Small and medium-sized enterprises (SMEs) employ about half the American workforce, and as a result their needs are deemed important for the economic health of the United States. From this perspective, the fact that 98 percent of exporters are small businesses suggests that trade is a critical component to the economic vitality of SMEs. Proponents of trade agreements argue that such agreements open markets to businesses of all sizes and that simplifying customs and promoting e-commerce can especially help small businesses. But critics of trade agreements cite the relatively high share of total exports by large firms as an indication that large firms—and their investors—are the main beneficiaries of open markets. This Policy Brief examines the evidence for these conflicting claims and shows that exports from both small and large firms are boosted when trade barriers are reduced. Foreign market liberalization offers as much to small firms as it offers to large firms. One important difference is that exports from small firms are likely to be boosted by increased participation—i.e., more firms export when trade costs fall—while exports from large firms are more likely to grow in volume—i.e., each firm exports more.
Data disclosure: The data underlying the figures in this analysis are available here.