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Diplomacy in Action

Remarks at APEC Private Host Committee SOM2 Big Sky Media Briefing SMEs and Growth, Jobs & Innovation

May 20, 2011

APEC Private Sector Host Committee




May 20, 2011

Big Sky Filing Center, Lone Peak Café, Montana


MR. SANCHEZ: Thank you, John. Good morning, everyone. Thank you, all, for being here. I'm pleased to be joined this morning by Scott Price of Walmart Asia and Lance Trebesh of, a Montana-based small business located not very far from where we are.

President Obama's stated goal for the United States APEC 2011 Host Year is to help build a seamless regional economy in the Asia Pacific region. We will do this by pursuing practical, concrete, and significant outcomes in three priority areas: Strengthening regional economic integration and expanding trade, promoting green growth, and advancing regulatory cooperation and convergence.

While in Big Sky, I've met with APEC Trade and SME Ministers to discuss our goals for these ministerial meetings. I've also raised bilateral market access and compliance issues in meetings with our counterparts to ensure SMEs have a level playing field to fully compete in the global economy.

Today, I had the privilege to attend the first-ever APEC Trade Ministers and APEC SME Ministers Joint Dialogue and I'm pleased to report that this meeting resulted in a commitment by APEC and its members to resolve the top barriers SMEs face in trading in the Asia Pacific Region.

Tomorrow, I will chair the APEC SME Ministers Annual Meeting where we will discuss, number one, embracing business ethics to enhance SMEs' Competitiveness, promoting SMEs' use of new technologies to reduce the cost of doing business, and identifying policies to support green SMEs.

Throughout the week, my colleagues and I have met with small business owners from across the Asia Pacific Region that are exporting and investing in APEC member economies. We have heard firsthand of their successes and the challenges that they face. Small- and medium-sized enterprises are absolutely essential to growing our economies.

In the APEC Region, SMEs account for 90 percent of all businesses and nearly 60 percent of the workforce. In 2010, 60 percent of all goods exported were to APEC markets. SMEs are also frequently the driving force behind innovation and the commercialization of new products and services that are the lifeblood of a global economy.

Through APEC, we are working to knock down many of the barriers of SMEs from taking advantage of all of the opportunities offered by today's dynamic Asia Pacific economy. I'm excited about the opportunities we have to move forward here and look forward to taking your questions.

Thank you.

MR. PRICE: Good morning. I'm glad to be here. So Walmart and SMEs, sounds like an oxymoron, doesn't it? In fact, Walmart obviously began as an SME and 50 years ago next year we'll celebrate our 50th Anniversary.

When we began, we were actually a very small retailer. Ninety-six percent of the volume that we sell in the United States is sourced from SMEs. That is similar in terms of the ratio when you look at our businesses in Japan, you look at our businesses in China, Mexico, and many other APEC nations. Therefore, for Walmart, how we support and assist SMEs to do business is actually a critical part of our business model.

We obviously speak to a lot of SMEs and we see very much the importance of removing barriers so that Walmart is able to help SMEs do business more internationally. We see four specific areas that we hear as themes continually from SMEs in terms of their barriers of doing business with other APEC countries.

The first is access to financing, the ability to grow. The second is the ability to access international markets. Clearly, I think, and certainly something Lance can speak to, the Internet and the Cloud, as they call it now, is beginning to remove that as a barrier. The issue then, of course, as you begin to leverage that mechanism to internationalize, is you very quickly run into the problem of different standards of countries around the world.

This is a particular area that Walmart is focused upon not only in agriculture but across many other categories whereby the standards, the testings, the certification of products is very, very difficult for SMEs to be able to overcome as they try and grow, and then, finally, intellectual property rights. I think this is certainly not even just for SMEs, I think this is a global issue for even large corporations, an issue that needs to continue to see support from governments around the world to protect the IPRs.

So again, also, very pleased to be here with the Under Secretary to talk a little bit on this topic and would just urge you to remember that Walmart actually is a big supporter of SMEs.

Thank you.

MR. TREBESH: There we go. Thank you for attending. It's kind of funny, I guess, to follow the largest company in the world to one of the smallest.

We're We're based out of Harlowtown, Montana. Harlowtown is a small town in Central Montana, population 900, and we also have a software development team and business team here in Bozeman. We're an event e-commerce company, so we provide event products for people, tickets, wrist bands, posters, flyers. We also do online event management where people can sell tickets online.

