oversight

Opportunities for Increasing Effectiveness of Overseas Trade Exhibitions

Published by the Government Accountability Office on 1971-11-04.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Opportunities For
Effectiveness 0
Trade Exhibitio            8.735239




Department   of Commerce
Department   of State
                  COMPTROLLER     GENERAL     OF I-HE UNI-ITD   STATES
                                WASHINGTON.    D.C.   20548




    B-135239




    To the President   of the Senate and the
c   Speaker  of the House of Representatives

              This is our report   on opportunities    for increasing      effec-
     tiveness     of overseas trade exhibitions     by the Department        of     -         :
                                                                                    :-.   ,    ‘.i
‘(2. State and the Department       of Commerce.

           Our review was made pursuant    to the Budget and Account-
    ing Act, 1921 (31 U.S.C. 53), and the Accounting   and Auditing
    Act of 1950 (31 U.S.C. 67).

           Copies of this report  are being sent to the Director,
    Office of Management     and Budget; the Secretary  of State;           and
    the Secretary  of Commerce.




                                              Comptroller        General
                                              of the United      States




                       50TH ANNIVERSARY               l921-   1971
COMPTROLLERGENERAL'S                    OPPORTUNITIES FOR INCREASING EFFECTIVENESS OF
REPORTTO THE COlK7RESS                  OVERSEASTRADE EXHIBITIONS
                                        Department of Commerce
                                        Department of State B-135239


DIGEST
------


WHYTHE REVIEWWASMADE
      The once-favorable      U.S. balance of trade,       which over the years has helped
      finance    the Nation's   international      programs,   dropped from a trade surplus
      of $7 billion     in 1964 to a trade deficit        of $936 million    in the first
      8 months of 1971.       This decline     is an important     reason for record U.S.
      balance-of-payments      deficits     in recent years.

      Thee Department of Commerce, for many years,  has organized   and administered          ?'i-
      a variety   of trade promotion programs to expand U.S. exports.

      The General Accounting   Office   (GAO) has focused     on two of the principal
      Commerce trade promotion    programs-- trade center     shows and trade and
      indus-trial exhibitions.

      GAO reviewed these two types of trade promotion      programs to learn whether
      they were effective     in helping American companies increase   their   exports
      and whether the number of American companies involved       in exporting   was
      being increased     as a result   of the programs.


FINDINGS AND CONCLUSIONS
      The Department  of Commerce can increase     the effectiveness     of trade exhibi-
      tions as a tool to promote foreign    trade.    The program has been only margin-
      ally successful  in meeting its goals of helping American companies with
      little or no export experience   to get started     in the field,     helping Ameri-
      can companies to enter new markets,     and promoting     new product    lines. (See
      pp. 17 and 18.)

      The market potential  for U.S. products     in developing   countries has received
      little  consideration in staging   trade exhibitions.      The U.S. share of this
      market, which was estimated    at $35.8 billion    in 1969, declined  from 24.8 per-
      cent in 1964 to 21.4 percent    in 1969.     (See p0 54.)

      An important     reason for the small number of exhibitions     in less developed
      countries    is the belief     of Commerce officials that the Congress and the
      Office    of Management and Budget expect the program to show an immediate
      payoff--as     measured by the amount of export sales in the 12-month period
      following    trade exhibitions     compared with the cost of the exhibitions.




 Tear Sheet
Concentrating   exhibitions     in developed countries                   affords  a greater   likeli-
hood of showing returns      on the promotional   dollar                  than exists   in less de-
veloped countries.       (See p. 15.)

In fiscal     years 1969 and       1970, Commerce         spent about $15 million--78      per-
cent--of    its promotional        costs of $19.2         million    for trade exhibitions    in
developed countries.          It   estimated    that      first-year     export sales from
exhibitions      approximated      $277 million.          (See pp. 12 and 15.)

GAO believes      that these benefits  were greatly overstated.                      It is unrealistic
to attribute      that volume of sales to the trade exhibitions                      because the ma-
jority    of participants    in the shows already exported their                     products  to those
markets.     (See p. 17.)

The exhibitions   are not being used effectively     to attract   new companies to
the export field   or to emphasize new product lines.        The exhibitions     are
used primarily   by American companies that already are engaged in interna-
tional  trade.   About 95 percent of the 4,957 participants       in exhibitions
during 1969 and 1970 previously    were exporting    to foreign   markets and 70 per-
cent already were exporting    the products exhibited     to the countries     in which
the exhibitions   were held.   (See p. 17.)

Based on interviews        with 34 American companies which had participated           in
trade exhibitions,       the consensus was that Commerce could be of greater
assistance     if promotional       programs were offered      in less developed countries.
Such countries      are considered       growing markets but have few promotional
activities     presently     available    to American businessmen.       The exporters
believe    that the number of Commerce-sponsored            trade exhibitions    in developed
countries     could be reduced without         hurting their overseas sales, since other
means of displaying        their products are available.           (See pp. 16 and 20 to 22.)

Short-range     cost-to-benefit         ratios   are not the best indicators     of the            suc-
cess of trade exhibition            programs.      Markets where American companies              have
few promotional       facilities       and relatively     less export experience   are           largely
ignored,    and the majority         of companies which should be the principal                  targets
for expanding exports            are not drawn into the programs.       The programs             should
consider    other measures of accomplishment,               such as

  --the    number of new-to-export         companies         attracted      to the programs,

  --the    number of new product         lines       exhibited,

  --the extent to which promotional      efforts  are keyed to competitive
      U.S. products    in countries where the U.S. share of the market is
      relatively   low, and

  --the extent to which promotional    efforts                    are keyed to countries  where
      there are few facilities for exhibiting                     U.S. products.   (See pp. 27
     and 28.)




                                                 2
        Stemming from these conclusions     is the questian   of whether it is useful
        to concentrate   trade promotion   efforts on a few fixed-facility    trade centers
        in developed countries.     The fact that the centers    are there and must be
        used means that Commerce is under pressure      to induce companies to use
        the facilities,    without regard to whether these companies are experienced
        or inexperienced    in the export field.   (See p. 28.)

        Participation     fees
        Commerce charges exhibitors     at trade exhibitions      nominal participation     fees.
        These fees are not intended     to recover the costs of staging        exhibitions.
        In fiscal years 1969 and 1970, participation         fees collected    amounted to
        $2.6 million,    which was only 13.6 percent     of the $19.2 million      cost of the
        trade exhibitions.     (See p. 32.)

        Commerce makes no distinction          between exhibitors       which participate       for the
        first    time and those which have participated           repeatedly.        Since one of the
        purposes of the programs is to introduce             American companies to international
        trade,     it might be desirable     to charge new exporters          less than experienced
        exporters.      A sliding  scale of fees would encourage new exporters                to ex-
        hibit    their   products.   In  addition,    repeat   exhibitors,       since   they claim
        significant      sales as a result     of the exhibitions,       presumably would be will-
        ing to pay more of the cost.           (See pp. 34 and 35.)


 RECOWNDATIONSOR SUGGESTIONS
        The Secretary      of Commerce should      consider:

            --Allocating      a greater     portion    of Commerce's resources      for overseas pro-
               motional    activities     to developing      countries  and limiting    promotional
               efforts   to developed countries          mainly to introducing      new products    or
               new-to-export       companies.       (See p. 29.)

            --Initiating     a continuing  program to contact -American companies,           State
               governments,    and other internationally         oriented   organizations  to de-
                termine what types of promotional         services     are needed and to provide
                those services   not presently    offered     under existing     programs.   (See
                p. 29.)

            --Developing   a more effective      domestic program to inform American companies
               of the benefits    of foreign   trade and to stimulate these companies to
               use trade exhibitions      to expand their  export businesses.  {See p. 29.)

            --Evaluating     the desirability   of maintaining permanent3 fixed-facility
               trade centers    in view of the need for alternative    promotional      devices
               in developing    countries.    (See p* 29.)

            --Adopting   more useful measures       of the benefits      of trade promotion pro-
               grams, recognizing   that these      programs cannot      always produce immediate
               results.   (See p. 29.)


Tar Sheet
___-
                                                   3
                                                                                                    1




      --Establishing      a flexible fee structure    using minimal fees to attract
         new companies and charging higher fees to repeat exhibitors        and es-
         tablished   international   trading   companies.   (See p. 35.)


AGENCYACTIONSAND UNRESOLVED
                          ISSUES
    The Department of Commerce concurred,     in general,    with our recommendations
    and advised us that corrective  actions     had been initiated   or were planned.
    (See pp. 29, 30, and 35 and app. V.)
    The Department of State also agreed with GAO's recommendations       for in-        '
    creased promotional    activities   in developing countries but felt that it
    was equally important    to preserve the U.S. trade share in the industrial
    markets.   (See'p.  31.)


