Last week, the U.S. Commerce Secretary, Gary Locke, unveiled details of the National Export Initiative (NEI), a new effort by President Obama aimed at doubling U.S. exports over the next five years to support 2 million jobs in America. According to the press release, NEI is focused on three key areas:

1. A more robust effort by this administration to expand its trade advocacy in all its forms, especially for small- and medium-sized enterprises. This effort includes educating U.S. companies about opportunities overseas, directly connecting them with new customers and advocating more forcefully for their interests.
2. Improving access to credit with a focus on small- and medium-sized businesses that want to export.
3. Continuing the rigorous enforcement of international trade laws to help remove barriers that prevent U.S. companies from getting free and fair access to foreign markets.

Global trade activity is usually associated with large, multi-national companies, but many small and midsize businesses (SMBs) are also engaged in global trade. In fact, according to the latest statistics available, small and midsized businesses (companies with fewer than 500 employees, as defined by the U.S. Commerce Department) accounted for 97 percent of all U.S. exporters in 2007, and export revenue from SMBs rose from $102.8 billion in 1992 to $312 billion in 2007!

SMBs Driving Growth in U.S. Exports (Source: US Department of Commerce; click to enlarge)

Even before last week’s announcement, Congress was already taking legislative action to promote global trade among SMBs (see Small Business International Trade Enhancements Act of 2009 (S. 1196) and the Small Business Export Promotion and Development Act of 2009 (S. 1208); both bills were introduced in mid 2009 but no additional action has been taken).

But do small and midsize companies have the internal expertise, processes, and IT capabilities to successfully engage in global trade?

The quick answer is no, especially with regards to IT. According to latest version of  ARC’s Global Trade Management (GTM) Worldwide Outlook Study, Tier 2 and Tier 3 companies each accounted for less than 25 percent of GTM solution sales. In other words, most small and midsize companies still rely on manual processes to manage their global trade operations, particularly their exports. Not only is this approach costly and inefficient, it also makes it difficult or impossible for companies to remain in compliance with customs regulations. The need to streamline and automate global trade processes is a key reason why the GTM solutions market is one of the fastest growing segments of the software industry.

GTM solutions automate a variety of trade activities, including:

• Perform restricted party screenings and embargo checks
• Assign export and import licenses
• Create and file trade documents
• Communicate electronically with customs authorities
• Facilitate product classification
• Manage customs processes and transit procedures
• Facilitate restitution handling
• Determine preferential trade eligibility

Trade content is another critical component of a GTM solution, as I discussed a few months ago in “Beyond Software: The Role of Content and Connectivity in Global Trade Management.”

Simply put, the launch of NEI is good news for GTM solution vendors. The initiative should stir up demand for GTM solutions among small and midsize companies. And NEI is also good news for companies looking to grow their exports. While the initiative focuses on some important factors, it doesn’t address all of the necessary building blocks for achieving global trade management excellence. A GTM solution is certainly one of these building blocks.