SBA Management Review: Office of International Trade (House Small Business Committee hearing, September 20, 2022)

Summary

The printed record of a House Committee on Small Business hearing, SBA Management Review: Office of International Trade, held September 20, 2022, Small Business Committee Document Number 117–067, printed in 2023. The committee met at 10:01 a.m. in Room 2360 of the Rayburn House Office Building with Chairwoman Nydia M. Velázquez presiding; she and Ranking Member Blaine Luetkemeyer gave opening statements. The sole witness was Gabriel Esparza, Associate Administrator of the Office of International Trade. Closing the hearing, Representative Houlahan points to the STEP Improvement Act of 2022, due before the committee the next day, as the vehicle for reauthorizing the State Trade Expansion Program. The appendix carries Esparza's prepared statement, his answers to Luetkemeyer and a Glenroy statement. The committee adjourned at 11:30 a.m.

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“SBA Management Review: Office of International Trade (House Small Business Committee hearing, September 20, 2022).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/sba-management-review-office-of-international-trade-house-small-busine-1e7b6af3b0/, SHA-256 f9aee382b6b02f7209bf203f26bffc43aa4f5c06cd4213d0561252fad28e9669.

Full text

SBA MANAGEMENT REVIEW: OFFICE OF
INTERNATIONAL TRADE

HEARING
BEFORE THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION

HEARING HELD
SEPTEMBER 20, 2022

Small Business Committee Document Number 117–067
Available via the GPO Website: www.govinfo.gov

U.S. GOVERNMENT PUBLISHING OFFICE
48–579 WASHINGTON : 2023
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
SCOTT PETERS, California
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
MIKE FLOOD, Nebraska

MELISSA JUNG, Majority Staff Director
ELLEN HARRINGTON, Majority Deputy Staff Director
DAVID PLANNING, Staff Director

(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Nydia Velázquez ............................................................................................. 1
Hon. Blaine Luetkemeyer ....................................................................................... 2

WITNESS
Mr. Gabriel Esparza, Associate Administrator, Office of International Trade,
U.S. Small Business Administration, Washington, DC .................................... 5

APPENDIX
Prepared Statement:
Mr. Gabriel Esparza, Associate Administrator, Office of International
Trade, U.S. Small Business Administration, Washington, DC ................. 35
Questions and Answers for the Record:
Questions from Hon. Luetkemeyer to Mr. Esparza and Answers from
Mr. Esparza ................................................................................................... 39
Additional Material for the Record:
Glenroy Statement ........................................................................................... 43

(III)
SBA MANAGEMENT REVIEW: OFFICE OF
INTERNATIONAL TRADE

TUESDAY, SEPTEMBER 20, 2022

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:01 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velázquez
[chairwoman of the Committee] presiding.
Present: Representatives Velázquez, Davids, Phillips, Newman,
Bourdeaux, Carter, Houlahan, Kim of New Jersey, Craig, Peters,
Luetkemeyer, Williams, Stauber, Meuser, Tenney, Garbarino, Kim
of California, Van Duyne, Fitzgerald, and Flood.
Chairwoman VELÁZQUEZ. Good morning. I call this hearing to
order. Without objection, the Chair is authorized to declare a recess
at any time.
I would like to begin by noting some important requirements.
Standing House and Committee rules will continue to apply during
hybrid proceedings. All Members are reminded that they are ex-
pected to adhere to these rules.
House regulations require Members to be visual through a video
connection throughout the proceeding, so please keep your cameras
on. Also, remember to remain muted until you are recognized to
minimize background noise.
In the event a Member encounters technical issues that prevent
them from being recognized for their questioning, I will move to the
next available Member of the same party, and I will recognize that
Member at the next appropriate time slot, provided they have re-
turned to the proceeding.
For small businesses, exporting products abroad can jump-start
growth and unlock an enterprise’s full potential. Nearly 96 percent
of consumers live outside of the United States. When small firms
sell their products internationally, they can reach countless new
customers, become more resilient, and boost their bottom line.
The approximately 166,000 small businesses in the U.S. that ex-
port account for roughly $341 billion in sales. However, small ex-
port businesses represent only 3 percent of U.S. small employer
firms. That is because exporting presents a range of unique risks
and challenges for small businesses stemming from the complex
nature of global trade.
Small businesses looking to expand overseas often have difficulty
obtaining the capital to fill foreign purchase orders, struggle to con-
nect with foreign buyers, and lack the expertise to understand
international rules and regulations.
(1)
2

Recognizing these challenges, the Small Business Administration
created the Office of International Trade in 2010 to work with
other federal agencies to encourage small business exports and pro-
vide expert assistance to small firms.
While OIT engages in a variety of activities to promote exports,
including managing three different loans specifically targeted to
small businesses looking to export—the Export Express, Export
Working Capital, and International Trade Loan Programs—the of-
fice’s primary responsibility is administering the State Trade Ex-
pansion Program, otherwise known as STEP.
STEP educates small firms on the nuances of the exporting proc-
ess and provides technical assistance to support small businesses
as they expand into international markets.
The program awards loans to all states and territories for partici-
pation in trade missions, international marketing efforts, work-
shops, export trade show exhibits, and other promotional activities.
These funds must be matched by the states at either 35 percent of
the federal award for states with high export volumes or 25 percent
for states without high export volumes.
Since its inception, STEP has helped thousands of small busi-
nesses break into the international marketplace. In fiscal year
2021, the SBA supported $832 million in export sales from STEP
and assisted over 3,400 small businesses. By expanding the num-
ber of small firms that export, we can grow both the small business
and U.S. economy.
That is why we must act to strengthen and improve the STEP
program. Representative Evans, along with Representative Young
Kim, recently introduced the STEP Improvement Act of 2022,
which will reauthorize the program for 4 fiscal years.
The bill also includes measures to streamline STEP’s application
process, increase grant spending flexibility, improve communication
between the SBA and participating states, implement more robust
reporting requirements, and allow small firms to participate in the
program sooner in their business journey.
Last Congress, the House passed a similar bill, but ultimately
the Senate declined to take action. I hope that we can continue our
bipartisan work to pass this bill through the House this Congress
and work with our Senate counterparts to enact this important leg-
islation into law.
Today, I want to take a closer look at the operations of SBA’s Of-
fice of International Trade and particularly STEP. I look forward
to discussing the actions Congress can take to improve the program
and address any challenges facing the office.
I want to thank Associate Administrator Esparza for being here
today, and I look forward to hearing your testimony.
I now would like to yield to the Ranking Member, Mr. Luetke-
meyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chairwoman.
And thank you, Associate Administrator Esparza, for taking time
to testify today.
I think it is important to hear directly from administration offi-
cials on the programs they manage and their work to support small
business.
3

Unfortunately, today marks 512 days since Secretary Yellen has
missed the legal deadline to testify before the Small Business Com-
mittee. This is unacceptable.
But, Mr. Esparza, we do appreciate you being here today and ful-
filling your responsibility.
Small businesses are the drivers of innovation, leaders in job cre-
ation, and beacons of American ingenuity across the globe. Inter-
national trade policy impacts nearly every type of small business,
whether it is agricultural products from Missouri or computer and
electronic products from California. We have seen how entre-
preneurs’ ability to compete on the world stage can grow our econ-
omy, support our American workers, and build communities.
To broaden markets and strengthen small businesses’ competi-
tive advantage, the Trump administration confronted unfair trade
practices and negotiated historic trade deals, including the United
States-Mexico-Canada Agreement, USMCA, and a written ‘‘Phase
One’’ trade agreement With China.
Under pro-growth and pro-business policies, small business opti-
mism broke a 35-year-old record and we experienced a blue collar
boom where wages grew faster for workers than for managers or
supervisors prior to the COVID-19 pandemic.
However, I am concerned that under the Biden administration
China’s economic aggression has gone unchecked, regulations and
taxes have increased for American manufacturers, and backlogs at
our ports have created supply chain disasters.
We have seen small business optimism decline, inflation reach
40-year highs, and two consecutive quarters of negative economic
growth, which translates to a recession, despite the left’s effort to
spin something to the contrary.
The Consumer Price Index, CPI, rose 8.3 percent in August as
compared to 1 year earlier. Additionally, the Producer Price Index,
or wholesale inflation, registered an annual increase of 8.7 percent.
Inflation remains the top concern for small business owners, yet
the Biden administration fails to provide solutions.
On the very same day that the Bureau of Labor Statistics re-
ported that CPI remains at a 40-year high, President Biden cele-
brated on the White House lawn a bill that the CBO found will not
reduce inflation and in fact could slightly increase inflation in
2023.
A recent survey of small business owners found that 90 percent
of small business owners report that broader economic trends, such
as inflation, persistent supply chain issues, and workforce chal-
lenges, are having a negative impact on their business.
These economic headwinds impact every aspect of a small busi-
ness owner’s operation. They struggle to pay exorbitant high utility
bills, place ‘‘help wanted’’ signs on their doors in the search for
skilled labor, and encounter backlogs waiting for delayed parts and
goods.
Further, small businesses looking to enter international trade
markets face a variety of trade barriers that limit their ability to
compete, including lack of resources, inadequate access to financ-
ing, anti-competitive technical standards, and complex export con-
trols. These barriers are likely why small businesses represent only
26 percent of total American export value.
4

