijders 1992). Someof the most popular tools include lobbying andvisits to targeted coimtries by high levelgovernment officials, the financing of tradeshows and the provision of other types ofgovernment-supplied financing packages(Washington Advocacy 1995). Exportpromotion tools also entail supplying actual and

potential exporters with specific information(Dichtl, Koeghnayr and Mueller 1990). Somecountries (e.g., Italy, Japan and Spain) have tiedtheir economic aid to developing countries withexport promotion programs (Frères 2000;Garten 1997). Likewise, Korea's exportpromotion measures have included theestablishment of specialized banks for thedevelopment of "strategically important"sectors (Mah, 2006; Soh 1997). Some Asianeconomies have developed free trade zones andprovided incentives to attract export producingmanufacturers (Rondinelli 1987; Rondinelli andBurpitt 2000).

GLOBAL OVERVIEW

While it is clear that there is great variety in theforms and objectives of trade promotionalactivities, there is also empirical evidence thatthere are systematic operating principles atwork regarding govemmentally sponsoredactivities used by export promotional agencies(EPAs) that are found around the world(Lederman, Olarreaga and Payton 2006).Working with the siqjport of the Office of theRegional Chief Economist, Latin America andthe Caribbean Region, the World Bank,Lederman, et al. (2006) evaluated data gatheredfrom EPAs of 104 countries and found thatexport promotion had a clear and significantimpact on exports. These authors note that onthe average, $1 spent on export promotionincreases export revenues by approximately$300. Additionally, their empirical analysesindicated that (1) for the greatest impact largefirms should be targeted with export promotion;(2) firm status with respect to prior exportactivities is important (promotional moniesspent on non-exporters had a greater impact);(3) the principal objective followed by EPAsconcemed increasing a country's overall levelof exports (60 percent of EPAs followed theobjective of "increase aggregate exports" (p.12), and (4) optimal level of expenditures toachieve maximum impact on a country'sexports fell in a certain range ($0.60 to $2.70per capita).

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It is important to note, however, that the resultsof Lederman, et al. (2006) did not hold for theoperations of each and every individualcountry's EPA. As they acknowledge, there isgreat heterogeneity in responses acrosscountries in the sample. A review of therelevant literature would suggest that suchheterogeneity in the responses of countries'EPA activities refiects different mixes ofexport promotion activities used by countries indifferent geographic sectors. We now reviewworks that shed light on this heterogeneity inselected geographic regions.

Southeast Asia

The character of govemmentally-sponsoredexport promotion offered by covintries inSoutheast Asia refiects their shift fromdevelopment using an import substitution traderegime to one of industrialization based onexport promotions (Naijoko and Amri 2007).In focusing on ASEAN-6 countries (Brunei,Indonesia, Malaysia, Thailand, Singapore andthe Philippines), Narjoko and Amri identify keytrade promotional strategies employed by eachcountry. For instance, Malaysia ".. .approachedindustrialization by developing exportprocessing zones (EPZ)" (p. 48). In contrast,Thailand chose to focus on specific industriesfor development. Singapore "directed itsexport promotion industrialization by shiftingmanufacturing activities towards skill- andtechnology-intensive industries" (p. 48). Theauthors emphasize that the effectiveness of eachapproach is validated by the speed with whichthese countries recovered from the Asianfinancial crisis of 1997. In contrast, Indonesiahas been slower in recovering, due to itsemphasis on export promotion centered onlabor and resource-intensive industries.