We recently expanded to the UK and Australia over the last two years and that process was very interesting to kind of execute and here's why. Number 1. For those specific countries, especially Australia, the ease of market access, the ease of market expansion of enabling us to set up a wholly-owned operation there were really important. We're a small company. We don't have the financing to do -- you know, to afford a large expansion or to work through, you know, very heavy regulatory regimes in a specific country. So that's very important to us in terms of what APEC's work is doing.

The other enabler of us in terms of expansion is really the Department of Commerce. The Department of Commerce, I would encourage any entrepreneur, any small-to-medium-size enterprise, to really, you know, use the Department of Commerce. They were immensely helpful in us expanding to Australia, as well as the UK, as well as Senator Baucus's team for us here in Montana.

To give you an indication of kind of why people say, well, are you exporting jobs, well, no. We don't export our products. What we do is we set up an operation there, we localize our website, and then we work with the local fulfillment provider, and in each case we've been able to add jobs to that local fulfillment providers and actually we've been able to add jobs here in Montana because our customer service people help support those operations. So we like to say we're kind of in-sourcing to some degree and, you know, right now as we're sitting here I have a customer, you know, service team up in Harlowtown, even Lewiston, Montana, who are, you know, talking with and helping Australia and the UK, and I have to tell you they love it.

So we're very, you know, excited about Asia PAC. We're very excited about APEC, as well as this focus on small-to-medium-sized enterprises.

MODERATOR: Thank you, gentlemen. Questions? I think a mike might be preferable. Great. Thanks.

QUESTION: Yeah. Jim Berger from Washington Trade Daily. Mr. Sanchez, you mentioned that Ministers, I guess yesterday or this week, are committed to reducing or maybe eliminating the four biggest barriers to small business trade. Can you elaborate on what are these barriers or is it the same as Walmart's barriers?

MR. SANCHEZ: Well, a lot of what we're focusing on here follow the themes of this year's APEC. So it's focusing on strengthening regional integration which means everything from making it easier for products to flow in and out of countries to dealing with regulations that -- specific regulations that make it hard for a company to enter a particular market, looking at standards, particularly in new areas, like green technology and green energy. So we're focusing on a wide range of issues but this year mostly focusing on areas of regulatory cooperation, of promoting green growth and looking at some of the broader issues that affect regional economic integration.

QUESTION: Thanks. I'm Shaun Tandon. I'm a journalist with the AFP News Agency. All of you mentioned to a certain extent Internet as something that's a factor. I know Walmart recently in China, in particular, has been active in expanding the online shopping, online grocery shopping.

Could you just detail a little bit more what the impediments, if any, are to growth on the Internet in Asia when it comes to a business angle?

MR. TREBESH: I can start. Number 1 is each country throughout APEC has different data privacy, different data security, different data management policies, and again speaking as a small-to-medium-sized enterprise going, I can't afford to hire, you know, a lawyer in country. So I've got to look into those or my team has to look into those, you know, specifically and in detail and then, to the extent that we have to, we have to customize our operations, our software, etcetera, as well as our policies specific to each country.

So I would look at that as harmonizing data management, data privacy, data security as a real fundamental goal that we should achieve because it will enable, you know, Cloud computing, which is what we use, right, it will enable business to expand faster and with greater ease.

QUESTION: In terms of APEC, there's something that could be done this year in terms of the Internet issue.

MR. SANCHEZ: Well, I think one of the most important things is that we really move that conversation forward. Cloud computing, and I have to say I need a continued tutorial on what exactly Cloud computing is, Cloud computing offers a tremendous cost savings, that part I know, but as Lance pointed out, it also begins to cause challenges when a company in Montana is servicing a client in Australia or some other country in the region because each country has different regulations. So we want to begin to move that conversation forward.

As you know, APEC is non-binding and the good thing about that is it provides a forum to have very frank and open discussions and that's the goal here, to have very frank and open discussions on challenging issues and move that ball forward in a forum where we do begin to try to reach agreement.

MODERATOR: Questions?

QUESTION: Hi. I wondered if each of you could expand on what exactly are the biggest barriers for a small- and mid-sized business to expand, particularly in Asia, because I think for many of them it just becomes this incredibly daunting, you know, how do you make the first phone call, how do you, you know, just begin to do business in these places?