The Small Business Administration is tasked with advocating for
small businesses in trade negotiations and promoting small busi-
ness exports. Today we will review the SBA’s Office of Inter-
national Trade, OIT, export promotion activities, including manage-
ment and training programs, loan programs, and State Trade Ex-
pansion Program grants.
As the Ranking Member of this Committee, I appreciate the
work of OIT to help Main Street navigate the obstacles involved
with engaging in international trade and their advancement of
small business interests at home and abroad. To increase their ex-
ports and expand into new markets, small businesses can access
counseling and training from the SBA’s resource partners, field of-
fices, and United States Export Assistance Centers.
To access additional capital, small businesses can utilize any of
the small business traditional loan programs. In addition, SBA’s
three export loan programs—the Export Express Loan Program,
the Export Working Capital Program, and the International Trade
Loan Program—are facilitated by private sector lenders and guar-
anteed by the SBA to assist small businesses in building export op-
erations, financing transactions, or expanding production capacity.
The State Trade Expansion Program, or STEP, is also a valuable
tool for small businesses. STEP grants are awarded to State trade
agencies, which are then awarded to eligible small businesses for
specific export activities. The grant funding can be used for partici-
pation in foreign trade missions and trade show exhibitions, design
and marketing media and websites, and procurement of consulting
services.
Missouri, my State, has participated in the STEP program since
its inception and over $2.5 million total has been disbursed to hun-
dreds of Missouri businesses. This program has made a real impact
on small business owners who have used the program to inter-
nationalize their websites and create relationships on foreign mar-
ket sales trips.
In Missouri, Tram (ph) Systems, a veteran-owned small business,
used the STEP program to participate in a trade show in Singa-
pore, which resulted in product distribution to 10 countries in
Southeast Asia and a new purchase order of $27,000.
Mr. Esparza, it sounds like, from your response there, it looks
like you recognize this entity.
Stauder Consulting, Inc., based in St. Peters, Missouri, again in
my district, previously felt the company’s size and limited resources
made it too difficult to market internationally.
However, after receiving financial assistance and connections
from STEP grants, the company now reports: A small business
with limited business development funds, the MO-STEP Program,
which is for Missouri, the Missouri version of it, has assisted our
efforts to market and sell our products and services internationally.
In the past 5 years, we have transitioned from zero percent inter-
national sales to 75 percent international sales. This program has
made a significant impact on our small business and our ability to
project our capabilities and products around the world.
This Committee has held multiple hearings on this important
program. In this past July, the Subcommittee on Economic Growth,
Tax, and Capital Access heard from beneficiaries of the program.
5

Prior to becoming a Member of Congress, Ranking Member
Meuser, who is with us this morning, was a small business owner,
and during the hearing he shared how his small business utilizes
STEP grants to reach new markets and grow their operations.
Tomorrow, this Committee will mark up the bipartisan STEP
Improvement Act of 2022. This legislation will improve coordina-
tion, increase accountability, and ensure small businesses can con-
tinue to benefit from this valuable program. I applaud Representa-
tives Evans, Newman, Kim, and Flood for their work on this legis-
lation.
In a growing global economy, we can all agree small businesses
deserve ample opportunities to engage in international trade. To
support entrepreneurs, we must stand up to China and advocate
for American innovation, reduce regulatory burdens that hold small
businesses back, restore our supply chains for the movement of
goods, keep taxes low for our nation’s job creators, and stop reck-
less spending on the backs of Main Street USA.
I look forward to discussing the Office of International Trade’s
initiatives, and I remind the administration that reckless spending
and increasing taxes and regulations fail to support small busi-
nesses in their efforts to expand and export.
And with that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. Thank you. The Ranking Member
yields back.
I would like to take a moment to explain how this hearing will
proceed. The witness will have 5 minutes to provide a statement
and each Committee Member will have 5 minutes for questions.
Please ensure that your mic is on when you begin speaking and
that you return to mute when you finish.
With that, I would like to introduce our witness, Mr. Gabriel
Esparza, the Associate Administrator for the Office of International
Trade at SBA.
Mr. Esparza is a seasoned executive with over 25 years of experi-
ence leading businesses from large corporations to startups. Prior
to joining the SBA, he was an investor, adviser, and operator in a
variety of entrepreneurial ventures.
Earlier in his career, Mr. Esparza spent 13 years at American
Express, including as Vice President of global business develop-
ment for the commercial payments business.
From 2009 to 2018, Mr. Esparza also served on the Board of
Civil Service Commissioners for the City of Los Angeles.
He holds a Master of Business Administration from Harvard
Business School and a Bachelor of Arts in international studies
from Stanford University.
Welcome, Mr. Esparza. I will now recognize you for 5 minutes.
STATEMENT OF MR. GABRIEL ESPARZA, ASSOCIATE ADMINIS-
TRATOR, OFFICE OF INTERNATIONAL TRADE, U.S. SMALL
BUSINESS ADMINISTRATION, WASHINGTON, DC
Mr. ESPARZA. Thank you. Chairwoman Velázquez, Ranking
Member Luetkemeyer, and distinguished Members of the Com-
mittee, thank you for honoring me with an invitation to come be-
fore you today to discuss the work of the Office of International
Trade at the U.S. Small Business Administration.
6

For America’s small businesses, exporting is an engine for
growth that allows our firms to reach new customers in an increas-
ingly interconnected global marketplace. Data shows that small
businesses that export are more resilient, expand faster, and create
higher paying jobs for Americans.
Raising awareness of the availability of trade assistance through
the SBA requires shifting our frame of reference for what an export
looks like today. The advent of digital tools, e-commerce engines,
and maturing payment networks has reduced barriers to entry for
small businesses to export both products and services.
At the SBA, Administrator Guzman has prioritized leveraging
these digital technologies to create a whole new generation of ex-
porters. During the pandemic, e-commerce increased in the United
States and small businesses adopted digital strategies to survive
and grow their revenues, often finding customers all over the
world.
We are driving transformational change so that the SBA can
help these ‘‘accidental exporters’’ become ‘‘intentional exporters’’ by
expanding and growing their businesses to new markets.
I am proud to bring my lived experience working around the
globe to SBA’s mission to help small businesses grow internation-
ally. Prior to joining the administration, I helped lead a startup
small business that built a modern 9-1-1 technology platform. Our
company launched in the United States and expanded around the
world.
Prior to that, I spent 13 years at American Express working with
small businesses and eventually leading global business develop-
ment for the commercial payments division.
Over the course of my 26-year career, I have lived, studied, and
worked around the globe, now almost 70 countries in total, while
at the same time being deeply intertwined in the small business
arena.
In that connection, I have seen the power of American entrepre-
neurship on a global scale, and I work each day at SBA to ensure
that our small businesses can find new customers to grow and com-
pete internationally.
One of our office’s primary responsibilities is providing education
and training to small businesses that are interested in exporting.
We help businesses prepare for navigating the complexities of
international sales, including customs, trade credit insurance, and
foreign exchange. Our efforts are supported by a range of partners
throughout the SBA, across the federal government, and with cer-
tain public-private partnerships.
After a business has established a solid idea, product, or service,
often including a track record of successful domestic sales, they
need access to capital to fund and grow their overseas expansion.
SBA’s lending portfolio provides guarantees on loans and credit
lines originated through the private banking industry.
The Office of International Trade is authorized to provide higher
guarantees on these facilities due to the unique circumstances
faced by exporters, namely increased buyer risk, country risk, and
currency risk.
7

The SBA’s Office of International Trade also focuses on providing
grants to small businesses in the form of export expense reimburse-
ment through the State Trade Expansion Program, or STEP.
This year, we are proud to be celebrating the tenth anniversary
of STEP, which over the last decade has awarded over $200 million
to all 50 States and six territories. The STEP program has sup-
ported 12,000 small businesses and generated approximately $5.5
billion in export sales.
Demand for STEP resources from the States is strong. This year,
STEP applications were the highest ever, both in terms of States
and territories applying as well as the total dollars requested. In
2022, we will have a record 48 States and 4 territories partici-
pating in the program.
Our partnership with the States, as well as with external advo-
cacy groups like the State International Development Organiza-
tions, or SIDO, is critical to the efficiency, relevancy, and impact
of the program.
The last piece of the puzzle for most small businesses as they
seek international opportunities is access to foreign markets. SBA
is deeply involved in the interagency trade apparatus of the federal
government. It is there that we advocate for small businesses for
all matters related to trade policy and trade agreements, bringing
to life the real lived experience of small business owners that we
meet every day.
SBA is committed to ensuring that the core offerings of our inter-
national trade office—education, capital, and market access—are
available to the growing universe of small business exporters.
Across the agency, Administrator Guzman has tasked us with de-
veloping more customer-centric approaches to our work that meets
our small business customers where they are. That is why the SBA
is focused on increasing awareness for trade by connecting to
broader audiences of small businesses who are currently exporting
or could potentially be exporting.
I am humbled by the opportunity to serve at the SBA, and I am
excited about the future of our nation’s small businesses to export
American-made products to customers throughout the world.
I appreciate the invitation to appear before you today, and I look
forward to your questions. Thank you.
Chairwoman VELÁZQUEZ. Thank you, Mr. Esparza.
I will begin by recognizing myself for 5 minutes.
You just stated STEP could be a great tool for small businesses,
but the issue is 96 percent of customers live outside the United
States. Only 3 percent of small businesses are exporting.
So as an Associate Administrator for OIT, do you have a plan to
market STEP to increase participation in exporting?
Mr. ESPARZA. Thank you, Chairwoman Velázquez.
Yes, of course. And, in fact, you hit on the correct word: market,
marketing awareness. We need to get the word out that this pro-
gram is effective. It has proven to be a generator of export sales,
a sustainer of jobs, allowing companies to expand into new mar-
kets. We simply need to get the word out more.
So our office has reorganized around having a stronger mar-
keting function. We have tasked the entirety of the staff to make
sure that they have a growth mindset and a marketing mindset.
8

And we will continue to work in our office, including across the eco-
system of partners that we have in federal government and in the
private sector, to make sure we continue that effort.
Chairwoman VELÁZQUEZ. I am glad that you mentioned re-
source partners. What about district offices?
Mr. ESPARZA. Absolutely. So the 68 district offices, Madam
Chairwoman, that the SBA manages are part of that ecosystem.
The 200-plus field staff of the U.S. Commercial Service in the
United States are women’s business offices, veterans business of-
fice, the Small Business Development Centers.
The ecosystem is large. If people want to talk about exporting,
small businesses, they should not suffer for lack of resources. It is
simply us being able to get the word out.
Chairwoman VELÁZQUEZ. Are you incorporating workshops in
some of our congressional districts, for example?
Mr. ESPARZA. Absolutely, Madam Chairwoman. In addition to
the one-on-one and in-person sessions, we are now, of course,
leveraging technology to do much broader seminars and webinars.
I speak very consistently out on the road at conferences in a vari-
ety of venues in which I too can get the word out. And so mar-
keting is fundamental to all that we are doing today.
Chairwoman VELÁZQUEZ. Can I ask you what will be the im-
pact of H.R. 8844 when we pass it?
Mr. ESPARZA. Thank you, Madam Chairwoman.
If and when we pass this bill, which we wholeheartedly support,
the opportunity for small businesses to continue to export, to con-
tinue to add to new markets will be an important driver of the U.S.
economy.
In addition to existing firms, we also have a very specific focus
on new-to-exporting firms as well as companies that come from his-
torically underserved communities. And so our reach is far and
broad, and we continue that effort today.
Chairwoman VELÁZQUEZ. In a recent hearing the Committee
heard from states and small businesses that participate in STEP.
Overwhelmingly, their testimony was positive, but we heard con-
cerns about the administrative aspects of managing the grant.
What steps did you take to improve the grant application process
for the 2022 grant cycle?
Mr. ESPARZA. Chairwoman Velázquez, we are—I am very
aware of this feedback, and I have spent time talking with State
directors, talking with managers of the grant programs. And I ac-
knowledge that there are aspects of the program that States want
to have become more efficient.
Of course, along with this Committee, what I try to do is make
sure that we have the right balance between protecting taxpayer
dollars and managing this program, and understanding at the
same time we ask very specific questions and have requirements
of the States in terms of their application process as well as their
quarterly reporting.
And so wherever we have an opportunity to improve the effi-
ciency of this program and the reporting requirements that we ask
of States, we will absolutely do that.
Chairwoman VELÁZQUEZ. Thank you.
9