MTTERS FOR CONSIDERATION BY THE CONGRESS

    This report should be of timely interest     to the Congress because of the                 I
    recent erosion of the U.S. trade surplus     and its effect  on the U.S. balance            I
    of payments.                                                                                I
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                          Contents
                                                               Page

DIGEST                                                           1

CHAPTER

  1        INTRODUCTION                                          5
               Operation of U.S. trade centers                   7
               Trade and industrial  exhibitions                 9

  2        FACTORSINDICATING NEED TO REDIRECT EFFORTS
           TO INCREASEEXPORTS                                   10
               Preponderance of exhibitions      held in
                 developed countries                            11
               U.S. share of markets in developing
                 countries                                      14
               Validity   of reported sales benefits
                 questioned                                     15
               Most participating     companies already
                  involved in exporting                         17
               Companies' views of Commerce's exhibi-
                 tion programs                                  20
               Comparison of Commerce's programs with
                 those of major foreign countries               24
               Views of National Export Expansion
                 Council                                        25
               Conclusions,     recommendations,  and agency
                 comments                                       27

   3       FEES CHARGEDTO COMPANIESPARTICIPATING IN
           COMMERCE'S EXHIBITIONS                               32
              Conclusions,  recommendations, and agency
                  comments                                      34

   4       SCOPEOF REVIEW                                       36

APPENDIX
   I       U.S. balance-of-payment    and balance-of-trade
             statistics   for the period 1960 through
             1970                                               39
APPENDIX                                                     Page

   II      Schedule of Commerce-sponsored exhibitions
             held during fiscal years 1969 and 1970           40

 III       Comments made by exporters     that   GAO con-
             tacted                                           42

   IV      Schedule of developing countries!   imports
             of manufactures,   showing share of market
             by the United States and other countries
             for the period 1964 through 1969                 54

       V   Letter dated     July 27, 1971, from the Acting
             Assistant     Secretary for Administration,
              Department    of Commerce, to the General
             Accounting     Office                            55

  VI       Letter dated July 2, 1971, from the Deputy
             Assistant Secretary for Budget and Fi-
             nance, Department of State, to the Cen-
             era1 Accounting Office                          64

 VII       Principal   officials of the Department of
              Commerce and the Department of State re-
              sponsible for administration  of activities
              discussed in this report                        65
COMPTROLLERGENERAL'S                      OPPORTUNITIES FOR INCREASING EFFECTIVENESS OF
REPORTTO THE CONGRESS                     OVERSEASTRADE EXHIBITIONS
                                          Department of Commerce
                                          Department of State B-135239


DIGEST
-----w

WHYTRE REVIEWWASiMDE
      The once-favorable    U.S. balance of trades which over the years has helped
      finance the Nation's    international     programs, dropped from a trade surplus
      of $7 billion    in 1964 to a trade deficit      of $936 million  in the first
      8 months of 1971. This decline is an important          reason for record U.S.
      bal ante-of -payments deficits     in recent years.

      The Department of Commerce, for many years, has organized    and administered
      a variety  of trade promotion programs to expand U.S. exports.

      The General Accounting   Office (GAO) has focused        on two of the principal
      Commerce trade promotion programs-- trade center         shows and trade and
      industrial  exhibitions.

      GAO reviewed these two types of trade promotion programs to learn whether
  .   they were effective     in helping American companies increase their    exports
      and whether the number of American companies involved      in exporting   was
      being increased     as a result   of the programs.


FINDINGS AND CONCLUSIONS
      The      Department of Commerce can increase the effectiveness        of trade exhibi-
      tions      as a tool to promote foreign   trade.     The program has been only margin-
      ally      successful  in meeting its goals of helping American companies with
      little      or no export experience   to get started    in the field,   helping Ameri-
      can      companies to enter new markets,    and promoting    new product lines.    (See
      pp.      17 and 18.)

      The market potential  for U.S. products     in developing   countries has received
      little  consideration in staging trade exhibitions.        The U.S. share of this
      market, which was estimated    at $35.8 billion    in 1969, declined from 24.8 per-
      cent in 1964 to 21.4 percent in 1969.        (See p. 54.)

      An important     reason for the small number of exhibitions     in less developed
      countries    is the belief     of Commerce officials that the Congress and the
      Office    of Management and Budget expect the program to show an immediate
      payoff--as     measured by the amount of export sales in the 12-month period
      following    trade exhibitions     compared with the cost of the exhibitions.
Concentrating   exhibitions    in developed countries                  affords  a greater   likeli-
hood of showing returns      on the promotional  dollar                 than exists   in less de-
veloped countries,       (See p* 15.)

In fiscal     years 1969 and       1970, Commerce       spent about $15 million--78      per-
cent--of    its promotional        costs of $19.2       million    for trade exhibitions    in
developed countries.          It   estimated    that    first-year     export sales from
exhibitions      approximated      $277 million.        (See pp. 12 and 15.)

GAO believes      that these benefits  were greatly overstated.                    It is unrealistic
to attribute      that volume of sales to the trade exhibitions                    because the ma-
jority    of participants    in the shows already exported their                   products to those
markets.     (Bee p. 17.)

The exhibitions   are not being used effectively    to attract   new companies to
the export field   or to emphasize new product 1,ines.      The exhibitions     are
used primarily   by American companies that already are engaged in interna-
tional  trade.   About 95 percent of the 4,957 participants      in exhibitions
during 1969 and 1970 previously    were exporting   to foreign   markets and 70 per-
cent already were exporting    the products exhibited    to the countries     in which
the exhibitions   were held.   (See p. 17.)

Based on interviews        with 34 American companies which had participated            in     .
trade exhibitions,       the consensus was that Commerce could be of greater
assistance     if promotional       programs were offered      in less developed countries,
Such countries      are considered growing markets but have few promotional
activities     presently     available    to American businessmen.        The exporters
believe    that the number of Commerce-sponsored            trade exhibitions     in developed
countries     could be reduced without        hurting  their     overseas sales, since other
means of displaying        their products are available.           (See pp. 16 and 20 to 22.)

Short-range     cost-to-benefit    ratios   are not the best indicators     of the               suc-
cess of trade exhibition       programs.      Markets where American companies                 have
few promotional  facilities       and relatively     less export experience   are              largely
ignored,  and the majority      of companies which should be the principal                     targets
for expanding exports       are not drawn into the programs.       The programs                should
consider other measures of accomplishment,             such as

  --the    number of new-to-export         companies       attracted      to the programs,

  --the    number of new      product lines        exhibited,

  --the extent to which promotional       efforts  are keyed to competitive
      U.S. products     in countries where the U.S. share of the market is
      relatively    low, and

  --the extent to which promotional    efforts                  are keyed to countries  where
      there are few facilities for exhibiting                   U.S. products.   {See pp. 27
     and 28.)




                                               2
    Stemming from these conclusions       is the question   of whether it is useful
    to concentrate   trade promotion    efforts  on a few fixed-facility    trade centers
    in developed countries.      The fact that the centers     are there and must be
    used means that Commerce is under pressure        to induce companies to use
    the facilities,    without regard to whether these companies are experienced
    or inexperienced    in the export field.     (See p. 28.)

    Participation    fees
    Commerce charges exhibitors     at trade exhibitions      nominal participation     fees.
    These fees are not intended      to recover the costs of staging       exhibitions.
    In fiscal years 1969 and 1970, participation         fees collected    amounted to
    $2.6 million,     which was only 13.6 percent of the $19.2 million         cost of the
    trade exhibitions.      (See p. 32.)

    Commerce makes no distinction          between exhibitors       which participate       for the
    first    time and those which have participated           repeatedly.        Since one of the
    purposes of the programs is to introduce             American companies to international
    trade,     it might be desirable     to charge new exporters          less than experienced
    exporters.      A sliding  scale of fees would encourage new exporters                to ex-
    hibit    their  products.    In  addition,    repeat   exhibitors.       since   they claim
    siqnificant     sales as a result      of the exhibitions,       presumably would be will-
    ing to pay more of the cost.           (See pp 34 and 35.)


RECObMENDATIONS
             OR SUGGESTIONS
    The Secretary     of Commerce should      consi der:

       --Allocating     a greater      portion    of Commerce's resources     for overseas pro-
          motional    activities     to developing      countries and limiting    promotional
          efforts   to developed countries          mainly to introducing     new products or
          new-to-export        companies.      (See p. 29.)