A recent GAO report provides specifics interms of what activities Asian nations employedduring the financial crisis (International Trade2009). For example, regarding the Philippinesthe report stated:

The Philippine Export Act... gave an apexbody, the Export Development Council,overall responsibility for formulating and

coordinating the national exportdevelopment effort. The councu waschaired by the Secretary of the Departmentof Trade and Industry and cabinet-levelmembers from the eight ministriesconcerned with economic development,(p. 6)

Malaysia is another country whose activities arepotentially worthy of consideration, particularlyin the domain of enhancement of SMEs'exporting activities. "Malaysia's Small andMedium Industries Development Corporation,for instance, linked SMEs into the supply chainof larger multinational corporations tiiat havethe systems and knowledge needed for SMEs tobecome globally competitive." (p. 8). Anelaboration on these and other Southeast Asiancountries' efforts in the domain of exportpromotion can be found in a studycommissioned under the auspices of the Asia-Pacific Economic Cooperation (APEC)organization (Alliance in Practice...(2007).

South America

Similar to the efforts of the identified ASEAN-6 countries, a variety of South Americannations attempted to shift from an importsubstitution trade regime to a policy ofeconomic growth through export promotion(Jonakin 2007). In the main, these effortsinvolved the engineering of "a large shifttoward manufactured and processed exportsthat substituted for traditional, primarycommodity exports" (p. 30). While the shifttoward manufactured exports has beensuccessful (manufactured exports accounted for60 percent of total exports by 2001), deficits inthe current account balances of many countriesin South America persist (Jonakin 2007).

In evaluating export promotion policies inBrazil, Chile, Colombia and Mexico, Macario(2000) conducted interviews with successfulexporters. Based on this she concluded thatpromotional activities should be directedtoward firms offering new products and/ortargeting new export markets. Second, the useof cost-sharing programs tends to ensure that



the programs will be iised by firms that arededicated to exporting. Third, adoption of atime limit of no more than a couple of yearsguarantees that programs will not become open-ended subsidies. Finally, the management ofEPAs should draw upon both public and privateresources.

Empirical research by Alvarez (2004) used asample of 295 small and medium sized Chileanenterprises (SMEs) that consisted of both"permanent" and "sporadic" exporters. A keyassumption was that the transformation ofsporadic exporters into permanent exporterswas a desired outcome of promotionalactivities. Results showed that the use of tradeshows and trade missions by sporadic exportersdid not tend to cause them to becomepermanent exporters. Furthermore, the resultsdemonstrated that permanent exporters madegreater use of all trade promotional facilitiesmade available by the Chüean National ExportPromotion Agency than did sporadic exporters.

In summarizing export promotion activities inSoutheast Asia and South America, we wouldlike to point to the transition from importsubstitution activities in each of the two majorgeographic sectors toward an emphasis onexport promotion. Additionally, exportpromotion has moved away from traditionalcommodity exports toward non-traditionalmanufactured goods. We now present anoverview of export promotion programs in theEuropean Union.

European Union

Lederman, Olarreaga and Payton (2006)examine aggregate levels of E. U. countryexports. Noteworthy in the results is evidencethat for E.U. countries such as Germany,Ireland, Norway, Sweden, the Czech Republicand the Netherlands, exports of goods andservices per capita generated for each countrywere well above the world average whenviewed in light of the identified country'sexport promotion agency budget per capita. Itis therefore useful to look at export promotionactivities of different countries in the E.U.

Marketing Management Journal, Fall 2011

The U.K. offers excellent examples of an E.U.government's well-coordinated and weU-funded campaigns in promoting exports.Observers have noted that the current U.K.government has put export promotion "at theheart of its foreign policy" ("A Better..."2010). The country's Prime Minister, Cabinetofficials and the royal family advocate inforeign countries for British firms' products(Washington Advocacy... 1995; SmallManufacturer... 2008). In the mid-1990s, one-fifth of British diplomats in foreign countriesworked ñül-time in export promotions activities(Washington Advocacy... 1995). Of particularinterest is the idea of involving the country'sroyal family in export promotions activities. In1997, the British government promised tospend US$97 million to buy a new yacht for theroyal family. The argument was that thequeen's visit to foreign countries on the "BuyBritish" yacht would help attract foreignbusinesses to British companies (ThoroughlyModem... 1997). Finally, the U.K.'s ExportExplorer and Passport to Export Successinitiatives are targeted at new exporters(hitemational Trade.. .2009).