Ensuring equitable knowledge of and access to SBA programs
and services has been a top priority for this Committee. However,
we have learned throughout the pandemic access to funding and
program support are not always equal.
How does SBA work to ensure that traditionally underserved
communities have access to STEP funds?
Mr. ESPARZA. Thank you, Madam Chairwoman.
This is important. Administrator Guzman has asked us across
the SBA not only to have a customer-centric lens in all that we do,
but to make sure that we have an equity lens with all that we do
as well so that historically underserved communities, women small
business owners, veteran small business owners, rural small busi-
ness owners all have an equal shot at the programs that we do.
Some of them, as you know, are built into statute such that the
STEP program, for example, has to be distributed evenly to all
States, it can’t be focused only on the highest exporting States.
And so both with what we work with in terms of the rules of our
programs as well as our interest in marketing to all communities,
we make every effort to ensure that underserved communities are
included there as well.
Chairwoman VELÁZQUEZ. Thank you, Mr. Esparza.
Now I yield to the Ranking Member, Mr. Luetkemeyer, for 5
minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Many in the American public feel that there is no identity to
what is driving the Biden administration’s trade policy agenda.
Are small businesses, the American worker, and private sector
growth key considerations when negotiating and examining trade
agreements?
Mr. ESPARZA. Thank you, Ranking Member.
We at the Office of International Trade work very closely with
the U.S. Trade Rep’s office, the Commercial Service, the entire
trade apparatus of the federal government.
We believe—and I believe individually—that it is our responsi-
bility to advocate for small businesses in all that we do and at
every seat at the table that we have. I try to bring those commu-
nications that I have with small businesses that I meet around the
country, bring those real life experiences and stories to this trade
apparatus when we talk.
Mr. LUETKEMEYER. I appreciate your comment that you want
to be an advocate for small business. I think that is your job, quite
frankly, and I appreciate that comment.
Do you talk to the administration at all with regards to the effect
of the policies of this administration with regards to inflation,
taxes, rules and regulations of small businesses that you are trying
to help export their products? Do you talk to anybody in the admin-
istration about that?
Mr. ESPARZA. Thank you, Ranking Member.
I talk with not only my boss, Administrator Guzman, but, again,
the U.S. Trade Rep’s office and Commercial Service, the State De-
partment, others in the federal trade apparatus. And I am always
advocating for small businesses, whatever their experience is,
whatever their circumstances.
10

Mr. LUETKEMEYER. Well, I appreciate that, because I asked
that same question of your director, Administrator Guzman, and
she is not talking to the administration, which is mind-blowing
from the standpoint that 99 percent of the businesses in this coun-
try are small businesses, businesses she has a direct impact over-
seeing and helping.
And yet we are not communicating the problems of small busi-
nesses to the administration with regards to their policies, whether
they work or don’t work. I mean, even if they are working, they
should be getting some feedback, positive feedback. Unfortunately,
most of it is negative.
But if you are not discussing that, I think it is very difficult to
help small businesses through all this.
When you advocate for small businesses in the trade arena, what
does your office do to hold China accountable for their predatory
digital trade policies, IP theft, currency manipulation, and violation
of WTO rules?
Mr. ESPARZA. Thank you, Ranking Member.
As I mentioned earlier, my advocacy for small businesses, our of-
fice’s advocacy, includes those small businesses that are trading
with China or would like to trade with China.
I am aware of circumstances and feedback from small business
in which tariffs in both directions can be positive and at the same
time can add friction to the system and be challenging to small
businesses.
So these are real experiences of small businesses that, again, in
my capacity in conversations with the trade apparatus across the
federal government, including the U.S. Trade Rep’s office, we share
these experiences so that we can advocate for small businesses
wherever possible.
Chairwoman LUETKEMEYER. You know, tax policy is a real
driver. The old adage ‘‘follow the money’’ is true with all the things
that are business-oriented.
As we saw with the Tax Cuts and Jobs Act of 2017, the inversion
that was going on with big companies moving their headquarters
overseas as a result of tax policy changed whenever we changed
our tax policy here. And since then, there hasn’t been one single
entity, not one, that has changed and has inverted their home of-
fice to a foreign country. In fact, many of them have brought them
home.
What do you see from the standpoint of tax policy that is harm-
ful to small businesses’ ability to transact trades with foreign coun-
tries?
Mr. ESPARZA. Thank you, Ranking Member.
Tax policy is not part of the conversations that I have personally
had with small businesses. I hear from small businesses their ques-
tions around: How do I find a buyer overseas? How do I have ac-
cess to capital? How can I take advantage of your programs and
services?
So while I am listening to them about their experiences and their
challenges, that is not one that I have specifically had a conversa-
tion about.
Mr. LUETKEMEYER. That is curious, because I think, I would
believe that going into another country, for instance Canada, I
11

mean, they tax the dickens out of American companies up there.
I mean, if you make money up there, you are taxed on it.
I would think that that would be something that if I am a small
business owner, I want to know what the tax laws are so if I sell
something and I make a hundred dollars’ worth of profit how much
of that do I actually get to keep and come home with. That sur-
prises me.
One quick follow-up. I saw an article this morning in The Wall
Street Journal how many people were coming back to work. Is ev-
erybody back to work in your department now, or do you still got
some folks back home?
Mr. ESPARZA. We are back to work.
Chairwoman LUETKEMEYER. 100 percent?
Mr. ESPARZA. And I, Ranking Member, I probably split my time
half the time in the office, half the time out on the road talking
to small businesses. When I am in the office, I am glad to see the
team, inspire them, lead them. At the same time, I do think it is
important to be out on the road talking to small businesses.
Mr. LUETKEMEYER. Well, I am not criticizing you being on the
road. What I am saying is we have too many people working from
home. We need to come back to work. And I assume that is what
you are doing. Most of your—all your people are back to work.
Mr. ESPARZA. We are back in the office.
Mr. LUETKEMEYER. Perfect. Thank you very much.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired.
And now I recognize the gentlelady from Pennsylvania, Ms.
Houlahan, for 5 minutes.
Ms. HOULAHAN. Thank you.
Associate Administrator Esparza, we hold in common that we
both went to Stanford. It looks as though you are a little bit young-
er than me, though, so we must have missed each other.
Very much appreciate the opportunity to have you appear before
the Committee. One of the things that makes me most proud about
serving on the Small Business Committee is that I have quite a lot
of experience in scaling small businesses to larger businesses. And
a couple of them have actually gone on to be global in their scope
and their span, one of them sold into 110 different countries from
startup.
Those were both started as two organizations in the Pennsyl-
vania area. And I am very, very glad to see that funding is coming
to Pennsylvania as part of the 2022 State Trade Expansion Pro-
gram awards.
This funding will support Pennsylvania’s Global Access Program,
which is designed to enhance the capability of small and midsize
Pennsylvania companies to increase export sales through innova-
tive uses, such as website enhancements, translator and inter-
preter fees, foreign market sales trips, and other sorts of things
that I know that I experienced as being powerful tools to be able
to grow your top line and bottom line and scale globally.
Considering the importance of this program, I really would like
to understand how States like Pennsylvania can further maximize
the amount of funding they receive in future years. Specifically, are
there ways that States can better utilize their funding in order to
obtain the maximum amount allowed in the next grant cycle?
12

One of the reasons why I am asking this question is that in
doing our research our team discovered that no States were award-
ed the maximum amount of $2 million for 2022. How can we be
that State that gets the $2 million?
Mr. ESPARZA. Thank you, Congresswoman.
For $20 million in available funding this year, we had $39 mil-
lion in requests from the States, almost two to one. And so almost
by definition we did not have enough money to satisfy every State’s
request.
But I can tell you that, in terms of maximizing the opportunity
for Pennsylvania or any other State, a good place to start is uti-
lizing all the funds available in a given year. We want to dem-
onstrate to you all that every State is maximizing the utility of the
program by utilizing all the funds.
Of course, we have several categories in which those funds can
be used. Principally, most small businesses look for expense reim-
bursement through the STEP program for trade shows and trade
missions, but there are nine expense categories, and they continue
to expand. We recently included now reimbursement for trade cred-
it insurance.
So we are starting to get very specific about all the aspects of ex-
porting, and we hope to continue to work with your State and oth-
ers to be able to maximize the program.
Ms. HOULAHAN. That is really interesting. And basically it is
a problem of supply and demand. There is a significant amount of
demand and not enough supply. Thank you for that answer.
Businesses in my community and nationwide are continuing to
be adversely impacted by increased costs due to Section 301 tariffs.
For instance, my office has been in close communication with a
company in my community called Lasko Products, which is an
international home comfort product and fan manufacturer that is
headquartered in my community. It has filed numerous requests
for exemptions from 301 tariffs, noting that the harmful impacts
that they are having on their business are difficult.
Given the role that your office does play in supporting businesses
that are engaged in exporting, I am sure that you understand how
challenging the 301 tariffs have been in the wake of the pandemic.
So this year is the 4-year statutory review mark for all four lists
of 301 tariffs on Chinese products. And recognizing that the United
States Trade Representative oversees an enforcement of the Sec-
tion 301 tariff regime, but also noting your expertise with their im-
pacts on small businesses, can you please explain to what extent
you do engage with the USTR on Section 301 tariffs?
Mr. ESPARZA. Thank you, Congresswoman.
So we are aware of the Section 301 process and the review that
is going on right now. We are also aware that several companies
have asked for exceptions from those tariffs.
Again, as I have said earlier, wherever we find real life stories
of small businesses that we meet every day across the country, in-
cluding the ones that you mentioned from Pennsylvania, we share
those stories, we share those examples with the U.S. Trade Rep’s
office, and we continue to advocate for them going forward.
More than anything, we keep abreast of these processes, the re-
view process, and we help in our capacity as educators and commu-
13