       --Initiating     a continuing  program to contact American companies,            State
          governments,    and other internationally         oriented   organizations  to de-
           termine what types of promotional         services     are needed and to provide
           those services   not presently    offered     under existing     programs.   (See
           p* 29.)

       --Developing   a more effective      domestic program to inform American companies
          of the benefits    of foreign   trade and to stimulate   these companies to
          use trade exhibitions      to expand their  export businesses.   (See p. 29.)

       --Evaluating     the desirability   of maintaining permanent3 fixed-facility
          trade centers    in view of the need for alternative    promotional     devices
          in developing    countries.    (See p. 29.)

       --Adopting  more useful measures         of the benefits      of trade promotion pro-
          grams, recognizing  that these        programs    cannot   always produce immediate
          results.   (See p. 29.)
       --Establishing      a flexible fee structure using minimal fees to attract
          new companies and charging      higher fees to repeat exhibitors and es-
          tablished   international   trading   companies.  (See p. 35.)


AGENCY ACTIONS AND G'NRESOLVEDISSUES

     The Department of Commerce concurred,       in general,    with our recommendations
     and advised us that corrective  actions       had been initiated   or were planned.
     (See pp. 29, 30, and 35 and app. V.)

     The Department   of State also agreed with GAO's recommendations        for in-
     creased promotional     activities    in developing  countries but felt   that it
     was equally   important    to preserve   the U.S. trade share in the industrial
     markets.    (See p. 31.)


M4TTERS FOR CONSIDERATION BY THE CONGRESS

     This report   should be of timely interest     to the Congress because of the
     recent erosion   of the U.S. trade surplus     and its effect  on the U.S. balance
     of payments.
                             CHAPTER1

                           INTRODUCTION

      Changes in the U.S. merchandise trade balance are con-
sidered significant      because of their impact on the NationPs
balance of payments.         Total exports and imports of goods and
services are the largest component in the balance of pay-
ments, and merchandise exports and imports account for the
major portion of the‘goods and services component.           The U.S.
trade surplus in past years has helped the country finance
its international     programs.      Since 1964, however3 the once-
favorable    balance of trade dropped sharply--from      a trade
surplus of $7 billion        in 1964 to a trade deficit  of $936 mil-
lion in the first     8 months of 1971. Balance-of-payment       and
balance-of-trade     statistics    for the period 1960 through 1970
are provided in appendix I.                  ..

      As a result of Presidential     directives    and balance-of-
payment messages concerned with the deterioration          in the U.S,
trade surplus,    the Department of Commerce carries       out a va-
riety of export promotion programs.         The objectives   are to
stimulate    and assist American companies to expand their ex-
port activity    and to develop foreign markets for long-term
export sales.     Emphasis is placed on helping American busi-
nessmen take advantage of foreign market opportunities.

       The principal     Commerce-sponsored promotional    programs
overseas are trade center shows and trade and industrial
exhibitions.      The Commercial Exhibits Division,      Office of
International     Trade Promotion, Bureau of International        Com-
merce, Department of Commerce, is responsible         for establish-
ing and operating      the U.S. trade centers abroad.      The Divi-
sion coordinates     exhibits   of American companies at the cen-
ters and in commercial trade fair or solo exhibitions,            ar-
ranges for participation      by American companies, and provides
market development support overseas for these activities.
The underlying     purpose of these promotional    efforts     is to
increase exports by giving American businessmen a firsthand
opportunity    to investigate    foreign markets, to establish
contacts with foreign businessmen, and to display their
products.
      Commerce's efforts       to promote U.S. business overseas
were initiated     in 1954 when a program to send trade missions
abroad was provided for under the PresidentIs          E;mergency Fund
for International     Affairs.     Funds were appropriated    to the
United States Information        Agency which, in turn, allocat,ed
them to Commerce for the program's operation.           Originally
the basic aim of the program was to build up goodwill for
the United States and to promote mutual international             under-
standing.      In 1960, however, the focus of the program shifted
from the conceptof       building   up goodwill to the selling      of
U.S. products.
         In 1961, at the direction       of the President,    maximum em-
phasis was placedbn         enlarging    U.S. foreign commerce for the
purpose of maintaining         an overall   balance in our interna-
tional payments.        Commerce was charged with ensuring that a
vigorous effort would be made to expand trade, travel,                and
investment and to "provide energetic             leadership  to American
industry     in a drive to develop export markets."            The Presi-
dent called upon the Departments of State and Commerce to
proceed jointly       to increase commercial representation          and
facilities      abroad.    This directive     signaled the start of a
substantial      expansion of Commerce's overseas trade promotion
program.       Further impetus to the promotion program was pro-
vided when President Johnson, in his January 1, 1968, balance
of payments message, stated that a substantially               larger ex-
port expansion program was needed and asked the Congress "to
support an intensified         5-year, $200 million       Commerce Depart-
ment program to promote the sale of American goods overseas."

      Commerce does not have an overseas commercial service
of its own and therefore     relies  on the Foreign Service of
the Department of State for the implementation        and support
of its overseas programs.       As of July 1970 Commerce funded
11 overseas positions    for Americans and 63 for locals.
These positions   were in the eight U.S. trade centers.        In
July 1970 the Foreign Service had 149 commercial officers
supported by 375 locals in 83 countries      throughout   the world.
The Foreign Service cofmnercial specialists,      located in U.S.
Embassies and consulates,     provide the following    support to
the export expansion program.

      1. Supply economic and commercial         information.
          2. Negotiate     policies contributing  to a more liberal-
             ized flow     of U.S. products to foreign markets,
          3. Provide assistance    to U.S. trade missions, individ-
             ual traders,   and groups of American businessmen.

          4. Direct and support        trade promotion activities         at
             U.S. trade centers        and commercial exhibits.

           Domestically     the export expansion programs are sup-
    ported by 42 Commerce field offices             located in 34 States and
    Puerto Rico.      This field-office        system makes available      the
    entire range of Commerce's resources and services to anyone
    needing information        or assistance      on business matters.       Its
    range of export promotion functions             includes disseminating
    foreign trade data, conducting export seminars and workshops,
    and providing     personalized      assistance     to active and poten-
Y   tial exporters      through an industry        contact program.     The 78
    international     trade specialists        in the field offices     are the
    primary sales arms for Commerce's domestic stimulation                 pro-
    grams, being the points of direct contact with the business
    community.     Aiding Commerce's field offices             in their export
    expansion efforts       are 42 Regional Export Expansion Councils,
    one in each field office area.             These councils are composed
    of about 1,600 businessmen, bankers9 and members of service
    organizations,      who provide their services and expertise            to
    the National Export Expansion Program.
                                                                                 k
    OPERATIONOF U.S. TRADE CEEJTERS

            Trade centers are permanent overseas commercial show-
    rooms established      at central  locations    within major market-
    ing areas where the potential        for sale of U.S. industrial
    products is considered to be high and continuous.             They are
    considered extensions       of the Commercial Affairs      Sections of
    U.S. Embassies but are sponsored by Commerce. As permanent
    installations     for displaying   and demonstrating      U.S. products
    on a year-round basis, they provide one means of introduc-
    ing both new and established       exporters    to foreign markets,
    achieving     immediate sales of exhibited      products,   and lining
    up local agents and distributors         for future export sales.
    Commerce currently      operates eight trade centers,       as shown
    in the table below.       A ninth center is scheduled to open in
    Mexico City, Mexico, in October 1971.

                                          7
                    Location                     Date opened
              London, England                     June   1961
              Bangkok, Thailand                   May    1962
              Frankfurt,   Germany                Nov.   1962
              Tokyo, Japan                        Apr.   1963
              Milan, Italy                        Jan.   1964
              Stockholm, Sweden                   Mar.   1965
              Paris, France                       Nov.   1969
              Sydney, Australia                   June   1970

       Historically    Commerce has .staged from six to nine of-
ficial    l-week exhibitions   annually at each trade center.
During the remaining available       time for display,     U.S. com-
panies or their agents are invited         to use the facilities   for
individual     "between show" exhibitions.
         The main requirement for exhibiting             material  in either
an official      or'an individual        exhibition    is that such mate-
rial be labeled and marketed under the name of an American
company and, if assembled outside the United States, must
contain U.S, components valued at more than 50 percent of
the value of the finished            product.      In addition,   each com-
pany is required to pay a minimal fee to participate                  in an
official     exhibition.         No charge is made for a company's use
of trade-center        facilities     for between-show or window-
display events.
TRADEAND INDUSTRIAL EXHIBITIONS

     Trade and industrial      exhibitions  are sponsored by Com-
merce outside of the trade centers to give American companies
an opportunity to show their products in selected market ar-
eas.  Commerce either     rents space in an established    trade
fair or stages the entire exhibition       and invites  American
companies to participate.