Among E. U. economies, German exportpromotion efforts appear to be similar in someways to those of the U. S. For instance, in 1995,Ronald H. Brown, then U.S. Secretary ofCommerce, wrote to the President and Speakerof the House: "The Germans are emulating theU.S. approach to export promotion" (Brown,1995). Among other things, German exportpromotion strategies entail supplying actual andpotential exporters with specific information(Dichtl, Koeghnayr and Mueller 1990).Central to Germany's export promotionactivities is The Federal Office of ForeignTrade hiformation (BfAI) (Kopka 1995). BfAIhas a touted network of correspondents abroad,and works with private sector Germanchambers of industry and commerce located ina variety of countries. Furthermore, Germany,along with Poland, has linked Foreign DirectInvestment with export promotion in a novelfashion. A passage from Small and Medium-Sized... U. S. and EU...(2010) illustrates theirapproach:

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The EU uses investment promotion tosupport SME exporting activities. SomeEU countries actively seek and promoteopportunities for inbound FDI as a part oftheir efforts to promote exports. Forexample, Germany and Poland seek foreigninvestors to constmct export-orientedmanufacturing facilities; once operational,these facilities develop supply chainlinkages with domestic SMEs, therebycontributing to SME indirect exports,(p. 2-31)

France, on the other hand, extensively utilizesdifferent lobbying strategies such as phonecalls, letters and high-level visits. In addition,the French government finances trade showsand provides other types of financing packagesto companies involved in exporting(Washington Advocacy... 1995). Italy andSpain also use high-level visits and trademissions as export promotions tools(Washington Advocacy... 1995). Moreover,economic aid to developing countries isfrequently tied with export promotion programs(Frères 2000).

Another issue that deserves mention relates to akey rationale behind E.U. governments'spending on export promotion activities. E.U.countries have argued that the U.S.government's increased export promotionactivities have forced them to promote domesticfirms through government intervention. TheFrench, for instance, think that U.S. successabroad threatens their country's exports andforces them to engage in more promotionalefforts (Washington Advocacy... 1995). InMay 2004, the E.U.'s trade commissioner notedthat E.U. countries would eliminate agriculturalexport subsidies if the U.S. and other countriesalso were to take similar measures (FromCancun... 2004). Given the visibility in thepress of comparisons between E.U. and U.S.export promotions, we now provide a moredirect comparison and contrast of E.U. and U.S.export promotions in key topic areas.

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COMPARISON AND CONTRAST OFU.S. AND E.U. EXPORT PROMOTION

In absolute terms, the U.S. spends less than theE.U. on export promotion (Shelbume 1997).For instance, in fiscal year 1995, the U.S. spent$3.1 billion on the entire export promotionbudget. This contrasts with E.U. expendituresof $12 billion on agricultural export promotionalone. Additionally, the U.S. spends less onexport promotion as a percentage of GrossDomestic Product (GDP) than does the E.U.(Shelbume). To put it into perspective, the U.S. spends three cents per thousand dollars ofGDP on export promotions, France spends 18cents and the U.K. spends 25 cents perthousand dollars of GDP (Donovan 1996).Garten (1997) states that France spends 10times as much as a percentage of GDP onexport promotion as does the U.S.

The distinction between the public and privatedomains is also more ambiguous in the E.U.than in the U.S. (Shelbume 1997) Support forthis contention is found in Brown (1995) andWashington Advocacy...(1995), articles thatdescribe geographic sectoral trade initiatives ofGermany and France. In the mid-1990s,Germany launched the "East Asia Initiative" toincrease German exports to the region(Washington Advocacy...1995). This initiativeinvolved both German diplomats and theGerman Economic Minister. Germandiplomats with industrial policy expertise wereassigned to spearhead efforts to expand Germanbusiness in China (Brown, 1995).