nicators with small businesses about those processes. And we hope
to be able to continue to do so.
Ms. HOULAHAN. So with the last seconds, that was actually the
final question, which is, how can small businesses like the ones in
my community better work with you all, kind of raise their hands
and say they would like to be exemplars or examples of kind of
what is going on and how we need to help these organizations?
What can your office do to seek these businesses out? And can
I direct this business to you more specifically?
Mr. ESPARZA. Yes, please, Congresswoman. On our website, we
have a trade tools portion of our website. We have a hotline. We
can take inbound calls. Communication and education relative to
not only tariffs but all aspects of the exporting journey is some-
thing that we work on very hard, and I am happy to work with
your office for that particular business.
Ms. HOULAHAN. [Presiding.] Thank you. I appreciate it. And I
yield back my time.
But I am now also serving as the acting Chair. And so the Chair
will now recognize Representative Roger Williams, who is the Vice
Ranking Member of the Committee, for his 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chair.
And as a small business owner—thanks for being here. As a
small business owner for 50 years—I am a car dealer, I have been
in business 51 years—I can tell you that President Biden’s SBA is
totally out of touch with Main Street America. And I am glad to
see that you are a businessperson, because, frankly, I didn’t know
they had any businesspeople over there. So I am glad that you
have that experience.
When I talk to business owners back in Texas, they are con-
cerned about the inability to find qualified workers, excessive gov-
ernment regulations, increasing compliance costs, and the constant
threat of tax increases coming from Washington.
And just real quick, do you think we should be raising taxes on
small business, on Main Street America? That is a short answer,
I mean, yes or no?
Mr. ESPARZA. Thank you, Congressman Williams.
I think tax fairness is an important aspect of what we should be
doing, and every American and every American small business
should pay its fair share of taxes.
Mr. WILLIAMS. See, I think we should cut taxes across the
board.
However, all businesses in my district are more concerned about
the—are most concerned about the out-of-control inflation, which
all of us are, which has soared to 13 percent under the Biden ad-
ministration and has caused prices across the grid to skyrocket.
Small business owners are having to drastically alter their oper-
ation to compensate for additional costs, forcing owners to decide
whether to reduce future capital investments, hold off hiring a new
employee, or raising prices on their consumers just to keep the
doors open. And you can’t continue to just raise prices. It is not
that easy. Small businesses have to eat most of that.
So, Mr. Esparza, as you talk with small business owners like my-
self, what changes are they having to make to their businesses’ op-
14

erations in response to inflation? And what would be your advice
to small businesses struggling with rising costs?
Mr. ESPARZA. Congressman, thank you.
Whether it is the current circumstances, whether it is the pan-
demic, whether it is a hurricane that is hurting Puerto Rico today,
for example, American small businesses are resilient. And it is our
domain in the Office of International Trade to make sure that they
have the education, training, access to capital, access to markets.
And so our office continues not only to be an advocate for these
small businesses, to provide them with the products and services
to help them in their exporting journey.
Mr. WILLIAMS. But how about being an adviser? That was my
question. I mean, what advice are you giving small business to deal
with these rising costs?
Mr. ESPARZA. What we tell them is that exporting can be an
important part of the journey. International sales, as was men-
tioned earlier, 95 percent of the world’s consumers live outside the
United States.
And so wherever we have an opportunity to talk with small busi-
nesses about the opportunities that exist overseas, we do that. And
then we provide them with opportunities for access to capital and
ensure that market access is an important part of that journey as
well.
Mr. WILLIAMS. We will move on, but if I was asking for advice,
you haven’t given me any.
So, number two, many businesses are facing a new problem they
have never had to deal with before, and that is supply chain. I am
in the car business. I used to have this many cars. Now I got this
many cars.
And U.S. ports are struggling to unload deliveries, and inven-
tories are sitting on container ships in the middle of the ocean. A
recent Goldman Sachs survey found that 61 percent of small busi-
ness owners reported supply chain issues that have been getting
worse over the past 3 months, and I am surprised that it is not
higher than that.
And so it is the responsibility of your office to assist small busi-
nesses in navigating the obstacles involved with international trade
and exporting.
So, Mr. Esparza, what is your office doing to help small busi-
nesses navigate these supply chain disruptions?
Mr. ESPARZA. Thank you, Congressman.
I was actually out in Seattle just a couple of weeks ago. Port
Commissioner Sam Cho there is somebody who has shared with me
the dynamics related to that particular port, and other ports that
I have come to understand their dynamics.
I do understand that the supply chain challenges in our ports
around the United States are easing to a certain degree. That is
not to say that those challenges don’t still exist, but they are eas-
ing. The cost of a crate, the cost of storage, the time in and out of
containers is improving.
But nevertheless, wherever we have an opportunity to discuss
these issues with small businesses we provide them with tools and
training and access to capital and market access so that we can
continue to help them on their journey, whatever they happen to
15

be shipping, whether it is product. Obviously, the advent of digital
tools helps the service side of the economy. But we advocate wher-
ever we can.
Mr. WILLIAMS. Well, advocating, again, is one thing, but help-
ing is different. So I will move on. I don’t feel I got a good answer
from you there. I think you dodged it.
Excessive amounts of red tape and administrative burdens can
make it extremely costly and overwhelming for smaller businesses
attempting to break into the international trade market.
While the STEP program was designed to increase the number
of small exporters, I have heard that the STEP reporting require-
ments tend to be more detailed and more burdensome compared to
other agencies’ grant programs.
This can be very discouraging, again, to smaller businesses who
don’t have the resources. They don’t have the people and they may
not have the money to fight bureaucratic red tape.
So, quickly, do you have a suggestion on how Congress can en-
sure that the STEP program can be made more accessible for small
businesses?
Mr. ESPARZA. Thank you, Congressman.
Well, obviously, more resources would be good for us to be able
to invest in technology platforms to help with some of that report-
ing requirement.
I give my predecessor good credit for having changed some of our
reporting process such that we are not collecting 50 Excel spread-
sheets from the States, but we are leveraging technology to be able
to do so.
We will continue to invest in that technology and improve those
processes so that we can make the reporting requirements as effi-
cient and burdenless as possible.
Mr. WILLIAMS. All right. I yield my time back.
Ms. HOULAHAN. The gentleman’s time has expired.
I now recognize Representative Carolyn Bourdeaux from the
State of Georgia for her 5 minutes.
Ms. BOURDEAUX. Thank you so much.
And thank you, Administrator Esparza, for joining us here today.
The SBA’s Office of International Trade can be an important tool
for small businesses who are looking to reach markets beyond the
U.S. borders.
I was very pleased to see the State of Georgia receive a $181,000
State Trade Expansion Program grant earlier this month after the
Committee heard from the Georgia Department of Economic Devel-
opment in July about the importance of this program to supporting
small businesses.
One of the things this Committee has heard about repeatedly is
the need to ensure that programs like STEP and other SBA pro-
grams are accessible to all small business owners, including those
who may not speak English as their first language.
And in my district, 30 percent of the people in the district were
born outside of this country. We have an enormous and vibrant im-
migrant community, probably a dozen or so chambers of commerce
that are targeted at different subgroups, such as the Korean cham-
ber, the Vietnamese chamber, the Taiwanese chamber.
16

And so one question is, what are you doing to reach out to people
who may not speak English particularly fluently but have these
great ties? They are small business owners, have great ties to the
community they emigrated from.
And I guess the second part of that is, what should I advise them
about how to take better advantage of the STEP program?
Mr. ESPARZA. Thank you, Congresswoman.
Administrator Guzman has tasked all of us in the SBA to make
sure that we have an equity lens in all that we do. And so commu-
nicating where customers are, where small businesses are in a way
that is impactful and effective for them, including another lan-
guage, is important.
I, myself, as a Spanish speaker, have participated in webinars
and seminars to help assist that particular community.
Your mention of the Korean community is important. Again, just
a few weeks ago we had a Korean diaspora event. We actually be-
lieve that diaspora communities, immigrant communities are of
particular importance to all things export-related, not just with our
STEP program, in that diaspora communities are predisposed to
export back to countries of origin because they speak the language.
They know the culture. They know the systems. They know how to
get things done.
And so our efforts in that regard not only are about reaching out
to small businesses in the methods in which they communicate, but
also to specifically focus on diaspora communities as a part of our
marketing and outreach efforts to promote exports across the spec-
trum.
Ms. BOURDEAUX. Thank you so much.
I just want to add in closing with this is that I know we have
a lot of concerns—I hear this in the foreign affairs space—about
China and how China has gone to many of these countries and is
building infrastructure and setting up businesses. And we have
this wonderful opportunity to leverage our immigrant communities
as ways to expand our influence not only to do well economically
but also to make sure that we have a presence and show that we
are deeply engaged in these countries around the world.
Thank you so much, and I yield back.
Ms. HOULAHAN. The gentlewoman yields back.
The gentleman from the great Commonwealth of Pennsylvania,
Mr. Dan Meuser, the Ranking Member on the Subcommittee on
Economic Growth, Tax, and Capital Access, is now recognized for
5 minutes.
Mr. MEUSER. And I thank the Chairwoman very much from the
great Commonwealth of Pennsylvania.
Mr. Esparza, thank you for being here with us. Appreciate it.
Your business background is helpful, I think, in these discussions,
and it is good to hear that STEP is at its highest ever.
You spend a lot of time traveling and working with small busi-
nesses, obviously, as I do. What they are facing today is maybe the
most burdens they have faced. From small business, you have
heard a hundred times, as have I, if not a thousand: Why did I ever
get into this, right, why did I ever start this business?
Now, some of those that say that after 2 years go on to be great,
sizable employers. Some go out of business. But let’s face it. Be-
17