       These exhibitions  were initiated     in 1963 when a number
of different   product lines were shown at exhibitions         in the
Netherlands,   France, and Spain.      The number of exhibitions
has grown from these initial     three in fiscal year 1963 to 22
in fiscal-year    1970.  Recent  exhibitions    have featured a
single-product    line or two or three closely related       lines
and are aimed primarily    at trade audiences.
       Comprehensive market research is conducted to determine
the best potential    opportunities  for sales of U.S. industrial
products,    Scheduled international    and national trade fairs
are then evaluated to match the product opportunities      iden-
tified   with scheduled events.

       Where suitable   trade fairs do not exist in target mar-
kets, Commerce stages solo exhibitions.          Market promotion
and customer identification       techniques are used in an effort
to try to ensure that the best foreign business prospects
come to the exhibitions       to buy, to meet with U.S. represen-
tatives,   and to conduct negotiations       for the establishment
of agencies,     The customer identification      and market promo-
tion work, including      personal calls on prospective      customers,
is conducted in advance of the fairs by market development
officers   of Commerce.




                                   9
                             CHAPTER2

                   FACTOR!3INDICATING NEED TO
             REDIRECT EFFORTS TO INCREASEEXPORTS

         Commerce's exhibitions    are concentrated  in developed
  countries,    primarily   in Western Europe and Japan, where the
,+$irtential   sales benefits   are considered the greatest.    Com-
  merce -officials     feel that Congress and the Office of Manage-
 lment and Budget consider sales results within the 12-month
  period immediately following       the exhibitions to be the best
  indicators    as to the success of the program.

        The growing markets of developing countries    have not
 been.emphasized by Commerce. Althaugh the longer term po-
 tent-ial+of  markets in developing countries    seemed to justify
 increas9ng the number of exhibitions     in those markets, the
 immediate sales potential    did not support the staging of
 exhibitions    there under Commerce's ground rules in effect at
 the time of our review.

        We found that the estimated sales benefit reported by
 exhibitors    as a result of their participating      in Commerce's
 exhibitions    programs was considerably    overstated.    Since the
 majority    of participants   already were engaged in exporting
 their products to the market, it was unrealistic         to attri-
 bute exhibition      sales and follow-on sales to any one show
 or event.
        Although the initial     purpose of putting   on commercial
 exhibitions      was to increase exports by attracting    new Ameri-
 can companies into the field,        we found that the preponderance
 of companies participating       already were engaged in interna-
 tional    trade.

       Discussions with American companies which have partic-
 ipated in these exhibitions      and a review of available   studies
 on Commerce's exhibitions     programs indicate   a need to re-
 direct the principal    thrust of the exhibitions    programs,
 The views of American businessmen and other authorities         are
 that Commerce's assistance     is desired in developing areas of
 the world where promotional      alternatives  are few and that
greater participation     by new-to-export    companies needs to
be achieved.

      These and other matters which point up a need to re-
evaluate the exhibitions   programs as presently   carried out
are discussed in more detail    in the sections that follow.

PREPONDERANCEOF EXHIBITIONS
HELD IN DEVELOPEDCOUNTRIES

        Commerce's promotion objectives        are to achieve immedi-
ate export increases and to encourage American companies to
commit a greater portion of their resources to export market
development.      Emphasis is placed on "hard sell" promotion
events in developed countries,          since Commerce believes that
market conditions     in these countries       are more conducive to
immediate, substantial      returns from exports than are market
conditions    in developing countries.         For the purpose of this
report,    developed countries     include the United States, Can-
ada, all Western European countries,           Republic of South Af-
rica, Japan, Australia,      and New Zealand.          Developing coun-
tries include all other countries           and territories      of the
free world.

       Commerce officials  advised us that the potential    for
immediate results had been an overriding      consideration   in
deciding where an exhibition     would be held and the product
theme. They assumed, from questions raised at appropriation
hearings,  that the Congress expected immediate results--ex-
port sales made during and within a K&month period after a
Commerce-sponsored exhibition.      In line with this emphasis,
most of Commerce's overseas promotion funds are allocated
to trade centers and trade and industrial      exhibitions  in de-
veloped countries.

         Commerce allocates  90 percent of its overseas promotion
funds to sponsor trade centers and trade and industrial        ex-
hibitions     in foreign markets.    More than three out of every
four dollars     spent on the exhibitions    programs goes for ac-
tivities    in developed countries,     as shown in the table below,




                                  11
                                              costs in
                              Total          developed
                         program costs       countries          Percent
Overseas programs        1969      -1970   -1969     -1970    1969
                                                             --       1970

                                 (000 omitted>--------

Trade centers           $3,473 $ 5,136 $3,058 $4,663           88     91
Trade and indus-
  trial exhibi-
  tions                  5,009     5,566    3,539    3,805     71     68

     Total              $8,482 $10,702 $6,597 $8,468           78      79
       Also reflective   of the continued low priority       placed on
providing   promotion services in developing countries          was the
fact that only 20 percent,       or 27, of the 137 exhibitions
sponsored by Commerce during fiscal       years 1969 and 1970 were
held in developing countries.        In addition,     the exposure to
developing-country     markets was further     limited by the fact
that 13 of these 27 exhibitions       were in Thailand,      A listing
of the exhibitions,     by location,   and related product themes
is included as appendix II.

       A significant      contributing    factor to the preponderance
of exhibitions       held in developed countries      is the fixed lo-
cation of Commerce's trade centers.             Once established,     trade
centers become permanent show places for U.S. activities,
and the need to use the centers dictates            where many exhibi-
tions are held,        Historically     Commerce has staged from six
to nine official        exhibitions    annually at each center.       Since
seven of the eight centers are located in developed coun-
tries,   87 percent,      or 83, of the 95 trade center exhibitions
staged during fiscal         years 1969 to 1970 were in developed
countries.       Only  the   Bangkok Trade Center, recently       desig-
nated as a regional         development center for Southeast Asia,
is located in a developing country.             This center was the
site for 12 exhibitions.
       The trade and industrial     exhibitions     program accounted
for the remaining exhibitions       held during fiscal      years 1969
and 1970. This program is more flexible           than the trade cen-
ter program,    in that exhibitions     can   be held   anywhere in the
world.    In conducting this program, Commerce either rents

                                     12
space in scheduled international.   and national    trade fairs
oh if no suitable    fairs exist,  rents   space on   a temporary
basis and stages solo exhibitions.       Even under this program,
however, 64 percent, or 27, of the 42 trade and industrial
exhibitions  were staged in developed countries.




                                13
U.S. §HAEtEOF MARjKETSIN DEVELOPINGCOUNTRIES

       Commerce's exhibitions    have not emphasized the sizable
and growing market potential      of developing countries.     In
the 6-year period from 1964 to 1969, the composite market in
developing    countries   for manufactured goods grew from
$22.8 billion    to almost $35.8 billion--a     growth of about
$13 billion,    or about 57 percent.      (App. IV shows the trade
potential    of developing countries.)

      The U.S. share of these markets decreased over the
6-year period.   Although U.S. exports increased in absolute
terms from $5.6 billion    in 1964 to $7.6 billion     in 1969, the
U.S. market share decreased from 24.8 percent in 1964 to
21.4 percent in 1969. During this same 6-year period, the
market share of other developed countries      increased in both
absolute and relative   terms.   The same is true of the market
share of the developing countries,    although the Communist
countries'  share decreased.

      We noted that, even though the U.S. share declined while
other developed countries'      shares increased,   Commerce span+
sored few exhibitions      in developing countries   in fiscal years
1969 and 1970. During this 2-year period, Commerce sponsored
only 27 exhibitions     in nine developing countries;     about half
of these were in Thailand because of the trade center there.
For reasons discussed in previous sections,        important mar-
kets, such as Argentina,      Venezuela, India, Taiwan, and Hong
Kong, received no exposure to United States products through
Commerce-sponsored exhibitions       and Brazil,  Mexico, and Middle
Eastern countries    received minimal exposure.
       We realize   that there are many reasons why one country
buys from another.      These reasons range from economic unions
based on former colonial      relationships to a lack of famil-
iarity   with available   products on the market.    Promotion is
not necessarily     the answer to changing existing   patterns of
trade, but it is one of the ingredients      of change.

       American businessmen told us that Commerce-sponsored
exhibitions     would assist them in penetrating  developing
countries'     markets.   Commerce's promotion in these countries
could lay the groundwork for the United States to partici-
pate in their expected growth and, at the same time, to as-
sist    them in supplying   their development needs.
                                14
       A recent publication      indicates that Commerce is aware
of this market, as Commerce is quoted as stating        that it
provides the greatest       thrust to the growth of demand in the
world and that "Developing nations *** provide added oppor-
tunities    for significant     U.S. sales gains."