There is also the issue of the locus of supportfor exports of small- and medium-sizedenterprises (SMEs). In larger countries in theE.U. (e.g., Germany, France, Italy and theU.K.), support for SME exports tends to comefrom regional, rather than national, authorities(de Koning and Snijders, 1992). This contrastswith the U.S., where major federal entities offersignificant support to SMEs in this domain.For instance, the Small BusinessAdministration offers both a working capitalprogram and an intemational trade loanprogram to assist small firms that are


Recent Trends in Export Promotions.. Williamson, Kshetri and Wilkinson

commencing export operations (Kurlantzick,2004).

In the USITC-commissioned Small andMedium-Sized...(2010), there is a usefulsummary comparison of U.S. and E.U. supportfor SME exporting activities. First, "the EUprovides greater support for trade fairparticipation..." (p. 2-30) for its SMEs.Second, there are networks of assistanceavailable in foreign markets:

The EU offers extensive networks ofassistance in foreign markets. SMEs inboth the United States and the EU haveaccess to a broad network of officialgovernment assistance in foreign markets.However, through multiple worldwidenetworks established at the EC [sic],national, and regional levels and the EEN,SMEs from EU countries appear to haveaccess to more extensive networks ofassistance in foreign markets than do U. S.SMEs. (p. 2-31)

IMPACT OF EXPORT PROMOTIONIN THE UNITED STATES:

The literature suggests that govemmentally-sponsored export promotion activities in the USprovide significant benefits for exporting firms.The enhancement of exports through exportpromotion is associated with the creation ofhigh paying jobs (Conlan and Sager 2001;Czinkota, 2002). hi the U.S., publishedestimates of the number of jobs created perbillion dollars in export revenues range from11,500 jobs (Czinkota and Ronkainen 2003) to22,800 jobs (Davis 1989). Fuñhermore,according to Secretary of Commerce Locke(Report to the President...(2010)), "...Americans working for firms that export eammore than 15 percent more than similar workersat firms that do not export" (p. 2).

Exporting activity also generates tax revenue atboth the federal and state levels. For example,Coughlin and Cartwright (1987) provide theresults of empirical research that indicates thateach dollar of trade promotional monies spentat the state level is associated with the creation

of $432 in export revenues. A study byWilkinson (1999) found that expenditures onstate export promotion were associated withincreased employment in firms engaged indirect overseas exports. While estimates of thenet impact of such activity on state tax revenuesmay vary from one state to the next, theinfluence of export promotions on state coffersis, indeed, significant. Czinkota (2002) mayhave had such financial benefits in mind whenhe characterized export promotional funds asthe "venture capital" of intemational economicactivity.

In addition, there are operating benefits thatfiow to exporting firms that stem from firms'taking advantage of govemmentally sponsoredexport promotion (Czinkota 1994; Kotabe andCzinkota 1992; Genturck and Kotabe 2001; andSinger and Czinkota 1994). These benefitsinclude immediate sales in overseas markets,developing long-term relationships withdistributors, the ability to access trade leads,and the availability of useñil market researchinformation (Wilkinson 2006).

The "Gap" in the Perceived Operating Risk/Profit Return Schedules

While the benefits that result fromgovemmentally-sponsored export promotionsare, indeed, significant, the environment fortrade promotion activities in the U.S. hasbecome more complex and demanding since theearly part of the 1990s. Perhaps the most basicissue concerns the notion that the managers ofmany non-exporting U.S. manufactiiringcompanies are increasingly viewed asunresponsive to govemmentally-sponsoredexport promotion of any sort. Suchunresponsiveness is the result of the widespreadperception that exporting is not an attractive useof company resources when compared toopportunities in domestic markets (Kotabe andCzinkota 1992). Support for this contention isfound in the empirical results of Kotabe andCzinkota. Their work links the lack ofattractiveness of exporting to the managementof many U.S. manufacturing concems with a"gap" in the perceived operating risk and profit



retum schedules of domestic and exportmarkets.