tween the gasoline prices, utility prices, general cost of supplies,
workforce, crime, regulations that exist, things have gotten that
much more difficult. Fortunately, we continue to have an entrepre-
neurial spirit in America.
But you made a comment about taxes and paying their fair
share. Just briefly, when you are dealing with exports, it is not
about paying your fair share. It is about being the most competi-
tive. Lower taxes are lower costs, so therefore that would increase
and improve made in the USA, right?
The more competitive we can be here versus other countries. I
mean, we now have a 21 percent corporate tax rate that many on
the other side complain about, yet that is middle of the pack, at
best. I mean, it is not even that much lower than—in fact, it is on
the high side for manufacturing countries, large companies. So you
know this.
And you also understand that small businesses pay a lot more
than that. I mean, we did have the 20 percent deduction from 2017,
but they are still paying in the 25, 26, 27 percent range.
So that doesn’t give us an advantage when it comes to exports,
right? And if you don’t give an advantage to exports, you are giving
an advantage to imports, and that largely means goods from China,
right?
So let’s just now talk about inflation, the number one issue that
small businesses are facing. It reduces profits, obviously. Reduces
ability to grow. They don’t add employees and they don’t really
focus on growing their business. They work upon survival.
It reduces tax revenue. So they are going to be seeing that this
year. It makes capital access more difficult, because banks don’t
want to lend if you are not making any money.
It increases interest rates, as we are seeing being spiked. We are
going to see it go up perhaps another point tomorrow. So that de-
creases market value, more for larger companies, but certainly pub-
lic companies, any company. It decreases your value.
And therefore it strengthens the dollar, the interest rates. So, as
you well know, strengthening the dollar means our exports are a
lot less attractive all over the world, again, assisting imports.
So all these factors coming together make your job a little bit
harder and make the United States’ economic strength weaker. So
we need to reverse a lot of those things.
So on to what you have authority on. The three-step plan, the
STEP plan, it is a three-point plan, basically, you put together on
it. And it looks good, and I am sure you have some goals set for
it.
What are the goals in the——
Mr. ESPARZA. For STEP, Congressman?
Mr. MEUSER. Yeah, for the new bill that we will be voting on
and I look forward to supporting. What are the goals for it?
Mr. ESPARZA. Thank you, Congressman.
So STEP has—of course, at the very top line we want to simply
increase U.S. exports, period. The way that STEP does that, of
course, is driving export sales and sustaining or expanding jobs.
Below that, we look at return on investment to the program of
any particular expense category, the degree to which we are engag-
ing not only existing exporters but new-to-exporting small busi-
18

nesses, as well as the degree to which we are engaging, as some
of the previous people asked, around underserved communities.
So all of those things are things that we track.
Mr. MEUSER. Could you give us an example of a small business
that has benefited well from the current STEP program and how
that may be enhanced moving forward?
Mr. ESPARZA. Sure, Congressman.
Again, I am out every day talking to small businesses. Our ex-
porter of the year was a small brewer up in the State of Montana.
We happened to over-index in brewers for some reason, but we
have got our exporter of the year there, and that is Glacier Hops
Ranch up in Montana.
They took advantage of the STEP program and were able to visit
trade shows, visit other countries, translate websites into other lan-
guages, work with wholesalers around the world. And their sales
are booming.
This is very common that we see these types of examples across
the country of folks who have taken advantage of STEP to be able
to find new markets and offset some of the costs associated with
exporting.
Mr. MEUSER. All right. I appreciate it.
Madam Chair, I yield back.
Ms. HOULAHAN. The gentleman yields back.
The gentleman from the great State of California, Representative
Scott Peters, is now recognized for 5 minutes.
Mr. PETERS. Thank you, Madam Chair.
Mr. Esparza, thanks for being with us today.
And to Administrator Guzman, thank you for providing $600,000
for California for the State Trade Expansion Program, or STEP.
These additional resources will help businesses in San Diego to
become better exporters and strengthen economic growth in our re-
gion. So we really very much appreciate that. I also appreciate the
Administrator’s visit to San Diego just recently.
SBA offers three loan programs specifically targeted to small
business exporters, the Export Express, Export Working Capital,
and International Trade Loan Programs. Do you have a sense or
can you give me a sense of how many small businesses currently
utilize these programs?
Mr. ESPARZA. Thank you, Congressman.
And I actually was just out in San Diego last week as well at
the America’s Small Business Development Center’s conference. So
I love being out there.
We do just north of 500 loans a year. What we focus on right
now—and this is unique to exporters—is our working capital lines
of credit happen to be a much more important product than our
term loans.
We support all three products, of course, but we put quite a bit
of emphasis on our working capital lines of credit because, given
the lengthier sales cycle, cash conversion cycle, and all the risks
that we discussed earlier around country risk, currency risk, buyer
risk, working capital is a much more important tool today.
That portfolio is expanding. We are also in the process of updat-
ing some of the standard operating procedures such that we can
continue to evolve not only the one that is unique to our office, but
19

in the Office of Capital Access, my sister organization within the
SBA, to make sure that their domestic tool is one that can accom-
modate small businesses that have a smaller nexus relative to ex-
porting.
Mr. PETERS. Mr. Esparza, I guess sort of what is the plan to
increase the use of the program? And what actions particularly can
this Committee take to ensure that these loan programs will meet
the needs of America’s small business exporters?
Mr. ESPARZA. Thank you, Congressman, because we are very
interested in evolving the program, evolving our products to make
sure that they fit the needs of the marketplace.
It has been over a decade since we raised the cap on the spend-
ing limit or spending authority of the program. Right now, it is
capped at $5 million. I think it is time that we relook at that.
We believe one of the biggest drivers of our ability to get these
loans out in the marketplace is expanding the lender base as well.
There have been a number of mergers and acquisitions in the
banking community, particularly in smaller banks, which is the
primary—90 percent of our loans go through community and re-
gional banks.
But to the degree that they have gone through a number of
mergers, our ability to lend through and increase the lending au-
thority through all sorts of trade finance specialty banks and so
forth are ways that we can continue to do.
This program should be much larger than it is today. I readily
recognize that. And we hope to work with your office and this Com-
mittee to continue to evolve our products and services.
Mr. PETERS. On that, do you have a feel for us of where the
sweet spot on the cap might be if it is not $5 million?
Mr. ESPARZA. Just by the metrics, I would suggest $7.5 million
would be sort of the next raise.
The original increase in the cap was back in 2010 from $2.5 mil-
lion to $5 million. I would propose another $2.5 million raise to
$7.5 million if we could. But I am happy to work with this Com-
mittee on the specifics of that.
Mr. PETERS. Okay.
STEP since its inception has provided grants to over 12,000
small businesses?
Mr. ESPARZA. That is correct.
Mr. PETERS. $200 million in the United States. And I want to
know—you are going to tell me you need more resources, but what
does that look like to get more small businesses to STEP? What do
we have to do?
Mr. ESPARZA. Yeah. Thank you, Congressman.
Mr. PETERS. And, alternatively, what kind of resources would
you be looking for?
Mr. ESPARZA. Thank you, Congressman.
I think one of the challenges we have is the concentration of the
STEP awards. We don’t tell the States how they can distribute
those awards. Sometimes they cap the amount that any given com-
pany can get. Sometimes they have fewer participants with a high-
er amount. Sometimes they have more participants with a smaller
amount.
20

Whatever they choose to do, of course, our interest is maximizing
the number of small businesses that participate.
Of course, given the demand that we just saw in the recent appli-
cation cycle, $39 million for only $20 million of available funds, if
we had what I understand to be potentially $30 million in the new
authorization, that of course would continue to drive not only as
many States and territories participating as possible, but spread
that number of—that amount of money throughout as many small
businesses participating.
Mr. PETERS. Thank you so much.
Madam Chair, my time has expired. I yield back.
Ms. HOULAHAN. The gentleman yields back.
The gentlewoman, Ms. Claudia Tenney from New York, is now
recognized for 5 minutes.
Ms. TENNEY. Thank you, Madam Chairwoman. It is the great
State of New York, once known as the Empire State.
So, yeah, we do have a border with the great Commonwealth of
Pennsylvania. Sometimes we wish we had more of your policies
than we do in New York. We kind of call that the Berlin Wall, be-
cause it is tough for our small business community to compete
right across the border with Pennsylvania.
I am also a small business owner and involved in manufacturing,
and it has been a passion of mine ever since I first ran for office.
And I appreciate what you do and having a business background.
But my concern is that in upstate New York and central New
York, this is where the Erie Canal was founded. This is the begin-
ning of industrialization. This is where the government actually in-
vested in a project that was criticized but turned out to be really
changing for so much of upstate New York and the region and our
whole country. We had titans like IBM, Kodak, Oneida Limited,
Remington, all these along the beautiful canal which is all in my
area.
And we would love to see more investment. And over the dec-
ades, we were told: Oh, we are going to be making things again,
we are going to be investing, and that this new globalization was
going to bring us all these great opportunities.
And what we have seen is this creative destruction has actually
not really empowered our manufacturing but sent our jobs over-
seas. And so that is the complexity that we face.
And as we opened up our American markets to cheaper foreign
products, we didn’t invest and we didn’t continue to invest in man-
ufacturing and do the work that we need to invest, create, and cul-
tivate these foreign markets, and I think undervaluing our manu-
facturing policy.
And our policymakers also need to look to the business commu-
nity to lead us away and into creating and bringing these jobs
back. It has left us with weak and fragile supply chains. We
learned that during the pandemic. And now this is hurting a lot
of our producers.
And the shortsightedness I think of this. And a lot of—look, it
was both sides of the aisle. It wasn’t just—it was both sides.
And that is why I did a plan for community renewal. We went
out and asked everyone in our region and across the country: What
do we do? And that is why I introduced the bills like Make in
21