      Commerce officials   agreed with us that more exhibitions
should be held in developing countries      and stated that steps
were being taken to increase the scope of their activities.
They emphasized, however, that staging these exhibitions
would be a much more formidable      task in developing countries
than in developed countries     because of differing   local busi-
ness practices  and limited general knowledge of these areas.

VALIDITY OF REPORTEDSALES BENEFITS QUESTIONED

       The principal    justification       for scheduling    the majority
of commercial exhibitions          in developed countries       is the fa-
vorable reported sales benefit-to-cost            ratio.     With  respect
to accomplishments based on their developed-country,                 short-
term-benefit-oriented        programs, Commerce reported to a sub-
committee of the House Committee on Appropriations                in May
1969 that, during fiscalyears1964-67,             Commerce spent
$19.9 million      promoting exports by means of overseas trade
fairs,   trade centers,      and America Week promotions.           Con-
firmed first-year      export sales resulting        from these promo-
tions amounted to $300.5 million--more            than 15 times the
Commerce budget cost.          On a balance-of-payments       basis, re-
sults were even more favorable.             Since less than 50 percent
of the appropriated       funds for these three programs was ex-
pended overseas, the direct           impact on the balance of payments
within 1 year of the export promotion events was more than
$30 in export sales for each Commerce dollar               spent overseas.
      To evaluate the reasonableness    of the sales figures
claimed, we requested Commerce to provide us with a list of
companies that had reported the $300 million      of sales.     The
list presented at the hearings included about 3,000 American
companies, of which just 100 accounted for about $150 mil-
lion, or 50 percent, of the reported sales.       Commerce pro-
vided us with a list of these top 100 companies and stated
that the list represented    the latest available   compilation
of confirmed sales resulting    from its promotion activities.
It advised us that, even though the sales had been made as a

                                    15
result of exhibitions    held during fiscal    years 1964 and 1967,
the list was respresentative       of those companies presently
reporting  a substantial    portion of the sales made at recent
Commerce-sponsored exhibitions.        Commerce estimated that
first-year  sales from exhibitions      held in fiscal years 1969
and 1970 approximated $277 million.

      We contacted 17 of the companies on the list.            Since
most of them were large, well-established           companies, we con-
tacted also 17 other companies, a majority           of which were
small, to get a more balanced sample.           Thus we contacted a
total of 34 companies, located in various geographical             areas,
to obtain their views on how the exhibitions           had benefited
them and to seek suggestions on how these promotions might
be made more effective.         These 34 companies cannot be con-
sidered statistically     a representative      sample of all the
companies that have participated        in Commerce exhibitions.
Nevertheless    their comments indicated       that the reported sales
are of questionable     validity    in deciding the direction      of
the Commerce-sponsored exhibitions         program.
       The impressive      sales benefits-to-cost.ratio  reported by
participants       did not hold up under close scrutiny.     Most of
the companies we interviewed        told us that reported sales
benefits     included:

      1. Sales which would have been made without the compa-
         nies' participating in Commerce exhibitions.

     -Z.,Products   that had been in advanced stages of negoti-
          ations before being displayed   in exhibitions.

      3. Deliveries    made from the companies'      foreign   subsid-
         iaries.

      4. Transfers    to foreign    agents.

      5. Sales which could not be attributed         to any specific
         activity  or event.

Commerce officials      agreed   that immediate export sales were
not a reliable     measurement    of the effectiveness  of the pro-
gram.   In  February    1971 a   consulting  firm was commissioned to
develop suitable     standards    of measurement.

                                    16
MOSTPARTICIPATING COMPANIES
ALREADYINVOLVED IN EXPORTING

       During appropriation      hearings when the exhibition    pro-
grams were initiated,       Commerce stated that the vast major-
ity of American companies were not engaged in foreign trade
and needed to be stimulated        to export.     The purpose of Com-
merce's programs, therefore,         was to introduce   American com-
panies to international       trade.    Once the companies were in-
troduced to these markets, it was expected that they even-
tually would be able to do business overseas without the
assistance   of Commerce's exhibitions.          The exhibition pro-
grams were not intended to aid companies already operating
overseas because it was expected that they knew their way
around.

      Commerce's records show, however, that its exhibitions
are used principally      by American companies already engaged
in international     trade.    During fiscal      years 1969 and 1970,
Commerce staged 137 exhibitions.          On the average, 36 com-
panies were represented       at each exhibition        for a total of
4,957 exhibitors.       Of these exhibitors,        95 percent were al-
ready exporting    to foreign markets and 70 percent were al-
ready exporting    the products displayed         to the country where
the exhibition    was held.     The preponderance of experienced
exporters participating      was further      indicated    by the fact
that about 56 percent, or 77, of the 137 exhibitions                  staged
by Commerce had no more than one new-to-export              company rep-
resented at the exhibitions,         Statistics      on participation
in Commerce's exhibitions       are provided below,
                                         Exhibitions  with      Total   Old-to-   New-to-   New-to-
                                           no more than       number    market    market    export
                           Exhibi-      one new-to-export     of ex-    exhibi-   exhibi-   exhibi-
Exhibition      programs    kions      company represented   hibitors    tars      tors      tors
Trade centers:
    Fiscal year 1970                            24             1,533     1,019        403       111
        11     " 1969                                          1,437     1,075        331        81
                                                s

             Total                              -50            3,020     2,094        734       192
                                                                                                _:
Trade and industrial
  exhibitions:
    Fiscal year 1970              22            15                963       681       254        28
         11    " 1969        -
                                  20            12             -- 974       691       257        26
             Total           -
                                  42            -27            1,937     1,372        511   .    54
             Total           G
                                 137            z              -4,957    -3,466    1,245        -246



                                                      17
        The fact that there were 4,957 exhibitors      did not
mean, however, that 4,957 different        companies participated
in Commerce's exhibitions.      Some American companies par-
ticipated     in several Commerce exhibitions    during fiscal
years 1969 and 1970. To get some idea of the extent of
this repeated participation,     we selected 20 companies that
were active in Commerce's exhibitions        and noted the number
of times that each had repeated.       This cursory review re-
vealed that the 20 companies accounted for 289 of the 4,957
exhibitors.

        Further,    we found that some of the companies counted
as exhibitors       actually     had not been present at the exhibi-
tions.      Instead,    these companies' products had been ex-
hibited     by either combination export managers or companies
acting as export managers.              These managers act as a com-
bined export department for several independent,                noncompe-
titive    manufacturers        in related   industries    that do not want
to maintain their own export departments.                 The managers
usually have sales representatives              in foreign markets.
During fiscal       years 1969 and 1970, about 640 American com-
panies were represented           at various Commerce-sponsored ex-
hibitions      by 78 different       export managers or companies act-
ing as such.        Statistics     on the number of exhibitors       in-
cluded the total number of companies rather than just the
number of export managers that participated.

       We did not attempt to prepare a list of the indepen-
dent companies that actually     had participated      in Commerce's
exhibitions.    On the basis of the factors       discussed above,
however, we believe that the number of companies involved
would be considerably    less than the cumulative number of
exhibitors,

      Commerce officials    responsible     for the exhibition     pro-
grams told us that, even though there were an estimated
300,000 manufacturing    establishments       in the United States,
they had experienced considerable       difficulty    in recruiting
companies to participate       in the exhibitions.      The offi-
cials attributed    this difficulty,    at least in part, to a,
pervasive   lack of export awareness and of knowledge of
Commerce's programs on the part of most American companies.
They stated that, once a company participated           in an
exhibition,    it   usually   was willing   to participate   in future
exhibitions.

       Commerce officials      advised us that the criteria       for
showing short-term      benefits    had resulted  in forgoing     the ad-
vantages of mounting exhibitions          in many countries    where fu-
ture increases in U.S. exports could be expected but immedi-
ate sales results      could not be guaranteed.      Consequently     the
original  purpose of attracting        new companies into exporting
had not been emphasized in favor of attracting            experienced
companies with products likely         to sell well in developed
markets.




                                     19
COMPANIESSVIEWS OF COMMERCE'S
EXHIBITION PROGRAMS

         Our examination indicated    that  CommerceDs exhibitions
could assist in increasing       exports by providing    the vehicle
by which American companies (1) enter international           trade
and (?) expand their exporting        programs to developing coon-
tries-.. ) such-as those in Latin America, Africa,      Southeast
Asia, and the Middle East.         Government action in these de-
veloping countries      can increase exports because (1) without
Commerce-sponsored exhibitions,         many American companies will
not attempt exporting      and (2) there are few organizations
capable of assisting      American companies in promoting their
products in the developing countries         of the world.

