June 28, 2022
The Small Business Administration’s State Trade Expansion
Program
American small businesses regularly export to international
(2) the number of ESBCs that have accessed a new market
markets, contributing to both domestic and global
due to STEP; and (3) the number of small businesses that
economies by trading with approximately 95% of the world
have created new jobs through STEP. The legislation also
population living outside the United States. But due to
would have required the SBA to conduct an annual survey
factors such as lack of experience or resources, some small
to gather feedback on STEP. In debate on the bill, some
businesses may encounter initial challenges breaking into or
Members of Congress argued that STEP was especially
expanding their operations in foreign countries. Starting in
important as the international economy recovered after the
2011, the Small Business Administration’s (SBA’s) State
COVID-19 pandemic and exporting small businesses
Trade Expansion Program (STEP) has helped address these
sought to reestablish operations. The bill passed the House
hurdles by offering competitive grants for projects that help
and was referred to the Senate Committee on Small
eligible small business concerns (ESBCs) build their export
Business and Entrepreneurship, but did not advance further.
activities. STEP awards are one of several SBA programs to
promote small business exports. While other programs offer
STEP History, Uses, and Outcomes
loans and management and training assistance, STEP is
Congress authorized the SBA to create a three-year State
unique in that it offers grants.
Trade and Export Promotion pilot grant program—a
predecessor to the current STEP—in the Small Business
STEP awards provide funding for a two-year period. For
and Jobs Act of 2010 (P.L. 111-240). Program advocates
FY2022, the grants offered ranged from $100,000 to $2
argued it would help small businesses and promote job
million per year, for a maximum award of $4 million. For
creation following the Great Recession. The pilot program
FY2020, the most recent year for which data is available,
was funded for two years ($30 million in both FY2011 and
STEP awarded 47 grants totaling $18 million. The program
FY2012), was not funded in FY2013, and the current
has three specific goals:
version of STEP has received appropriations each year
since ($20 million in FY2022). In 2016, Congress passed
increase the number of small businesses exporting;
the Trade Facilitation and Trade Enforcement Act of 2015
(P.L. 114-125), giving the program its current name and
increase the dollar value of U.S. small business exports;
permanent statutory authority. This law authorized STEP to
and
competitively award grants to all states, the District of
increase the number of small businesses exploring
Columbia, American Samoa, Guam, the Northern Mariana
significant new trade opportunities, which includes both
Islands, Puerto Rico, and the U.S. Virgin Islands.
new export opportunities and expansions.
STEP grant funds may be used for the following purposes:
Recent Legislation
STEP, which Congress permanently authorized in the Trade
participation in foreign trade missions;
Facilitation and Trade Enforcement Act of 2015 (P.L. 114-
Department of Commerce subscription services;
125), has been the focus of significant legislative activity in
recent years. In 2021, the House-passed Build Back Better
website fee payment;
Act (H.R. 5376) would appropriate $30 million for STEP
marketing media design;
from unappropriated Department of the Treasury funds
each fiscal year from FY2022 to FY2025. The funds would
trade show exhibition;
remain available to the program for three fiscal years. The
participation in export training workshops;
CARES Act (P.L. 116-136) extended the utilization period
for STEP awards made in FY2018 and FY2019, making
reverse trade missions;
them available through FY2021. The CARES Act also
procurement of consulting services; and
allowed the SBA Administrator to reimburse grant
recipients for financial losses related to canceled foreign
other export initiatives, which must be deemed
trade shows and missions.
appropriate by the SBA’s Office of International Trade
Associate Administrator or Deputy Associate
The 116th Congress debated the STEP Improvement Act of
Administrator.
2020 (H.R. 6133). The bill would have required the SBA to
Other program provisions differ slightly among states. The
collect additional performance data on the program and its
10 states with the largest number of small business
recipients, including (1) the total number of ESBC
exporters can receive no more than 40% of awarded STEP
awardees, disaggregated by socially and economically
grants. STEP awards have a matching requirement. For
disadvantaged status, women-owned status, and rural status;
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The Small Business Administration’s State Trade Expansion Program
states with high export volumes (California, New York, and
performance metrics should be reported regularly. This
Texas for FY2022), the federal share of project costs is
could assist in better evaluating the program’s outcomes.