America to Sell in America Act and also the American Innovation
and Manufacturing Act.
And that is because I think we need to move our trade policy be-
yond just to disburse grants, which I think is great, but also to-
ward a more actual comprehensive national industrial policy.
How do we increase the value of our markets, bring American
products back and reshore them?
And I guess that is what really drives me to my first question
for you is, is there, with your work that you are doing, a plan with
this administration to reindustrialize and bring us back to making
things again, helping our supply chains? And is that something
that you are focused on, either with the SBA representative or with
your organization?
And sorry for my long intro there, but I think it is really impor-
tant that we talk about getting our supply chains back here, espe-
cially what we have learned during the pandemic and what we
have learned with the American workers suffering and our small
businesses suffering at the hands of predatory competition like, for
example, from the People’s Republic of China.
Mr. ESPARZA. Thank you, Congresswoman.
Manufacturing is critical to American small businesses and
American small businesses exporters in particular. This is Manu-
facturing Month, October is Manufacturing Month, so we are en-
gaged in a number of events in that celebration.
I will also tell you that, in addition to being very aware of and
in support of the Made in America efforts across the administration
and the federal government, 80 percent of the loans and lines of
credit that I was discussing earlier with the Congressman from
California are lent to manufacturing and wholesale companies.
So while I earlier mentioned that the economy is evolving and
the service economy and the digital economy are growing, there is
no doubt that the small businesses that we deal with on a day-to-
day basis are still very much rooted in the manufacturing base.
And so wherever we can continue to work to advocate for manu-
facturing Made in America, American jobs, and allowing those
manufacturing companies to export their products overseas, we will
continue to do that.
Ms. TENNEY. Is there an overall plan, though, to try to bring
this—is there something—is that a priority of the administration
to not—obviously, we would love to see more manufacturing. We
have a lot of people that would love to go to work, would be great
at making things, building things, and I think we need to focus on
that with more of a comprehensive plan, is what we have learned.
I mean, we are desperate for employees. I know in this Com-
mittee that is all we talk about, is our businesses needing people
to come to work who can make things, across all sectors, whether
it is high tech, whether it is lesser tech manufacturing. And I think
that is really important.
We tend to focus on the high tech, good shiny stuff, but some-
times just making great things is really important. And I think it
could really help our economy and our competitiveness.
So I think I am out of time. But we do appreciate your efforts.
But it is up to the Chairwoman if you want to answer that quickly.
22

Ms. HOULAHAN. Sure. Why don’t you go ahead and answer
that real quick?
Mr. ESPARZA. Thank you, Congresswoman.
So post-pandemic there was a great deal of work done in the ad-
ministration about supply chain resiliency and onshoring and mak-
ing sure Made in America was an important part of the safety and
security of our supply chains. And so that, of course, has an enor-
mous impact on the manufacturing base, and we absolutely support
that in the Office of International Trade.
Ms. TENNEY. Thank you so much.
I yield back.
Ms. HOULAHAN. Of course. And my apologies to the gentlelady
from the great State, the Empire State of New York. I was remiss
in saying that.
The Chair now recognizes the gentlewoman, Representative Van
Duyne, Ranking Member, Subcommittee on Oversight, Investiga-
tions, and Regulations, for 5 minutes.
Ms. VAN DUYNE. And you can introduce me as coming from the
great State of Texas, because that is what we are known for.
Ms. HOULAHAN. From the great State of Texas.
Ms. VAN DUYNE. The great State of Texas, which also happens
to be the largest exporter in the country for 20 years running, more
exports than both California and New York combined, just to give
some context.
Over the August recess I traveled to South Korea, Cambodia, and
Singapore on delegations to learn more about the role that the U.S.
is playing in Southeast Asia and trade, as well as to find out what
the perceptions of the U.S. engagement is over there and how that
is affecting China’s influence in the region.
All three of those countries could not be more different, yet the
message that they portrayed to us was the same: A strong U.S. is
essential to balance the power that China is exerting, but the U.S.
is absent. And China is happy, by the way, to fill that void.
It is a changing time in that region. Trade is still occurring with
or without us. Unfortunately, since the U.S. is not participating, we
are left with China writing the rules and taking ownership in the
region.
They were very clear in their messages with every single branch
of their government that the Indo-Pacific economic framework that
has been put out by this administration is a fine conversation
starter, but that it lacks any teeth or direction.
And I agree with them that something is better than nothing,
but the ground that we are giving up, it is dangerous, and it is al-
lowing China far too many opportunities to strengthen its muscle,
as reflected by the Solomon Islands suspending all visits by not
only U.S., but also by British ships.
As you know, Solomon Islands is very strategic. The U.S. lost
blood and lives fighting for it. And now China is pretty much de-
manding that we can’t even land.
Do you believe that the U.S. is doing enough when it comes to
trade?
Mr. ESPARZA. Well, thank you, Congresswoman.
Trade is fundamental to driving aspects of our economy, and par-
ticularly for small businesses. It is an opportunity, given how many
23

consumers actually live outside the United States, to be able to
focus on trade. That is the entirety of the focus of my office.
And so we work every day to make sure education, training,
technical assistance, access to capital, access to markets are in
every conversation that we have with small businesses.
Our ability to advocate for small businesses across the U.S. trade
apparatus is important in making sure small businesses have a
seat at the table in this economy, and we hope to continue to do
that.
Ms. VAN DUYNE. But do you think that we could be doing
more?
Mr. ESPARZA. I am very optimistic. I always think we can be
doing more in every capacity. I would love to see more free trade
agreements.
Anywhere that there is friction in the system that causes chal-
lenges for small businesses to be able to sell their goods overseas,
we want to make sure that we have as many robust relationships
and partnerships around the world to be able to provide markets
for American small businesses to sell their products, absolutely.
Ms. VAN DUYNE. When you say we could be doing more, do you
think that we could be doing more to combat China?
Mr. ESPARZA. You know, Congresswoman, I think the China re-
lationship is a complex one. Trade is only one component of that
broader geopolitical relationship.
And as I have said earlier, wherever we see examples of small
businesses that have interactions with the Asian market broadly,
China in particular, and whether it is based on tariffs that China
imposes or tariffs that we have imposed, we simply want to be able
to communicate what the impact of those dynamics are for a par-
ticular small business.
I met a small business the other day who was importing kelp
from China to make chemicals. It is a company in North Carolina.
And the tariffs that we place on imports from China were chal-
lenging to her, and she has asked for an exception for some of
those.
At the same time, the tariffs that China put on us can be——
Ms. VAN DUYNE. Yeah, but China is actually even shutting
down the ability for U.S. companies specifically to be able to import
or export. I mean, they are being very discriminatory against U.S.
companies. I mean, they told us that directly.
But do you believe that this administration has empowered U.S.
Trade Rep Katherine Tai, or do you think she is being held back?
Mr. ESPARZA. I don’t know, Congresswoman, if I am in a posi-
tion to say that.
I will tell you that, again, wherever we advocate for small busi-
nesses and can find examples, we are surely in communication
with the U.S. Trade Rep’s office and have very consistent and open
communication with her office about those small businesses that
we find in the export universe.
Ms. VAN DUYNE. Do you personally believe that she is being
empowered?
Mr. ESPARZA. She is a Member of the Cabinet, Congresswoman,
and I believe she has every opportunity to do her job.
24

Ms. VAN DUYNE. Okay. And what is your opinion of IPEF? Do
you believe IPEF is good for small businesses? And do you believe
that the Congress should weigh in?
Mr. ESPARZA. I am sorry. What was that again?
Ms. VAN DUYNE. For the Indo-Pacific Economic Framework, do
you think Congress should weigh in, or do you think it is a fine
framework?
Ms. HOULAHAN. And very quickly because the gentlewoman’s
time has expired.
Mr. ESPARZA. Yeah. Thank you, Congresswoman.
As that framework continues to evolve, obviously at the point in
which anything needs to be passed, this Congress will have a say
in that.
Ms. VAN DUYNE. Thank you very much.
I yield back.
Ms. HOULAHAN. The gentlewoman from the great State of
Texas yields back.
The Chair now recognizes Representative Mike Flood for 5 min-
utes from the great State of Nebraska.
Mr. FLOOD. Thank you, Madam Chair.
Thank you for your testimony today.
One of my goals here is to ensure that Nebraska’s small busi-
nesses are as competitive as possible in today’s globalized economy.
I am interested, obviously, in e-commerce, which has made a lot
of businesses, large and small, obvious exporters. We need to en-
sure that we are capitalizing on the doors opened by the internet
so that our constituents can reap the rewards of the truly global
economy.
Associate Administrator Esparza, in your testimony you empha-
size education is a core piece of the SBA’s trade agenda. Can you
speak to what kinds of education your Office of International Trade
can provide?
Mr. ESPARZA. Sure. Thank you, Congressman.
Let me begin actually, if I may, by referring to your comment on
e-commerce.
One of the things that we found during the pandemic is that, for
whatever reason, people who either were displaced from their jobs
or chose to leave their jobs, find a new place to live, they didn’t just
sit still. These are people that started a side hustle, created a
website, have some product, put up an e-commerce engine, as you
referred to. And, lo and behold, they got an order from overseas.
And so it might not have been on purpose. In fact, the Adminis-
trator calls these accidental exporters.
Our intention in the Office of International Trade is to make
sure that these accidental exporters become intentional exporters.
And so part of that journey, as you referred to, is education, train-
ing, and technical assistance.
And so either through our website, through our inbound hotline,
but more importantly through outbound efforts, all of the Members
of our staff are working very hard through webinars, training, one-
on-one consultations to make sure that American small businesses
have the education and training they need to be able to compete
in the marketplace.
Mr. FLOOD. Thank you.
25

Following up on my colleague from Texas’ question on China,
China’s government provides very aggressive subsidies and export
assistance to aid their businesses.
Can you speak to how China’s aggressive and frequent govern-
ment intervention affects American small businesses? Because they
are out there really promoting their products. And where are we
in comparison to that, and are they hurting us?
Mr. ESPARZA. Thank you, Congressman.
Any country that provides subsidies to its companies can poten-
tially create an unfair marketplace. So this is, again, where our of-
fice, as we listen to small businesses around the country provide
examples where this dynamic comes into play—I don’t recall any
off the top of my head—but as these examples of unfair trade prac-
tices, unfair competitive practices come into play, we make sure
that we communicate those not only to you all in forums like this,
but to the Trade Rep’s office, the Commerce Department, through-
out the trade apparatus of the government.
Mr. FLOOD. I appreciate that answer.
I am passionate about developing an economic environment
where Nebraska businesses can take risks, and I think that is lack-
ing sometimes. People don’t understand that that is how we build
wealth. Sometimes small businesses and startups fail, and that is
part of our free market system.
It is important that when our entrepreneurs come up with these
ideas, good ideas and a good business plan, those entrepreneurs are
given the opportunity to thrive.
That is why I am co-leading H.R. 8844, along with my colleagues
Congressman Dwight Evans, Congresswoman Marie Newman, and
Congresswoman Young Kim. This H.R. 8844 would reauthorize the
State Trade Expansion Program, or STEP, within the Small Busi-
ness Administration.
As you know, as you have testified, STEP provides funding to
small businesses to help them develop their exports, and this pro-
gram is very important.
I note that the State of Nebraska funded 85 ESBC activities, and
I am hopeful that as we go forward we can also see an increase
in the number of fintech products that we are pushing.
I looked through a lot of the different States, and I would like
to see more fintech products being pushed around the globe. Can
you speak to that briefly?
Mr. ESPARZA. Sure. Thank you, Congressman. And thank you
for the authorship of the bill.
I also know Nebraska got 100 percent of what it has asked for
in this STEP cycle, so I am glad Nebraska can use those funds to
be as competitive as possible.
Obviously, fintech is a growing part of the economy, not only for
those products and services, but the payment networks that they
ride on. And to the degree that we can continue to evolve our ef-
forts to accommodate and celebrate that aspect of the developing
economy, we will do so.
In fact, the Administrator has established a Small Business Dig-
ital Alliance that very much focuses on the digital economy. There
are payment networks as a part of that. And we will continue to
work on fintech, sir.
26