       Most of the established     exporting    firms that we con-
tacted told us that they were participating           in Commerce's
exhibitions    and that these exhibitions      were of value to
them, especially    when trying to introduce new products.
They stated, however, that the number of exhibitions             in de-
veloped countries     could be reduced without any significant
adverse effect on their overseas business.            The companies
said that, although Commercess exhibitions           provided them
with low-cost promotion vehicles,         there were many alterna-
tives available    to them in developed countries         for promoting
their products.     For example, in 1970, 1,700 privately          spon-
sored trade fairs were held in 58 countries,           mostly in de-
veloped countries.      Although not all of the 1,700 fairs were
considered prestigious      events, about 800 might have been
equivalent   in stature to Commerce exhibitions.

      A majority  of the companies that we interviewed          said
that they wished that more exhibitions       were sponsored       by
Commerce in developing countries      of the world.   They      felt
the need was the greatest in such countries       as those      in
Latin America, Africa,    Southeast Asia, and the Middle          East
where the growth trend is up and where there are few            promo-
tional activities   presently  available    to them.
        Typical comments made by these companies concerning         the
value    of CommerceBs exhibitions  to them were as follows:

        --Commerce's shows were an inexpensive,  easy way to ex-
           pose the company's products.  It was hard for the
       company not to participate        in those shows because of
       their low price and the services that Commerce of-
       fered with them, such as building         a booth and sending
       out invitations    to potentially     interested   customers.
       The company would prefer,       however, to see Commerce
       put on more shows in the less developed countries           be-
       cause, in countries     like Germany, Japan, and the
       United Kingdom, there would be many alternatives
       available    to promote products.       The company said that
       it would welcome Commerce's exhibitions          in such de-
       veloping countries     as Taiwan, Hong Kong, Korea, and
       those of Latin America.
     --Commerce's       exhibitions  were helpful because of their
        low cost,      but there were many alternatives    available
        to promote      the company's products;   in fact, Europe
        and Japan      were overloaded with trade fairs.

     --Alternatives        to Commerce's exhibitions,    although ex-
        isting    in   the developed countries     of Europe and in
        Japan, did      not exist in developing countries.       This
        was due to       a lack of organizations    that could sponsor
        fairs and      less sophisticated    media.
     --Commerce@s exhibitions        did help the company when it
        was first    entering international      trade.    The company
        said that currently,       however, those exhibitions
        played a small role in its overall          promotion activi-
        ties and therefore      elimination    of them would have
        little    or no effect on it.       The company said also
        that it participated       in mny local and international
        technical    fairs which cost much more than did Com-
        merce's fairs.       It would like to use Commercets ex-
        hibition    programs to introduce      new products or to get
        into new markets because of their inexpensiveness,
        but seldom was there the right kind of Commerce fair
        available    at the right time.
     A more complete presentation  of the comments made by
the companies we contacted is provided as appendix III.

      The comments of the companies we interviewed  indicate
that, to varying degrees, Commercets exhibitions   do benefit
the companies that participate  in them. These comments
indicate also, however, that providing     experienced exporters
with a low-cost means for exhibiting    their products in de-
veloped countries  does not necessarily    result in an expan-
sion of U.S. exports.

        The value of Commerce's exhibitions    to experienced ex-
porters was put into perspective      by a survey of businesses
commissioned by Commerce. In September 1968 a private cor-
poration    began a survey of American companies, to determine
their views regarding what steps the U.S. Government could
take to boost exports.      A sample 158 companies were inter-
viewed for purposes of the survey.        The sample included 120
large and 38 small companies, the demarcation line's         being
sales of $150 million.      Of the 158 companies that provided
statistical     data, 149 reported export sales of $8.1 billion,
or one third of the total U.S. exports of manufactured goods
in 1967. The companies expected their exports to rise to
$11.3 billion     by 1973, an increase of about 39 percent.
        In order of frequency mentioned, the primary measures
the Government could take to boost exports were (1) create
tax incentives,      (2) improve export insurance and credit,
 (3) negotiate    removal of nontariff     barriers,   (4) negotiate
further    tariff   cuts, (5) reduce U.S. inflation,       (6) help re-
duce transportation       costs, (7) eliminate     the Foreign Direct
Investment Program, and (8) improve Government export promo-
tion.     The fact that export promotion ranked eighth in the
responses tends to confirm that        companies already engaged in
international     trade, particularly    large companies, do not
need the assistance       of direct Government export promotion to
substantially     increase their exports.       This was further     evi-
denced by the fact that only 45 of 158 companies considered
improved Government export promotion important.

        It should be noted, however, that a significantly
higher percentage of small companies considered direct pro-
motion more important than did large companies.          Further,   it
was evident from our review that Commerce-sponsored exhibi-
tions did influence     companies to enter into exporting      or to
try new market areas.       This fact was brought out in another
survey    made by Commerce in '11969. This survey showed that
80 percent of the new-to-export       companies and 50 percent of
the new-to-market     companies that participated     in Commerce's
exhibitions     were successful  in either initiating    or

                                   22
expanding their export programs.     It showed also that, of
the successful   companies, 25 percent of the new-to-export
companies and 16 percent of the new-to-market      companies
would not attempt to enter exporting    or new markets without
the stimulus of Commerce's exhibition    programs.    In addi-
tion, another 20 percent of the new-to-export      companies and
13 percent of the new-to-market    companies would not have
made the attempt
            ..     until  later.




                                                                               :        .


                         I.
                                        .:                                 I           ,.i


                          ”   :     :        , :
                                                                               .-      _             _


                                                   I.                              ,




                                                                                             .   .



                                                            I”

                                                                                                         ._


                                                        .        s   I_,
COMPARISONOF COMMERCE'SPROGRAMS
WITH THOSE OF MAJOR FOREIGN COUNTRIES

       Recognizing that other trading nations have enhanced
their position    in world markets by aggressive promotional
efforts,   Commerce undertook a study directed   toward compar-
ing major facets of its programs with those of Canada,
France, Germany, Italy,    Japan, and the United Kingdom.

      The study, released in July 1970, disclosed         that the
United States, compared with those countries,         placed less
emphasis on (1) stimulating     domestic companies to export,
(2) providing   promotional   activities    in developing countries,
and (3) working closely with companies in planning to in-
crease their export activity.         Some of the major conclu-
sions reached in the study were:
     --Competitor   ‘nations devoted a higher portion of their
        total export promotion efforts       to the domestic stimu-
        lation  of increased export activity       than did the
        United States.     This was particularly      significant in
        view of the fact that the United States had a more
        serious lack of business community export awareness
        than did any of the other countries.

     --Some other nations emphasized their images in less
        developed countries, apparently laying bases for com-
        mercial presences as economic development occurred in
        those countries.

     --The United States did not plan export programs or
        policies     in concert with American industries  nor ex-
        hibit    business-Government  export expansion collabora-
        tion to the degree encountered in virtually      all the
        competitor     nations.

     --The United States lagged far behind all other coun-
        tries in its use of, and cooperation    with, the pri-
        vate sector in export expansion activities.

      Although the comparative       study did not demonstrate    that
the United States necessarily        could, or should, pattern    its
approach after the other major        trading nations,   it did
point  out that the above areas       should be considered in

                                24
formulating a more effective     solution   to the problem of
promoting exports.
VIEWS OF NATIONAL EXPORTEXPANSIONCOUNCIL
     The National Export Expansion Council comprises emi-
nent industrial  leaders and serves in an advisory capacity
to Commerce in matters dealing with export expansion.    In
March 1967 a council committee, studying the area of export
promotion, stated that:
     "New markets and opportunities       are in prospect
     with population    growth, the emergence of the
     newly developing countries,       and the abundance
     of new technology.      It behooves us, therefore,
     to make an unrelenting     effort   to improve our
     present performance if we are going to achieve
     the high volume of exports that we require."               -
       In April 1967 another council committee, studying        ways
in which U.S. aid programs in less developed countries          could
make a greater contribution   to U.S. export developmat         ob-
jectives,   stated that:

     "The major special U.S. Department of Commerce
     trade promotion programs are largely concen-
     trated in industrialized      countries.     Thus, in
     the past three years, only 9 out of 54 Trade
     Fair participations      were in LDCs [less devel-
     oped countries].      Only one out of six perma-
     nent Trade Centers maintained by Commerce is
     in an IDC (Thailand).       This emphasis is quite
     understandable     in terms of maximizing immed-
     iate sales results,      but may be questionable     in
     the sense that special government support in
     market development is relatively         more needed in
     IDCs than in industrialized      countries."
      These statements indicated that industrial leaders
comprising these committees recognized that the developing
countries  offered a source for future growth and develop-
ment of U.S. exports.



