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Trade Barriers That U.S United States International Trade Commission Trade Barriers That U.S. Small and Medium-sized Enterprises Perceive as Affecting Exports to the European Union Investigation No. 332-541 USITC Publication 4455 March 2014 U.S. International Trade Commission COMMISSIONERS Irving A. Williamson, Chairman Shara L. Aranoff Dean A. Pinkert David S. Johanson Meredith M. Broadbent F. Scott Kieff Robert B. Koopman Director, Office of Operations Sandra A. Rivera Acting Director, Office of Economics Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Trade Barriers That U.S. Small and Medium- sized Enterprises Perceive as Affecting Exports to the European Union Investigation No. 332-541 Publication 4455 March 2014 This report was prepared principally by Project Leader William Deese [email protected] Deputy Project Leader Tamar Khachaturian [email protected] Office of Industries Caitlin Blair, Laura Bloodgood, Joanna Bonarriva, Andrew David, Dennis Fravel, John Fry, Alberto Goetzl, Cathy Jabara, Jacqueline Jones, John Kitzmiller, Martha Lawless, Jeanette Leary, Katherine Linton, Brendan Lynch, Elizabeth Nesbitt, Erick Oh, Jeff Okun- Kozlowicki, Joann Peterson, Alison Rozema, George Serletis, Michael Stanton-Geddes, Mihir Torsekar, Marin Weaver, and Linda White Office of Economics Samantha Day, Bill Greene, Aimee Larsen, and Sandra Rivera Content Reviewers Heidi Colby-Oizumi and Kyle Johnson Office of Analysis and Research Services John Stevens Editorial Review Peg Hausman Administrative Support Trina Chambers and Monica Reed Help Desk and Customer Service Division Debra Daniels, Shadara Peters, Mark Toye, and Sonya Wilson Under the direction of Sandra A. Rivera, Acting Director, Office of Economics William Powers, Chief, Research Division Acknowledgements The U.S. International Trade Commission (Commission) wishes to acknowledge the assistance provided by the Small Business Administration and U.S. Commercial Service in both their Washington and field or export assistance center offices in identifying and inviting small and medium-sized enterprises (SMEs) to the roundtable meetings and in providing the facilities at which many of the roundtables were held. The Commission also wishes to acknowledge the assistance from the U.S. Census Bureau’s Foreign Trade Division in providing specially tabulated data on SME exports to the European Union. i Abstract This report catalogs trade-related barriers that U.S. small and medium-sized enterprises (SMEs) perceive as disproportionately affecting their exports to the European Union (EU) relative to large exporters to the EU. Various approaches were used to gather information directly from SMEs and other interested parties (“respondents”) for this report. Respondents reported that numerous EU trade barriers, particularly standards-related measures, limit SMEs’ exports to the EU more than those of large exporters. They explained that while complying with standards, technical regulations, and conformity assessment procedures is costly for larger firms, it is potentially prohibitive for SMEs because many costs are fixed regardless of a firm’s size or revenue. Respondents also cited difficulties involving trade secrets, patenting costs, and logistics challenges, especially customs requirements, Harmonized System classifications, and the EU’s value-added tax system. Trade financing in the EU was reported to be a lesser problem. Besides these cross-cutting issues, the report describes many industry-specific barriers. Many respondents involved with chemicals and related products singled out high compliance costs for the EU chemical regulation, while SMEs exporting cosmetics expressed difficulties meeting the EU’s cosmetics directive. Respondents in the apparel industry highlighted the recent retaliatory increase in EU duties on U.S. exports of women’s denim jeans, since most affected producers are SMEs. SMEs producing machinery, electronic, transportation, and other goods cited a lack of harmonized international standards and mutual recognition for conformity assessment, as well as problems complying with technical regulations and conformity assessment procedures. Respondents in the agriculture sector reported diverse export barriers. Respondents in the corn, dried fruit, animal feed, cheese, and wheat industries cited high tariffs, stringent and inconsistent EU rules and testing mandates, non-science-based regulations (especially for genetically modified traits), lack of harmonization between U.S. and EU standards, and the EU’s protected designations of origin (PDOs). The U.S. poultry and lamb industries reported that they are effectively banned from exporting to the EU. U.S. services SMEs in the healthcare, engineering, testing, and audiovisual industries highlighted a lack of mutual recognition of licensing, credentials, and standards, as well as broadcasting and film quotas, language dubbing requirements, government subsidies, and intellectual property and piracy issues. In certain industries, respondents also provided suggestions for increasing U.S. SME transatlantic trade with the EU and, at times, stories of successfully exporting to the EU. iii CONTENTS Page Acknowledgments ........................................................................................................... i Abstract ................................................................................................................................... iii Abbreviations and Acronyms ................................................................................ ix Executive Summary ....................................................................................................... xi Chapter 1 Introduction ............................................................................................... 1-1 Purpose and scope .......................................................................................................................... 1-1 Approach ........................................................................................................................................ 1-2 Roundtables ............................................................................................................................. 1-3 Washington, DC hearing and field hearing in California ........................................................ 1-4 Letter sent to SMEs ................................................................................................................. 1-4 Review of the literature ........................................................................................................... 1-4 Statistics on SME trade with the EU ....................................................................................... 1-4 Organization ................................................................................................................................... 1-5 Importance of the EU market and SME trade ................................................................................ 1-5 Barriers to accessing the EU market .............................................................................................. 1-6 EU tariffs ................................................................................................................................. 1-6 EU NTMs ................................................................................................................................ 1-7 Suggested ways to enhance SME participation in trade ................................................................ 1-9 Bibliography .................................................................................................................................. 1-11 Chapter 2 Cross-cutting Trade Barriers and Issues ........................... 2-1 Standards and regulations .............................................................................................................. 2-2 Different regulatory approaches in the EU and the United States ........................................... 2-4 Conformity assessment procedures and the Conformité Européenne marking perceived as barriers to SME exports ...................................................................................................... 2-6 Intellectual property issues important to U.S. SMEs exporting to the EU..................................... 2-7 Increased protection of trade secrets and regulatory data ........................................................ 2-7 A unified system for EU patent protection .............................................................................. 2-8 Logistical issues, including customs, tax requirements, shipping, and distribution ...................... 2-9 U.S. SMEs encounter problems understanding, and complying with EU customs requirements ....................................................................................................................... 2-10 U.S. SMEs highlight challenges with the transportation and distribution of products in the EU ....................................................................................................................................... 2-12 Private and public entities assist U.S. SMEs exporting to the EU .......................................... 2-13 Finance-related issues faced by SMEs exporting to Europe .......................................................... 2-13 Longer payment
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