Mr. FLOOD. Thank you for your efforts. Thank you, sir.
I yield back.
Ms. HOULAHAN. The gentleman yields.
The gentleman, Representative Dean Phillips from the great
State of Minnesota, is now recognized for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair.
And greetings, Mr. Esparza.
As a former export manager for our business, I recognize how in-
tegral it is and also how challenging it is. This was about 25 years
ago, before e-commerce, so we had to do it the old-fashion way. So
I celebrate the STEP program in particular.
In Minnesota, I know we are receiving $175,000 since 2017.
STEP has generated, I think, $30 for every dollar of investment,
which is a return on investment that I wish every government pro-
gram could claim. So I really do celebrate it.
I know it is a competitive application process, and I was hoping
you could speak about what factors go into that consideration as
you take those applications into account.
Mr. ESPARZA. Sure. Thank you, Congressman.
The primary factors that we take into consideration, as is explic-
itly described in the notice of funds opportunity, is not only pri-
marily what the State proposes to do with that money, but also the
secondary component of past performance.
So the past performance is important relative to return on in-
vestment, relative to the number of the mix of new-to-export busi-
nesses, as well as existing exporters that have been included.
And then the third component there is the degree to which un-
derserved communities—women small business owners, veteran
small business owners, rural small business owners—have been ad-
dressed in the past.
So it is both what is being proposed to do in the future as well
as past performance.
Mr. PHILLIPS. Okay. And what advice would you give to small
businesses that wish to apply? How can they best present them-
selves?
Mr. ESPARZA. Well, any small business, of course, that wants
to participate in the program and take advantage of these reim-
bursement funds needs to approach the State apparatus that man-
ages the funds on our behalf.
So there are 50 different versions—or 48 and 4 territories that
are doing it this year. Every State has its own application process
for small businesses that want to participate.
So I can’t speak to the uniqueness of Minnesota in this case,
Congressman. But what I would simply tell a small business—as-
suming they know about it; part of our challenge is making sure
we get the word out—is to contact the local State director for our
program. All of those names and contact information are on our
website.
Mr. PHILLIPS. Great. Thank you.
And I also know SBA guarantees three export loan products, Ex-
port Express, Export Working Capital, and International Trade.
Can you speak to us about how those loan guarantees enable those
programs and the efficacy of each of them?
Mr. ESPARZA. Thank you, Congressman.
27

The Office of International Trade is actually empowered to have
a higher guarantee on the loans. So the typical loan, the 7(a) loans
that I am sure you are all familiar with that the SBA broadly man-
ages, have a 75 percent guarantee. The Office of International
Trade is authorized to have up to a 90 percent guarantee.
That is largely because exporting, by definition, is more risky.
Our small businesses, not only are they small businesses and
therefore risky to bankers, but because they are dealing with dif-
ferent types of risks overseas—buyer risk, country risk, currency
risk—we are authorized as such to have a higher guarantee.
So our products and services are meant to be able to support the
growth and development of the export economy, and we look for-
ward to continuing to do that.
Mr. PHILLIPS. Great.
And since I have a little bit of time left, I like bench marketing
and identifying best practices, and I think it is important that we
look around the world.
Are there any other countries that are supporting small busi-
nesses and their export dreams and aspirations as well as we do
or perhaps even better?
Mr. ESPARZA. Well, I believe America is the shining star and
the number one export economy, and we have our processes and
programs running well.
I will tell you that, as a part of a variety of our free trade agree-
ments, I participate in a small business dialogue between the U.S.,
Mexico, and Canada. Similarly, I am participating in a small busi-
ness dialogue next week in Europe with the European Union and
later this year with the U.K. We have already had one with the
U.K.
So we engage in these small business dialogues with other gov-
ernments not only relative to how our free trade agreements are
functioning, but to continue to talk with our sister governments
and friendly partners on how we can support small businesses in
their trade and international sales activities and do so in a way
that is beneficial for both countries and both markets.
Mr. PHILLIPS. Okay. So if we are number one in supporting
small businesses and their export aspirations, who would be num-
ber two?
Mr. ESPARZA. That is hard for me to say, Congressman. We
have so many—in fact, we have 20 free trade agreements around
the world, and I would look to those important partners as exam-
ples of countries that are working with us in a productive way.
Mr. PHILLIPS. I appreciate it. Thank you.
And I yield back.
Ms. HOULAHAN. The gentleman yields back.
The Chair now recognizes the gentlelady, Representative Young
Kim, Ranking Member of the Subcommittee on Innovation, Entre-
preneurship, and Workforce Development, from the great State of
California, for 5 minutes.
Ms. YOUNG KIM. Thank you, Chairwoman.
And, Mr. Esparza, thank you so much for being with us and an-
swering our questions.
My congressional district is home to probably the top two largest
seaports in the Western Hemisphere. The Ports of L.A., Ports of
28

Long Beach, together they make up the San Pedro Port Complex,
and they are the fifth largest in the world.
So I do represent a very important segment in the region that
pertains to our industry in the trade area, so I have seen firsthand
the persistent supply chain disruptions and how it could impact
our ability to export and hinder our country’s ability to expand our
markets abroad.
We have as a result a golden opportunity to counter China’s
growing influence in the Indo-Pacific region. And as you know, we
do have the Biden administration that started the Indo-Pacific Eco-
nomic Framework.
So I wanted to ask you what type of involvement the Office of
International Trade has had in developing that IPEF and how is
the administration planning to increase our country’s small busi-
ness exports using the IPEF model.
Mr. ESPARZA. Thank you, Congresswoman.
Let me begin by saying that much of my family lives in southern
California in your district, and so I appreciate your representation.
The Indo-Pacific Economic Framework is something that this ad-
ministration, and particularly the U.S. Trade Rep’s office, is driv-
ing. We work very hard to make sure the voice of the small busi-
ness owner and American small business exporters are heard and
represented in all of the agreements and policies that we have rel-
ative to trade, including the Indo-Pacific Economic Framework.
And so our communication with the U.S. Trade Rep’s office and
with other actors across the trade apparatus of the government
continues to be filled with that advocacy. And you have every com-
mitment on my part to continue to advocate not only for small
businesses in southern California, but across the American econ-
omy.
Ms. YOUNG KIM. As you know, IPEF is not a traditional free
trade agreement model. So do you think this is the right model to
support our friends and allies in the Indo-Pacific as China’s domi-
nance and their goal to dominate the world economy is becoming
more apparent?
Mr. ESPARZA. It is the model that we have chosen to pursue at
this point. I mentioned to your colleague before, we have 20 free
trade agreements. This is a different version of that. And we will
support the administration’s effort to further those interests in the
Asian-Pacific region.
Ms. YOUNG KIM. Sure.
My view is that instead of having a framework that did not go
through the proper consideration of Congress or the trade pro-
motion authority process, I would like to ask the administration to
engage Congress on meaningful trade agreements in the region.
And I know this is a step, but I would like to see our U.S. getting
back in the CPTPP, as I have also advocated for U.S. TPP. We will
be missing out if we don’t, because China is getting ready to get
into CPTPP, and it could be exercising its influence and pressuring
our allies. So I just wanted to mention that.
And my colleague earlier talked about H.R. 8844, the STEP Im-
provement Act. I am very proud to be one of the original sponsors
there because, among other things, it would improve the implemen-
tation of a standardized application process.
29

So can you tell us or our Committee here how the standard proc-
ess could make it easier for small businesses to apply for the STEP
program?
Mr. ESPARZA. Thank you, Congresswoman, and thank you for
your sponsorship of the bill. I think it is an important part of con-
tinuing to support American exporters around the country.
Of course, anywhere that we can improve processes and stand-
ardize processes we would hope to do so. We have absolutely con-
templated whether or not we can work with the States to provide
one standard application for small businesses to apply for STEP
funds.
The challenge is that not every State authorizes every
expensable category. Some choose not to reimburse every category.
And that would have an impact potentially on the application proc-
ess.
So we will continue to research this one. Again, I am in very
close contact with SIDO, which is the advocacy organization that
supports many of the States in this endeavor. Where we can collec-
tively come up with opportunities to standardize and improve proc-
esses we will absolutely do so.
Ms. YOUNG KIM. Thank you.
I know my time is up, even though I wanted to ask another ques-
tion. So I yield my time back.
Ms. HOULAHAN. The gentlewoman yields back.
The Chair now recognizes the gentleman from Wisconsin, the
great State of Wisconsin, Representative Scott Fitzgerald, for 5
minutes.
Mr. FITZGERALD. Thank you, Madam Chair.
Thank you for being here, sir. Appreciate it.
I want to get kind of real specific now and probably something
that we can do some follow-up on. You mentioned in your testi-
mony that OIT is an advocate for small business for all matters re-
lated to trade policy and trade agreements.
And kind of this, there is a situation, I think, that is starting to
evolve, and it is some manufacturing that has happened in China
is actually kind of making its way as a secondary product into a
lot of American, for the most part, light manufacturing.
So I have a small business in my district, Glenroy, Inc. It is lo-
cated in Menomonee Falls, Wisconsin. Glenroy manufactures—it is
that real thin, flexible packaging. It is tin foil that is part of phar-
maceuticals when you may kind of get access to any over-the-
counter pharmaceutical for the most part.
And Glenroy was recently informed by the Department of Com-
merce that it is going to initiate an investigation into certain alu-
minum foil imports that may have inputs from China, even though
they are produced in South Korea.
So I would think that this—you know, this is a very specific, I
think, example of something that we think is going on, a little bit
more widespread than that.
So my point is there have got to be certain trade policies by the
Biden administration that could be negatively affecting some of
these small businesses because of the level of investigation. And
Glenroy is a company, it has only got 250 employees.
30