Gencturk and Kotabe (2001) indicate thatexport assistance programs such as counseling,trade shows and trade leads directly andpositively influence the efficiency,effectiveness and competitive positioning offirms that use these programs. However, otherresearch (Kotabe and Czinkota 1992) suggeststhat the level of perceived benefits is notuniform across firms. The relative dearth ofperceived benefits for some firms appears to betied to their managements' perceptions of risks:

Many firms, particularly small- to medium-sized ones, appear to have developed a fearof intemational market activities. Theirmanagement tends to see only the risks—informational gaps, unfamiliar conditions inmarkets, complicated domestic and foreigntrade regulations, the absence of trainedmiddle managers for exporting, and a lackof financial resources...rather than theopportunities that the intemational marketcan present. (Kotabe and Czinkota, p. 640)

These authors link perceived operating riskswith profitability when they present results ofempirical research indicating that, in the U. S.,firms' profits from exports are lower than thoseof domestic operations for firms that exhibit allbut the highest levels of involvement inexporting. In the foUovwng passage, Kotabeand Czinkota (1992) appear to conclude thatsuch negative perceptions of profit prospectsfrom exporting may provide a very fundamentalrationale for the existence of govemmentallysponsored export promotion in the U.S.

Exporting would not appear to be anattractive altemative for firms, save thosewith unrealistic expectations. The publicsector, however, is much more interested incompetitiveness issues, since those willdetermine the future levels of job creationand tax revenue. There appears to be alegitimate gap in the market mechanismaddressed by the government through itsexport promotion efforts, which...lower therisk of intemational activities and/orincrease their level of profitability. The

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existence of this gap may then well justifythe expenditure of public funds on exportpromotion. (Kotabe and Czinkota, p. 655).

In response to President Obama's NationalExport Initiative, the House Committee onSmall Business conducted a hearing on April28, 2010. Michael Czinkota's testimonyincluded this statement:

Export assistance should be concentratedprimarily in those areas where profit andrisk inconsistencies produce market gaps,and be linked directly to identifiableorganizational or managerial characteristicsthat need improvement. Otherwise,assistance supports only exports that wouldhave taken place anyway. There should be aclear demonstration of̂ export [increases]which occur... due to government support.In order to assess such effects, it isimportant to encourage and devise exportperformance measurements which don'tjust evaluate issues such as governmentalbudget compliance, but assess bottom lineperformance shifts, not just in terms ofprofitability, but also in terms of majorcompetitive achievements (Czinkota2010).

THE WTO AND EXPORT PROMOTION

The principle of comparative advantage hasbeen the fundamental principle behind the tradeorthodoxy of the World Trade Organizationsince its founding in 1994. The originalRicardian theory of comparative advantageaddressed relative productivities and is notconcemed with issues such as differing levelsof factor endowments across countries. TheHeckscher-Ohlin-Samuelson (HOS) theoryintegrates the works of Heckscher (1919),Ohlin (1924) and Samuelson (1948) to examinesome of the limitations of Ricardian theory.HOS theory argues that coimtries' comparativeadvantages are functions of their relative factorendowments.

The HOS extension of Ricardian comparativeadvantage indicates that a country'sgovernmental policy makers should foster thedevelopment of product-based industries that



utilize factors of production that are in relativeabundance in the country. When engaging inindustrial specialization in this fashion, acountry presumably can and should secure itsother product needs through intemational tradeinvolving exports in which it has a comparativeadvantage in production and exporting.