                                25
       Commerce has been informed of the need to place in-
creased emphasis on promotional   services in developing coun-      '
tries,   but it continues to use most of.its   promotional  funds
spent overseas in trying to obtain immediate impact on ex-
port sales.    This was brought out by Commerce officials     in
another study, issued in September'l967,     which stated that:
      **Since immediate results continue to be a prime
      objective     of the National Export Expansion Pro-
      gram the study group concludes that developed
      markets must receive the great preponderance of
      promotional     funds and efforts.  Jwlckexhibitions
      in less developed countries produce substan-
      tially    less immediate results than those in
      developed countries.       Yet these limited    im-
      mediate results must be balanced against the
      longer-term     potential  offered by SOme of the
      developing countries,      in which the establish-
   ' .rnat of a foothold today may lead to an im-
      portant market in the future."
With a major portion of its money going for programs in de-
veloped countries,   Commerce is unable to make more funds
available  for other recognized needs.    In fact, Commerce
continues to increase the amount of funds it spends to pro-
vide promotion services in developed countries.




                                26
CONCLUSIONS,RECOMMENDATIONS,
AND AGENCYCOMMENTS
       We conclude that a redirection           of a greater part of
Commerce's exhibitions         programs from developed countries      to
developing countries        needs to be considered.        We believe
that some amount of promotion in the developed countries              is
desirable   and should be continued to introduce new companies
into exporting,     facilitate      entry of new products into cer-
tain market areas,       assist    in retaining    the U.S. share of
established    products and market areas, and maintain a U.S.
presence in certain        foreign business communities.
       According to companies that we interviewed,         the need
for promotional     devices appears to be most prevalent          in the
developing countries      of the world.     We recognize that, in
the context of the national       balance-of-payments     situation,
Commerce's contribution      to exports through exhibitions          rep-
resents only a small fraction        of total export sales.         Com-
merce's exhibitions,      however, should provide a means for
introducing    companies to new export markets, which could
lay the basis for more far-reaching         and long-range benefits.
Because of the need to show an immediate payoff, Commerce
exhibitions     have been concentrated     in developed countries
at the expense of developing countries'          markets.

        We concluded that short-range       cost-to-benefit    ratios
were not the best indications          of the success of the trade
exhibitions     programs.    By focusing on these cost-to-benefit
ratios,    Commerce directs     its programs primarily      to those
countries    and those companies least in need of the effort.
In so doing, markets where American companies have few pro-
motional facilities       and relatively     less export experience
are largely     ignored, and a large number of companies which
should be the principal       targets for expanding exports are
not drawn into the programs.           We believe that the programs
should be managed in a way that considers other measures of
accomplishment and suggest the following            measures as being
especially    worthy of consideration.

      --The number of new-to-export         companies attracted      to
         the programs.
      --The number of new product        lines   exhibited.

                                    27
      --The extent to which promotional  efforts   are keyed
         to competitive U.S. products in countries   where the
         U.S. share of the market for the products is rela-
         tively low.

      --The extent to which promotional   efforts           are keyed to
         countries where there are few facilities            for exhibit-
         ing U.S. products.

      Stemming from these conclusions      is the question of
whether it is useful to concentrate       a high percentage of
the trade promotion effort      on a few fixed-facility       trade
centers in developed countries.        The fact that the centers
are there and should be used tends to influence          Commerce
to induce companies to use the facilities         without sufficient
consideration   of whether these companies are experienced           or
inexperienced   in the export field.      The existence     of these
centers reduces the flexibility      of promotional     activities
and forces marginally    economic use of staff and facilities.
Although our review was not sufficient        in depth for us to
r&commend an appropriate    course of action for these trade
centers, ,there seemed to be sufficient       evidence to indicate
that the usefulness   of any center more than several years
old needed to be reevaluated      in the light of the rapid
changes in patterns   of trade.
       Promotional      programs designed to maximize exports re-
quire close coordination           with companies, trade organizations,
State governments, and other groups to determine what is
desired,     what is available,        and what types of assistance
are most suitable         to fill   the remaining gaps.       Our review
indicated      that this type of close coordination           had been
lacking.       American companies that we interviewed           felt that
developing      countries    of the world offered good long-range
potential      for increasing      exports and that this was where
they needed Commerce's assistance.                In view of the general
unavailability       of promotional      activities,in    these countries,
Commerce's assistance          could be offered to help American
companies get in on the ground floor.

      The inability   to attract more than minimal participa-
tion by new-to-export    companies presents a real challenge.
Although we have no ready answer to remedy the situation,
it seems that a more vigorous program is needed to educate

                                    28
American companies as to the benefits    of foreign trade             and
to inform them of the assistance  available    to introduce
them to export markets.

RECOMMENDATIONS

     We recommend that          the Secretary     of Commerce consider:
      --Allocating    a greater portion       of Commerce's resources
         for overseas promotional       activities     to developing
         countries   and limiting    promotional      efforts   to devel-
         oped countries    mainly to introducing         new products
         or to introducing     new-to-export       companies.

      --Initiating    a continuing  program to contact American
         companies, State governments, and other internation-
         ally oriented organizations     to determine what types
         of promotional   services are needed, and to provide
         those services not presently     offered under existing
         programs.
      --Developing   a more effective    domestic program to in-
         form American companies of the benefits      of foreign
         trade and to stimulate     these companies to use trade
         exhibitions  to expand their export businesses.

     --Evaluating         the desirability      of maintaining  permanent,
        fixed-facility         trade centers, in view of the need for
        alternative        promotional     devices in developing coun-
        tries.
     --Adopting   more useful measures of the benefits  of trade
        promotion programs, recognizing  that these programs
        cannot always produce immediate results.

AGENCYCOMMENTS                              ,I

      In response        to a draft   of this    report,   Commerce advised
us that it was:

     --Striving    to achieve a better balance between developed
        and developing countries,    by stabilizing   promotion
        activities   in developed areas either at or near the
        current level while increasing     activities  in


                                       29
  developing  areas,    Available   facts indicate    that an
  increase in promotion resources to less developed
  markets is needed, but these facts do not support a
  conclusion  that a majority     of the promotion efforts
  should be transferred     to such markets as proposed in
  the draft report.     Commerce is trying to develop a
  sound basis for making the determination         as to the
  optimum proportion    of export promotion resources to
  be devoted to the less developed markets.          (We agree
  with the agency on this point and have changed our
  recommendation accordingly.)

--Providing    individual     counseling    to, and two-way com-
   munication with, new-to-export          and new-to-market
   companies before their participation           in Commerce-
   sponsored exhibitions,       increasing     communication with
   State departments of commerce and other organizations
   interested    in international      trade, and studying ad-
   ditional   efforts    that can be initiated      in the near
   future.

--Launching    an aggressive export stimulation-domestic
   awareness   program, including  a contract with an ad-
   vertising   agency for the execution of an appropriate
   all-media   program.

--Using existing      trade centers as primary means for
   introducing   new companies to exporting,          Commerce
   was considering      having fewer organized exhibitions,
   to provide more time and resources for individual
   new-to-export    company endeavors.       This policy adjust-
   ment would also permit a greater allocation           of re-
   sources to developing countries.          Through the new
   export awareness activities,        Commerce expects to
   achieve higher new-to-market        and new-to-export    company
   participation    in the trade centers.        Commerce was
   also considering      alternatives   for .setting more spe-
   cific new-to-export       and new-to-market     company targets
   for these operations.
--Studying     alternative means for measuring the effec-
   tiveness    of the trade promotion programs.




                             30
      III response to our solicitation      of comments, the Depart-
ment  of State advised us that although the suggestions       in
our draft report were addressed to the Secretary of Commerce,
the Department of State offered the following        comments in
view of its close relationship       with the Department of Com-
merce,
       We are in agreement     with the recommendations for
       increased promotional    activities  in the developing
       countries.   However,   we also feel that it is
       equally important to    preserve the U.S. trade share
       in the industrialized    markets.   On balance, we
       feel that the report    prepared by your office    is a
       commendable analysis    of our overseas exhibition
       program and provides    valuable guidance for future
       planning."




