Eliminate the International Trade Administration's Trade Promotion Activities or Charge the Beneficiaries

The Manufacturing and Services unit of the International Trade Administration (ITA) in the Department of Commerce strives to enhance the competitiveness of U.S. industries and to increase exports. ITA also operates the U.S. Commercial Service, which is the trade promotion arm of the agency. The service counsels domestic businesses on issues related to exports and engages in trade advocacy for U.S. companies. It charges fees for those services, but the fees do not cover the costs of all activities. This option encompasses two alternatives: eliminating ITA's trade promotion activities or charging the beneficiaries for those services. Either change would save about $2 billion through 2016 and almost $4 billion over the 2012-2021 period.

The principal rationale for eliminating ITA's trade promotion activities is that such business activities are usually better left to the companies and industries that are likely to benefit rather than to a government agency. In addition, having the government engage in such activities (without charging the beneficiaries for their full cost) is an expensive means of helping U.S. businesses because the benefits are partially passed on to consumers and firms abroad in the form of lower prices for U.S. exports. Hence, the cost to taxpayers is likely to be larger than the benefit to U.S. businesses. Furthermore, in its 2008 evaluation using the Program Assessment Rating Tool, the Office of Management and Budget concluded that businesses can obtain services similar to those offered by ITA from state, local, and private-sector entities.

An argument against eliminating ITA's trade promotion activities is that they may be subject to some economies of scale, so having one entity (the federal government) counsel exporters about foreign legal and other requirements, disseminate information about foreign markets, and promote U.S. products abroad might make sense.

An alternative way to reduce net federal spending but continue ITA's activities would be to charge the beneficiaries for their full costs. Fully funding ITA's trade promotion activities through voluntary charges, however, could prove difficult. In many cases, it would be impossible to promote the products of selected businesses that were willing to pay for such promotion without also promoting the products of other companies in the same industry. In those circumstances, there would be little incentive for companies to purchase ITA's services because they would probably accrue benefits regardless of whether they paid for them. Consequently, if the federal government wanted to charge beneficiaries for ITA's services, it might have to require that all companies in an industry (or the industry's national trade group) decide collectively whether to buy the services. If an industry chose to purchase the services, all of the companies in the industry would be required to pay according to some equitable formula.