But my bigger question is kind of what has been the involvement
and kind of the back channels on making sure that manufacturing
going on in Asia, and specifically China, how is that being tracked
or what is the administration looking at when—if they are going
to launch these investigations, how widespread are these? And
what do they look like, I guess?
Mr. ESPARZA. Well, Congressman, respectfully, is your question
that we should be limiting the amount of China inputs into manu-
facturing or allowing them?
Mr. FITZGERALD. Well, if there is going to be—if they are actu-
ally going to launch investigations or put some of these smaller size
companies, I think, kind of through the wringer on this stuff, what
would be—kind of what is the position on that, or has there been
a position developed on these manufacturing processes? Because it
seems to be happening quite often.
Mr. ESPARZA. Yeah. Thank you, Congressman.
I am personally not aware of the degree to which we are inves-
tigating small businesses relative to China inputs. I am happy to
follow up with your office on that particular example and what we
might be able to uncover.
And more importantly, where there are these types of processes
I think it is our role to be able to provide information to small busi-
nesses so that they are aware of any of these dynamics and can be
advised as to how to either avoid the investigations that you are
talking about or to advocate for themselves to continue to manufac-
ture as they wish.
Mr. FITZGERALD. Yeah. And it kind of adds another wrinkle to
the whole supply chain issue that we are faced with right now is
that I think oftentimes it is kind of thought as—I go back to light
manufacturing, because that is what my State is more directly in-
volved in.
But I think there are some challenges here that we could over-
come if we would be a little bit more upfront and kind of work to-
wards making sure that these smaller businesses understand what
the guardrails are, what the parameters are, instead of finding
themselves with somebody mailing them a letter or contacting
them directly and saying: Well, we are going to start kind of
digging through some of these things.
So it is something I wanted to put on your radar this morning
and certainly will be able to forward any of the materials on this
corporation in Menomonee Falls, too.
Mr. ESPARZA. I appreciate that.
And, again, the SBA typically is not in the investigation mode
relative to sources of manufacturing. But where that might occur
from other pieces of the government, again, we want to make sure
that we are informing small businesses for all the dynamics rel-
ative to exporting. And so this might be one that we add to our list
of things to inform small businesses about.
Mr. FITZGERALD. Very good. Thank you very much.
I yield back, Madam Chair.
Ms. HOULAHAN. The gentleman yields.
The gentleman, Representative Pete Stauber from the great
State of Minnesota, is now recognized for 5 minutes.
Mr. STAUBER. Well, thank you very much, Madam Chair.
31

According to an analysis of President Biden’s first year in office,
this administration has issued regulations that will cost $201 bil-
lion of additional regulations and add 131 million hours in annual
paperwork. That is a brutal reality for our small businesses.
Bureaucratic red tape, however, has always been a significant
hurdle for small firms looking to enter international trade markets.
Mr. Esparza, in your role at the SBA, you are supposed to be an
advocate for small business interests. How are you working to un-
wind burdensome regulations that hold small businesses back from
participating in these international markets?
Mr. ESPARZA. Thank you, Congressman.
I think whenever we are talking with small businesses and we
hear from them what their challenges might be, I will tell you that
the number one challenge I hear from small businesses is simply
how to find a buyer. They are working overseas to explores new
markets, and they simply ask us: How do I find a buyer? What can
I do from a market research standpoint? What can I do to connect
with resources to help us find a buyer? That is number one.
The second challenge that we hear from them is around access
to capital. They want to make sure that in order to grow and de-
velop their businesses that they have access to capital. And so our
relationship with the private banking industry and the guarantees
that we put on loans and lines of credit is an important part of that
journey.
So I hope to continue to advocate our small businesses for what-
ever their dynamics are, but those are the two things that we hear
most from small businesses, sir.
Mr. STAUBER. I appreciate that.
The number one priority I hear is the rules and regulations that
are stifling their potential growth to move into the international
markets if they so choose.
In your testimony you referenced the Biden-Harris administra-
tion’s commitment to equity. Can you explain how the Office of
International Trade considers equity during the grant- and loan-
making process?
Mr. ESPARZA. Yes. So thank you, Congressman.
First and foremost, it is the communication to the marketplace
as to the availability and the process that administers in this case
the STEP program, I assume you are talking about.
I did also mention that one of the explicit categories of assess-
ment that we have in analyzing any particular application is the
degree to which a given applicant has reached out and addressed
and had participation from underserved communities. That is both
minority communities, women small businesses, veteran small
businesses, and rural small businesses. That equity lens is explicit
and a part of the notice of funds opportunity.
It is also, as I mentioned earlier, an explicit——
Mr. STAUBER. Let me, because my time is limited, I don’t mean
to interrupt you.
Mr. ESPARZA. Right.
Mr. STAUBER. But are you prioritizing rural Americans in mid-
dle America like the ones in Minnesota’s Eighth Congressional Dis-
trict?
32

Mr. ESPARZA. Yes, Congressman, in the sense that, while your
colleague from Texas pointed out that Texas is the largest exporter
in the United States, largest exporting State, the rules of the STEP
program actually require that the concentration of our awards can-
not be overindexed into those largest States. It is very explicit.
And so by definition we are distributing a relatively higher por-
tion of those funds to nontraditionally exporting States or more
rural States. So that is absolutely something we do. And it is also
explicitly in the assessment criteria——
Mr. STAUBER. Well, Mr. Esparza, what percentage of those
funds are going to rural America, do you think?
Mr. ESPARZA. That is a good question. I am not sure I have
that number off the top of my head, sir, but I am happy to look
into that.
Mr. STAUBER. Yeah, would you look into that and give it to the
Chair or Ranking Member? That would be great.
Mr. ESPARZA. Sure.
Mr. STAUBER. Madam Chair, how much time do I have? I don’t
have a timer here.
Ms. HOULAHAN. Thirty-five seconds.
Mr. STAUBER. Thirty-five. Okay.
Well, I just appreciate this opportunity to be with you all, and
I appreciate the Chair and Ranking Member bringing this together.
So one of the things that we do that I wanted to get into was
energy costs and the devastation that it is costing our small busi-
nesses to produce their energy to make whatever they are making
in the industry. So that is what I am hearing as well, the energy
costs are through the roof.
So, Madam Chair, I yield back.
Ms. HOULAHAN. The gentleman yields back.
The gentleman, Andrew Garbarino, Representative Andrew
Garbarino from the great State, the Empire State of New York, is
now recognized for 5 minutes.
Mr. GARBARINO. Thank you, Chairwoman, and thank you to
the Ranking Member, for hosting this hearing. I also want to thank
our witness for being here today.
I want to echo some of the comments that my colleague just
made about things I have heard from small businesses in my dis-
trict is the red tape in being able to become an exporter. So I think
that is something we should try to work on to make it easier.
But something else I have heard from offices or small businesses
in my district is, if they export, what is being done to protect their
intellectual property? They are concerned.
I have several manufacturers, as well as companies that I have
spoken to that also deal with a lot of different computer chips and
other things. What is being done by the Office of International
Trade to help protect that innovation here and intellectual prop-
erty?
Mr. ESPARZA. Thank you, Congressman.
The answer is twofold.
Number one is where we hear those stories of challenges around
the world where intellectual property is at risk, we make sure we
communicate those stories not only in forums like this, but to the
rest of the trade apparatus across the federal government.
33

Secondarily, the ability to apply for and pay for the legal services
to help get patent protection and other intellectual capital protec-
tion around the world is something that the STEP funds can be
used for.
So the costs associated with intellectual property protection, ap-
plying for patent protection, applying for other sources of intellec-
tual capital protection around the world, the costs associated with
that are an approved reimbursable expense category under STEP.
Mr. GARBARINO. What about enforcement? I mean, to get the
protection is one thing. But are these small businesses—you know,
they can’t—they are not the Intels or the Microsofts of the world
where they have a legal team after their IP has been stolen. So
what can be done on the enforcement end?
Mr. ESPARZA. Yeah. Thank you, Congressman.
The enforcement end is not one that we directly have authority
over. I will tell you that not only do we share the stories when we
hear them, but we also generally tend to drive small businesses to-
wards those markets in which we have free trade agreements.
There are 20 free trade agreements that we have around the
world, and we know that there are increased assurances and levels
of patent protection and intellectual property protection in those
markets. That is where we typically drive most of the small busi-
nesses that we work with.
But wherever they are trading around the world, part of our edu-
cation, consulting, and technical assistance does discuss and con-
template intellectual property and other patent protection meas-
ures that they can take. So that is an important part of the journey
that we have with small businesses.
Mr. GARBARINO. All right. And I appreciate that.
And you talked about free trade agreements that we have across
the world.
What is the Office of International Trade, are they taking any ac-
tion to support trade negotiations with the U.K. or Kenya and
other partners worldwide to get more access, to have more coun-
tries where we can have these trade agreements?
Mr. ESPARZA. Absolutely. We are a hundred percent at the
table when it comes to any free trade agreements or any trade pol-
icy discussions. Our ability to advocate for small businesses and
small business owners is critical as we help to literally line by line
edit and work on provisions in various agreements and various
policies that contemplate impacts on small businesses.
So I believe we are well represented in those discussions, and
you have my commitment that we will continue to advocate vigor-
ously for small business exporters wherever they might be in the
United States.
Mr. GARBARINO. Can you give an example? Like you said we
go line by line. Can you give an example of something that the of-
fice has had a hand in changing one of these agreements to specifi-
cally help small businesses?
Mr. ESPARZA. Sure, Congressman.
Two recently. The national export strategy is a policy that is put
forth across, again, the trade apparatus of the government. And,
secondarily, the national trade and tourism policy also con-
34

templates many small business provisions. And we were right
there at the table helping to edit those documents line by line.
Mr. GARBARINO. I appreciate that answer.
I had another question, but I am down to 10 seconds, so defi-
nitely not enough time.
I thank the witness.
And I yield back.
Ms. HOULAHAN. The gentleman yields back.
I want to thank Associate Administrator Esparza again for join-
ing us today. Your testimony has shed light on the importance of
STEP and the actions that Congress can take to help this program
reach its full potential.
Today we have discussed many ways that Congress can optimize
STEP to help more small firms. The STEP Improvement Act of
2022 would institute many of these changes and take the critical
step of reauthorizing the program.
I look forward very much to supporting the bill when it comes
before the Committee tomorrow.
Without objection, Members have 5 legislative days to submit
statements and supporting materials for the record.
And if there is no further business to come before the Committee,
without objection, we are adjourned.
[Whereupon, at 11:30 a.m., the Committee was adjourned.]
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