MR. PRICE: Yeah. We actually get approached by a lot of SMEs who are asking how do they access our global platform. We have operations in today 16 countries. We're expecting through an acquisition that we are optimistic of in South Africa to make that 33 countries and, you know, even though we obviously offer an access, it's up to the SME themselves to figure out the regulatory environment, to figure out the standards, to figure out the import/export rules. It's hideously complex and, although we have the resources ourselves to be able to do that, at the end of the day it represents an inefficiency that equals cost to the final consumer and, in particular, when you look at Asian countries, you have a vast majority of the population who live on very small incomes and it's ironic that in fact it's that population who can afford least some of these incremental costs that come from that inefficiency.

For me, I think, in particular, around agricultural products, food products, just standardizing not only food security and food safety rules but also how you do testing, how you do certification would go a long way, I think, to be able to help a lot of SMEs who are involved in agriculture and food products to globalize and globalize simply with, frankly, the ultimate winner of all of that not necessarily the businesses but the end consumer.

MR. SANCHEZ: Just to follow along on what Scott's saying, if you -- you can lump a lot of this into costs, costs of doing business, as Lance mentioned, on data privacy and data storage. He would have to hire a lawyer in each of these countries to make sure he's doing everything correctly. That's challenging for a small business.

I had the privilege yesterday of visiting West Paw which is a small Montana company that exports green pet products, everything from pet beds to pet toys, using virtually all recyclable goods. They have a tremendous impact on the local economy but they also impact the entire country. They have a hundred different SMEs that supply them and help them in a lot of different ways, but they are also a company that have revenues under $10 million and for them to be able to expand, they're already doing pretty well, they're in about 25 countries, but for them to expand, everything we can do to reduce the cost, the transactional cost of doing business means that they can get into another market, means that they can expand in the markets they already are.

So I think Scott covered a lot of the things that we need to focus on, regulatory convergence, standards. I think for a lot of companies, IPR becomes critical and so this is something that we need to work on in order to help small- and medium-sized companies take better advantage of what's available here.

MR. TREBESH: I would just add that what would be helpful is a very basic step for all governments is to basically be transparent in terms of the communications of how to set up a business in their country and it varies, right? Sometimes it's easy to find that information, sometimes it's hard, but time to market is very important for us. The sooner we're up and running the sooner we're generating revenue, the sooner we can add jobs there in that country and add jobs here.

QUESTION: Did you have a consultant or did you just gather it all yourself?

MR. TREBESH: In Australia specifically, I had a friend who was a freelance consultant and she went out and just kind of gathered all of the information for us which really was extremely helpful. In the UK, we did it ourselves and that ranges in our business from, you know, setting up the business, having the right structure, corporate structure, but also getting into the details specific to our business, such as, you know, raffle tickets and whatever the raffle regulations.

MR. SANCHEZ Can you speak to what Carey -- how Carey helped you?

MR. TREBESH: Oh, yeah. Absolutely. In terms of the Department of Commerce, --

MR. SANCHEZ: That was not prompted at all.

MR. TREBESH: Exactly. Not prompted.

MR. SANCHEZ: I can't shamelessly plug the department but he can.

MR. TREBESH: Well, what was interesting and again for us, we're an Internet company, so we just expect to find things on the Internet, right, and Carey specifically --

MR. SANCHEZ: Can you tell who Carey is?

MR. TREBESH: Carey is the Commercial Service Officer in Australia, as well as Australia New Zealand.

MR. PRICE: In fact, if I may completely embarrass him, this is our guy here in Montana who does an outstanding job for a lot of SMEs.

MR. TREBESH: Yes. There are you, Carey. I didn't see you. Carey was very helpful in assembling the right information and pulling it together in terms of what we need to care about because, as we kind of pour through, let's say, the Australia Government site, it's just hard to kind of pull out exactly what we need to do. So the Department of Commerce, Carey was very instrumental in that. Some of the field team in Australia New Zealand were also instrumental and again, as a small-to-medium enterprise, you've got to find leverage. Leverage, you've got to use an extended team. Extended team is definitely for us, you know, Department of Commerce, having the freelance consultant kind of work, you know, determine the market research, and then also, you know, Senator Baucus and his team were just superb.

QUESTION: Yeah. Hi. Doug Palmer with Reuters. Mr. Sanchez, just going back to your opening remarks and talking about President Obama's goal of helping to build a seamless regional economy in the Asia Pacific and, I mean, you know, just looking at the issues that you're contending with, you know, harmonizing regulation and tackling IPR and stuff of that sort, it doesn't seem like something where there's necessarily going to be a quick solution.

So what sort of time frame are you thinking about? I mean, how long do you think it will take to build a seamless regional economy in the Asia Pacific, and how does the Asia Pacific compare now with, say, you know, other parts of the world, I mean, like trade between the U.S. and Europe? Are there more barriers in the Asia Pacific than transatlantic?