Czinkota (1994) appears to draw upon thetheory of HOS-extended comparativeadvantage when he suggests that the focus ofpublic policy should be on assisting ah-eadyexporting firms to do better: "...Attentionshould...concentrate on...helping successfulfirms do better" (p. 99). When applied in thecontext of product-based export promotion, thissuggests that a country's funds should bepermitted to fiow to any given product-basedindustry in which the country has an HOS-extended comparative advantage. Gomory andBaumöl (2000) provide economic support forthe long-term benefits of such a policy whenthey demonstrate that a country's (HOS-extended) comparative advantage in specificindustries can be developed and maintainedover time.

The HOS-extended theory of comparativeadvantage has already been recommended as adevice that governmental entities at either thestate (Breuer 1996) or country (Cuyvers 2004)levels can use to identify product-basedindustries for further enhancement in exporting,presumably through the employment of exportpromotion. In Cuyvers (p. 270), the benefit ismade clear: the use of the HOS-extendedtheory of comparative advantage will enablepolicy makers to identify product-basedindustries in which a given country iscompetitive in the relevant global exportproduct market, and, thereby "...allow fiirtherfuture expansion of ...the country's ... marketshare .. .in those product-based industries."

Williamson, Cramer and Myrden (2009)provide a methodology that employs theconcept of HOS-extended comparativeadvantage and is useful in identifying product-based industries in any given state in the UnitedStates for the purpose of targeting those


industries with export promotion while notdistorting trade. In their methodology, theindustries that are chosen are shown assatisfying specific needs of three key"stakeholder" groups: (1) the WTO, (2) themanagement of non-exporting SMEmanufacturing concems in a given state and (3)the entity that ftmds export promotion. Thisapproach is similar to that of Czinkota andWongtada (1997) because export competitiveproduct-based industries are identified.However, the methodology presented inWilliamson, Cramer and Myrden also ensuresthat the identified product-based industries in agiven state in the U.S. have a "RevealedComparative Advantage" [RCA] (Balassa1965) regarding the overall U.S. export marketfor the identified product based industries,when compared with all states in the U.S. as awhole. TTie application of this methodologywould provide positive empirical evidence tothe WTO that the product-based exportpromotion does not have the tendency to distorttrade.

We now present several trends in the UnitedStates regarding govemmentally-sponsoredexport promotion. On the whole, these trendsrefiect the emerging importance of exportpromotion that is conceived, funded andexecuted by individual states within the U. S.,rather than by the Federal Govemment alone.

RECENT EXPORT TRENDSIN THE UNITED STATES

In recent years there has been a move fromusing more broadly defined measures to morenarrowly defined measures in evaluating thesuccess of export promotion programs. Hibbert(1998) describes three country-level "strategicexport objectives" that can be used to broadlydefine and evaluate the success of a country'sexport promotion programs: (1) the overallexpansion of the coimtry's exports, presented ina single export revenue figure; (2) the extent ofdiversification of the country's exports acrossproduct categories, and (3) innovation in thecountry's introduction of new types of exportproducts. He indicates, however, that a variety

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of "extemal factors" (p. 467) (e.g.̂ ' tariff andnon-tariff trade barriers, price fluctuations, andprotectionist trends) can impede one's ability todetermine the effectiveness of a country'sexport promotional programs through the use ofthese measures alone. Hibbert concludes that"...it is worthwhile considering a system inwhich the emphasis would be on relatingspecific promotional activities to narrowlydefined objectives rather than to overall exportperformance" (Hibbert, p. 468).

A move toward replacing general exportperformance measures with specific ones hasalready taken place in U. S. states such asCalifornia, Minnesota and New York (Conlanand Sager, 2001). In these states, theevaluation of export performance has entailed".. .the identification of key industry sectors orclusters" (Conlan and Sager, p. 15) and theassessment of their respective states' exportsboth before and after the execution ofassociated export trade promotional programs.The rationale behind the use of more specificperformance measures is clear: to better "focuson those activities which have proven mosteffective" (Conlan and Sager, p. 15).