65%, and the required state match is 35% of the sum of the
federal award and the recipient’s match amount; by this
With some performance metrics leading to potentially
formula, for every $1 of federal funds, the state must fund
nebulous conclusions, and with STEP activity concentrated
53.8 cents. For all other states, the federal share is 75%,
in a few activities, Congress may wish to determine which
with the state matching 25% of the sum of the federal
metrics it considers most useful for evaluation and
award and the recipient’s match amount, or 33.3 cents for
oversight and what, if any, role those metrics may play in
every federal dollar. State matching funds must be at least
driving amendments to the program. A list of required
50% cash, with the rest either as in-kind or indirect
performance metrics and an analysis of them was included
expenses such as rent and utilities.
in the STEP Improvement Act of 2020.
In 2021, the SBA commissioned an evaluation of STEP by
The results of the 2021 STEP evaluation provided
an outside consulting firm (2M Research). The study found
somewhat conflicting data about the effectiveness of
domestic firms expanding export operations most
allowable uses for STEP awards. Congress may wish to
frequently use STEP funds to participate in trade show
consider which findings are more significant than others,
exhibitions, whereas newly exporting firms most frequently
and if that determination should impact the range of
use awards for export training workshops. The evaluation
allowable uses for the grants. For example, the 2021 STEP
found that, from FY2014 to FY2018, export sales from
evaluation found that from FY2014 through FY2018, of the
STEP-funded participation in trade show exhibitions
nine allowable uses, export training workshops (10,381),
dominated overall sales for STEP-funded activities,
trade show exhibitions (7,657), and other export initiatives
generating almost $2 billion; other export initiatives
(6,600) were, by far, the most utilized by STEP recipients
(including foreign sales trips) made $600 million; and
(compared to 1,772 firms participating in foreign trade
foreign trade missions and reverse trade missions each
missions, the fourth most used.) But of those activities, only
earned about $200 million. ESBCs in four states—
trade show exhibitions ranked as having one of the three
Michigan, New Jersey, North Carolina, and Washington—
highest ROIs. And yet, when asked what activity generated
accounted for 68% of sales from STEP-funded trade show
the highest sales, 49% of participating states identified trade
exhibitions. Lastly, the study calculated that reverse trade
show exhibitions—twice the percentage that selected the
missions had the highest return on investment (ROI) for
next-most profitable option. More granular and regular
STEP activities, followed by marketing media design and
performance reporting may help clarify the connection
trade show exhibitions.
between allowable uses and small business export growth.
The SBA establishes an annual target average ROI for
The 2021 evaluation also found that some STEP benefits
STEP. Average ROI is calculated as the dollar amount of
may accrue unevenly. As mentioned, between FY2014 and
small business exports for every $1 in STEP grants. Figure
FY2018, 68% of all STEP-related export sales from trade
1 presents the actual and targeted average ROI for STEP for
show exhibitions were from ESBCs in four states, with
FY2017 to FY2021. As shown, STEP exceeded the targeted
one—Michigan—accounting for 36% of export sales.
average ROI each year except for FY2021, when the
Congress could consider additional rules to ensure ESBCs
COVID-19 pandemic disrupted the global economy.
in all states benefit from STEP grants, such as increasing
the federal share of project costs for states that do not have
Figure 1.Actual, Target Average ROI of STEP Grants
a high volume of exports. Conversely, Congress may
determine that STEP is working as intended; the 2021
evaluation found that ESBCs in states which have
participated in STEP the longest had the most export
clients.
Lastly, Congress may wish to consider how current and
potential economic and business trends might impact
STEP’s design. For example, a number of STEP’s most
utilized activities, including trade show exhibitions and
foreign sales trips, require business travel. The COVID-19
pandemic heavily diminished the ability of small businesses
to travel abroad; this may have contributed to STEP
missing its target ROI in FY2021. Members of Congress
may consider whether additional allowable uses, such as the
Source: U.S. Smal Business Administration, FY2023 Congressional
purchase of virtual meeting and conference tools, might
Budget Justification FY2021 Annual Performance Report.
address this issue and help exporting small businesses
Policy Considerations
compete in an increasingly interrelated world economy.
As American small businesses and the world economy
Adam G. Levin, Analyst in Economic Development Policy
recover from the COVID-19 pandemic, Congress may
discuss how STEP can play a role in that process. To do so,
IF12149
Congress may continue its debate on which STEP
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The Small Business Administration’s State Trade Expansion Program
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