MR. SANCHEZ: Well, first of all, we just begin with the importance of this region. I believe it's approximately 60 percent of our exports to the world go to this region. So it's an area that we have to pay attention to. I believe that number is going to continue to grow and in APEC specifically, as I mentioned earlier, the conversations here are non-binding, but the advantage of that is that you do have open discussions, Number 1, and, Number 2, although we have private sector participation in a lot of forums where we discuss trade issues, I think APEC is a particularly effective model because the integration of the private sector is very, very strong.

Yesterday, I had a roundtable lunch with, I don't know, 30 or so companies where, in a very short amount of time, I learned a lot, reinforced some of the things that I already knew. Later in the day with Ambassador Kirk and other ministers that are here, we had an informal conversation with members of the business community that were here and so that participation is very, very helpful for two things. One, to zero in on those things that we can begin to move forward quickly, identify those that we need to put in the medium-term bucket and still others that we need to put into the longer-term bucket.

But the other thing is that to have ministers from around the region here directly from the businesses that are impacted by the policies that our governments put forward is extremely, extremely helpful. So I think it's very hard for me to give it a time frame. What I can say is that this is very much an iterative process. A lot of what we do here and elsewhere is blocking and tackling, moving the ball forward by inches, and I realize that that's using a football analogy in an international setting is probably not the best analogy. So I hope everybody understands my football analogy of blocking and tackling.

It's not as sexy as inking a trade agreement but it's every bit as important. If we can make progress on standards for energy products, for green products, this goes a long, long way. If we can take some specific regulations, whether it be in the food area that Scott talked about, it can have a huge impact. So this is a step in the process and I would say a very important step.

MR. TREBESH: I would also add, just as a small-to-medium-size enterprise, looking at this and participating in this for the second time, to get deals done, right, you've got to have relationships. To get deals done, you've got to have open candid conversation and it just can't be right at the free trade agreement negotiation level. It has to be building here and what I see around here is a lot of, as Secretary Sanchez mentioned, a lot of candid conversation, a lot of good input, a lot of good business integration with the ministers here, but also, you know, momentum around relationships and hard discussions.

MR. SANCHEZ: And if I can also just say, this year in particular, we have brought forward over 200 SMEs from around the region and so we hope that, in addition to moving policies forward that reduce trade barriers, we hope by having 200 or so SMEs from around the region, that as they meet each other, they can actually engage in business. So this is an added benefit and kind of a new addition to the APEC process.

MODERATOR: Mark, did you have one last question?

QUESTION: Scott, I just wanted to follow up on Jordi question about the Internet. Mark Dragen, Bloomberg. What exactly does Walmart want to have happen in terms of that? Are there specific things that you're facing in terms of barriers on data flows that you want to see changed Asia-wide?

MR. PRICE: I don't necessarily think for Walmart, which is inherently a local business in every country it does business, as this is a barrier of trade for us per se, setting up Internet businesses. I think back to the earlier point, though, we see ourselves in many ways a trade facilitator for SMEs. So although the data flow issue for us has less of an impact than, say, for someone who is a core part of the business model, we do see, for example, the rules and the regulations that are applying to online payment, online marketing, how fulfillment centers can be integrated, etcetera, as being wildly different country to country.

So similar to small businesses, we have to invest very heavily to try and meet -- try and navigate our way around the different rules and the different regulations and all it does it just add cost. If there was a mechanism and a forum to be able to standardize that for even a company of Walmart's size, it ultimately represents the ability to offer products to the end consumer at a much lower price, and I just want to re-emphasize the point that was made by the Under Secretary.

You know, the private enterprise has an important role to play in this entire process. For us, it is not, you know, esoteric trade negotiation debates. We live day-in and day-out the level of obstacles that create these costs and I think, you know, an unprompted pitch, what we find is the role that the Commerce Department plays is very valuable to create the forum for us to have these debates and we're very much looking forward to APEC in Honolulu. We think it's going to be with the inclusion of SMEs a very powerful mechanism to get out some important messages because, frankly, there's so many huge opportunities to reduce wastage, whether it be supply chain, regulations. All of these just represent billions of dollars of bureaucratic wastage that's not necessary, in our view.

MODERATOR: Thanks very much, everyone. That's all the time we have for this particular segment. We're going to transition directly into our Food Security segment, but I would like to thank the Under Secretary and Mr. Trebesh for participating in this.

Thanks very much.

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