Another recent trend is an emphasis onestablishing causality when evaluating theresults of govemmentally-sponsored exportpromotion programs. For instance, when astate sponsors a promotion targeted at a specifictype of product, and when one or moremanufacturing firms in the state subsequentlycommence the export of the focal product, akey issue is establishing whether the identifiedexports of the product were a direct result of thefocal export promotion (Friedman 2005).

The causality issue is seen as complex in lightof the emerging tendency to evaluate "...tradepromotion policy...from a network perspectivethat emphasizes the role and importance ofinterfirm relations and networks spanningi n d u s t r y a n d i n t e r n a t i o n a lboundaries" (Wilkinson, Mattsson and Easton2000, p. 275). When one moves "...fromtargeting individual firms as a way ofenhancing trade performance to a focus on the

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relationships and networks linkingfirms" (Wilkinson, Mattsson and Easton, p.278), the issue of causality becomes cmcialbecause "...important parts of the...networkmay lie outside the [focal] country and be lessa m e n a b l e t o g o v e r n m e n tintervention" (Wilkinson, Mattsson and Easton,p. 282).

A state governmental agency is imUkely to fundproduct-based export promotion that targetsfirms in business networks wherein the loci ofmarketing instigation for the creation of exporttransactions is outside the U.S. One situationwhere a key part of an export-related networklies outside of the focal state is one where theexporter of record is a U.S.-based productionsubsidiary of a multinational company that isheadquartered outside of the U.S., where theproduction subsidiary sells product to a salessubsidiary located in another country. In such asituation, the locus of instigation for the exporttransaction is likely to be the foreign salessubsidiary. Such an export transaction isclearly not a "free market" transaction from thepoint of view of the U.S.-based productionsubsidiary. In such a circumstance, thesubsidiary is probably better characterized as apassive vendor than an active marketer. As aconsequence, an export transaction between aU.S. production subsidiary that is the exporterof record and a related foreign entity that is thesales subsidiary would not appear to qualify asa valid outcome of govemmentally-sponsoredexport promotion, when the sponsoringgoverrmiental entity is located in the U.S.

Miles Friedman (2005), former ExecutiveDirector of the National Association of StateDevelopment Agencies, says that there is anincreasingly clear realignment of roles betweenthe federal government and individual stategovemments regarding the provision of exportpromotion services. The federal governmenthas become more of a "wholesaler" for stategovemments in providing trade data, tradeleads and periodic foreign trade missions underthe guidance of the Foreign and CommercialService. In contrast, state govemments haveadopted a "retailing" role of dealing directly


Recent Trends in Export Promotions... Williamson, Kshetri and Wilkinson

with individual firms in their own respectivestates, and motivating them to either commenceexporting activities or increase involvement inexporting.

The complementarity in roles of Federal andState governments regarding their involvementin export promotion activities is bome out inSecretary of Commerce Locke's Report to thePresident...(2010):

State govemors, the National Associationof State Departments of Agriculture, StateRegional Trade Groups, and the StateIntemational Development Organization[SIDO] are key players in this country'sfrade promotion efforts. Most States haveoffices devoted to export promotions for in-State companies, and many govemors leadat least one trade mission a year. At thelocal level, the States work very closelywith their Federal Govemment Partners. Inmany states, the offices of the State andFederal export promotion agencies are co-located and work together to developannual operating plans, (p. 32)

Government sponsored export promotionactivities are increasingly targeting small andmediimi-sized enterprises (SMEs). First, itappears that SMEs have, in important ways,performed better than their large scalecounterparts in capitalizing on opportunitiesthat have become evident in the wake of theglobalization of a variety of export markets("New Challenges for..." 1999). Empiricalevidence presented by McCurdy (2003)provides support for this contention. Also,increases in rates of SME participation inexporting activities over the 1997 to 2007 timeperiod have outstripped those of their largercounterparts. The USITC-commissioned Smalland Medium-Sized... (2010) refiects this:

