November 13, 2013

Discretionary SpendingOption 14

Function 370 - Commerce and Housing Credit

Eliminate the International Trade Administration’s Trade Promotion Activities

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Spending                        
  Budget authority 0 -0.3 -0.3 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -1.4 -3.4
  Outlays 0 -0.3 -0.3 -0.3 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -1.3 -3.3

Note: This option would take effect in October 2014.

The International Trade Administration (ITA) is an agency within the Department of Commerce that provides support to U.S. businesses selling their goods and services abroad. The agency assists domestic companies that wish to increase their exports or that are new to the exporting process. Under its authority to provide assistance for trade development, ITA assesses the competitiveness of specific U.S. industries in foreign markets and develops trade and investment policies to promote U.S. exports. In addition, ITA supports U.S. exporters in their pursuit of fair market value for U.S. goods, monitors compliance with trade agreements, and enforces U.S. trade law. ITA is one of several federal agencies that engage in trade development and promotion; it receives the largest discretionary appropriations. The Congressional Budget Office estimates that ITA’s 2013 appropriation for those purposes was $308 million.

This option would eliminate ITA’s trade promotion activities. That change would reduce discretionary outlays by $3 billion from 2015 through 2023, CBO estimates.

One rationale for this option is that such business activities are usually better left to the companies and individuals that would be expected to benefit rather than to a government agency. Another rationale is that the cost to taxpayers to provide those services at the federal level probably exceeds the benefit to U.S. businesses; because those costs are not reflected in the prices of the goods and services sold abroad, a portion of the benefits are passed on to consumers and firms in other countries in the form of lower prices for U.S. exports. In addition, trade promotion activities that are developed by an industry are probably more efficient than those developed by government agencies because they can be better tailored to meet the particular needs of the businesses involved. Several private-sector entities already provide trade promotion services that target particular industries or regions. For example, TradePort, a joint venture of the Bay Area Council Economic Institute and the Los Angeles Area Chamber of Commerce, is a repository of free information and resources for businesses seeking to increase international trade to and from California.

An argument against eliminating ITA’s trade promotion activities is that those activities may be subject to economies of scale, so having a single entity (the federal government) develop the expertise to counsel exporters about foreign legal and other requirements, disseminate information about foreign markets, and promote U.S. products abroad might be more effective. In addition, the cut could curtail efforts that are under way to increase U.S. exports. The National Export Initiative, established by Executive Order 13534 in March 2010, presented a strategy for doubling U.S. exports that relies in part on ITA’s trade promotion programs. According to the 2012 National Export Strategy published by the Trade Promotion Coordinating Committee, ITA’s trade promotion efforts supported $73 billion in U.S. exports from January 2010 through September 2012.