While total SME merchandise exportsincreased rapidly between 1997 and 2007,this increase is attributable both to anapproximately 80 percent increase in theexport value per firm and to anapproximately 30 percent increase in thenumber of exporting firms... By contrast,the number of large exporting firms


remained relatively unchanged... WhileSMEs contributed 31.5 percent of the overallexport value growth, they accounted fornearly 100 percent of the growth in thenumber of exporting firms, (pp. 3-4)

Additionally, larger firms appear to be lessresponsive to govemmentally-sponsored exportpromotions than SMEs because they have theresources to independently capitalize onopportunities in export markets (Crick 1997).Managers of larger firms are more likely toview govemmentally-sponsored exportpromotion as unwanted intrusions into thefirms' business activities. Another reasonbehind the increase in focus of govemmentally-sponsored export promotion programs onSMEs concems the greater propensity of largefirms to use foreign affiliates in their exportingactivities. Support for the latter contention isfound in McCurdy (2003), whose researchdetermined that while only 17 percent of U. S.-based SME exports involved the use of foreignaffiliates, 40 percent of exports of large U.S.firms involved the use of foreign affiliates.

A final trend in regard to export promotionalprograms in the U. S. concems the emergenceof Mandated Commodity Promotion"programs (Alston, Crespi, Kaiser and Sexton2007). These programs are receivingincreasing usage in promoting a variety of U.S.agricultural products (Alston, Crespi, Kaiserand Sexton). These programs involve the useof "check-off" taxes (typically less than onepercent of the value of the goods) that arelevied on the goods, but only if an adequatemajority of producers agree to the tax. The taxis legally binding on all producers of the focalproduct, even producers who vote against it,and addresses a "free rider" problem thatotherwise emerges when advertisementstargeted at a generic product create benefits forproducers of the product who do not contributemonies in support of the promotional programs.

The benefits of these programs appear to besignificant. One program tiiat was reported onin some detail by Alston, Crespi, Kaiser andSexton (2007) concemed export promotion of

162


California raisins that were targeted at theJapanese and U.K. markets. The results of theeconometric assessments indicated that thepromotions "accoimted for an increase in salesof 6,107 metric tons per year in Japan, and18,116 metric tons per year in the UnitedKingdom." (p. 52) Other products that werereported as having been the subject ofsuccessful product export promotionalprograms are ahnonds, cotton, pecans, wahiuts,orange juice, "red meat," and soybeans. In theconclusion of Alston, Crespi, Kaiser and Sexton(2007), the authors indicated that "all of thestudies found statistically significant demandresponses to price and promotion and themeasures of demand response to promotionwere generally large" (p. 56).

CONCLUSION

This paper addressed a variety of issues relatedto export promotions, ones focusing on recenttrends in the U.S. and made all the moreimportant in light of President Obama'sNational Export Initiative. In the introductionof the paper some of the more salient benefitsof export promotion were identified andexplained. Empirically-established operatingprinciples for Export Promotion Agencies(EPAs) around the world were then clarified,and different export promotion programs ofselected countries in identified geographicsectors were highlighted. Subsequently, U.S.and E.U. export promotions were contrasted inseveral distinct domains and the impact ofexport promotions in various segments of theeconomy of the U.S. was then described.Finally, various trends in export promotions inthe U.S. that have emerged since the beginningof the 1990s were identified and explained.

A constant theme of international businessinstruction is the importance of buildingrelationships with people operating in targetedmarkets. Trade shows, trade missions, andforeign trade ofSces are the primary means thatgovernment agencies have used to create andfacilitate these experiences. Once a businessperson or organization develops an effective,long-term business relationship with an

163

appropriate entity in an overseas market, thesky is the limit. The importance of relationshipbuilding (which takes much more time than weAmericans want it to take) cannot beoverstated. Export promotion programs make asubstantial contribution to building suchrelationships when they help smaller businessowners and managers get into foreign marketsto see what international business is all about.

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