                                  31
                                CHAPTER3

                      FEES CHARGEDTO COMPANIES
                PARTICIPATING IN COMMERCE'SEXHIBITIONS
       We found that Commerce had no specific           criteria   for es-
tablishing      exhibition  fees.      Although participation    fees are
charged to all exhibitors,          the fees charged are nominal, are
not intended to recover the costs of staging exhibitions,
and do not distinguish       between multinational        and small eom-
panies.      Also no differentiation        is made between exhibitors
participating       for the first      time and those exhibiting      re-
peatedly..
       In general, fees are set by Commerce officials   at a
level that, in their opinion, will not discourage participa-
tion by small- and medium-size companies.     During fiscal
years 1969 and 1970, Commerce collected    about $2.6 million
of the $19.2 million   expended in support of these programs.
A breakdown of the costs and fees is provided in the table
below.
                                                               Percent re-
  Ekhibition                                  Exhibitors'      imbursed by
   proprams             Total   costs       contributions       exhibftors
                       1969      1970        w1969 -1970        --1969 1970
                                   (000 omitted)
Trade
  centers             $3,473 $ 5,136        $ 439 $ 482         12.6      9.4 .
Trade and
  industrial
  exhibitions          5,009     5,566       LEi!i       916    15.3   16.5

     Total            $8,482 $10,702        $1,205 $1,398      14.2    13,l
     Total for
       1969 and
       1970              $19,184                $2,603             13.6
      The same fee schedule is used for all companies within
a trade center, but the schedule differs   for each center.

                                     32
A company is required to pay a flat fee of $150 to partici-
pate in exhibitions     at the Bangkok Trade Center, $250 at the
Sydney Trade Center, and $450 at each of the remaining six
centers in Western Europe and Japan.        No fee is charged for
the use of a trade center for between-show or window-display
events.    The fee charged for participation      in trade and in-
dustrial   exhibitions   varies from $3.50 to $7.50 a square
foot, depending on such factors as the location         and type of
exhibition   involved.,

       For the participation     fee, a company receives space,
booth construction,      market promotion,    and various other sup-
port activities,     such as receptionists.      Commerce also pays
the cost of shipping the products back to the United States
if they are not sold,        In addition   to the fee, each company
is required to bear the cost of shipping its products to the
exhibition    site and the cost of travel and salary for at
least one sales representative         to man the company's booth.

        In September 1968 Commerce officials    made a study to
identify    a systematic basis for setting participation        fees.
This study noted that, historically,       the rationale    for par-
ticipation    fees had been (1) the desire of the Congress
that industry bear a share of program costs, (2) the belief
that reasonable fees could be charged without hurting           the
progra% and (3) the desire to ensure a serious business
interest    on the part of U,S, participants.       The study noted
also that:

     *'Any useful study on the subject must take into
     consideration   the effect  fee levels may have on
     the accomplishment of program objectives..       To do
     otherwise is to forget that while these programs
     offer a service to business they also serve as
     export promotion tools for government.       It is
     necessary therefore,    to strike a fair balance
     for both partners in cost sharing.      Government
     can offer incentives    and serve as a catalyst,    but
     it is the firms that must make the investment and
     do the selling    that will spell out success in the
     effort,"

      The officials    conducting the study recommended, in gen-
eral, that participation      fees be established and adminis-
tered to offset a standard percentage of program operating

                                 33
costs and that the percentage achieved in each exhibition
program in fiscal    year 1967 be accepted as the target for
program planning in fiscal       year 1969. In 1967 companies
reimbursed Commerce for 10.4 percent of the trade center
costs and 12.5 percent of the trade and industrial            exhibi-
tions costs.     The officials    recommended also that the oppor-
tunity and the need to alter the standard rate be reviewed
annually,   with special regard to (1) past and anticipated
changes in operating      costs, (2) observed changes in partici-
pation,   (3) changes in program precepts and objectives,            and
 (4) need to prevent the cost of participation         from signifi-
cantly exceeding the cost of comparable participation             in
domestic trade shows. These specific        recommendations were
never adopted, however, because agreement could not be
reached on an appropriate       basis for establishing     fees.
       We agree with this study's premise that there was a
need for developing a systematic basis for setting          fees and
that establishment    of fees should be related       to the underly-
ing objective   of increasing    U.S. exports.     As we understand
it, the intent initially      was for the Government to absorb
the major share of exhibitions        costs to introduce   companies
to exporting.    Later these companies were expected to pay
higher fees and, eventually,       to not require any assistance.
Fees charged exhibitors     therefore    are a form of subsidy to
interest   companies in exporting      and should be evaluated in
terms of the degree of inducement required          to accomplish
this purpose.    New-to-export    companies need greater induce-
ment, because of the uncertainty        of their doing business in
a foreign land, and should be charged less t'nan companies
already involved in international         trade.

       Most of the companies participating in Commerce's exhi-
bitions,   however, are already engaged in international trade
and are charged the same fee as companies just entering    ex-             .
porting.

CONCLUSIONS,RECOMMENDATIONS,
AND AGENCYCOMMENTS

       Commerce makes no distribution     between exhibitors which
participate   for the first    time in its programs and those
which have participated     repeatedly.    Since one of the


                                   34
purposes of the programs is to introduce      American companies
to international     trade, it might be desirable   to charge new
exporters    less than experienced exporters.     A sliding  scale
of fees would serve two purposes:

      --Encourage    new exporters-to       exhibit   their   products.

      --Assess experienced exporters      that benefit  from the
         programs a greater,portion     of the costs.  'Since re-
         peat exhibitors  claim significant    sales as a result of
         the exhibitions,   they presumably would be willing     to
         pay more of the costs.
RECCOMENDATION

        We recommend that the Secretary of Comerce consider
establishing     a flexible    fee structure.usingminimalfees       to
attract    new companies and charging higher fees to repeat
exhibitors     and established    international     trading companies.
AGENCYCOMMENTS

      Commerce concurred with the intent of the suggestion
in our draft report to provide special incentives    to new-to-
export and new-to-market  companies.    It advised us that‘:
     "Differential    exhibitor     contribution        rates have
     been previously      considered by the Bureau, with
     the conclusion     that differential         rates pose se-
     rious operational      and administrative          difficul-
     ties.    We now have under consideration               a number
     of internal   proposals which, hopefully,               could
     surmount the difficulties          previously      encountered.
     We have under consideration,           for example, a pro-
     posal to increase the share of costs borne by
     old-to-market    firms by eliminating           the govern-
     ment return freight       obligation      for these firms."




                                     35
                               CHAPTER4

                           SCOPEOF REVIEW
      We reviewed-presidential       directives,   records of con-
gressional   hearings,    and related documents that pertained
to Commercels exhibition       programs.     We examined pertinent
records and documents at the Department of Commerce head-
quarters in Washington, D.C., and held discussions           with
Commerce officials     responsible    for administration   of the
programs.

      We visited     the sites of trade and industrial        exhibi-
tions in Paris, France; Copenhagen, Denmark; Milan, Italy;
Mexico City, Mexico; and San Salvador, El Salvador.              We
also toured the Paris Trade Center and attended an exhibi-
tion held at the Milan Trade Center.          We held discussions
with officials     from both the Department of State and the
Department of Commerce involved in staging the exhibitions
and with officials      responsible   for operation   of the trade
centers.     We also interviewed    representatives     of American
companies that were participating         in the exhibitions.
       More in-depth    interviews    were held with officials       re-
sponsible    for the international       activities     of 34 American
companies located in the vicinities            of New York, N.Y.;
Washington, D.C.;     Detroit,     Michigan;     Chicago, Illinois;
Minneapolis,     Minnesota; Los Angeles and San Francisco,           Cal-
ifornia;   Seattle,   Washington; and Portland,          Oregon. All of
these companies had participated          in Commerce's exhibitions.




                                   36
APPENDIXES




37
                                                                                                          APPENDIX I

                   U.S.      BALANCEOF PAYMENTAND BALANCEOF TRADE
                     STATISTICS FOR THE PERIOD 1960 THROUGH1970

                                      Balance-of-trade                              Balance-of-payments
                                                                                                  Official
                                                                                   Liquidity    settlement
 Calendar                                                         Trade             balance        balance
   year                    Exports            Imports            surplus           (note 1)       (note 2)
                                                                    (billions)
      1960                   $19.6              $15.0               $4.6             43.9                      S-3.4
      1961                     20.2               14.8               5.4               -2.4                      -1.3
       1962                    21.0               16.4               4.6               -2.2                      -2.7
      1963                     22.4               17.2               5.2               -2.7                      -2.0
      1964                     25.6               18.6               7.0               -2.8                      -1.6
      1965                     26.5               21.3               5.2               -1,3                      -1.3
      1966                     29.4               25.6               3.8               -1.4                          .3
      1967                     31.0               26.9               4.1               -3.5                      -3.4
      1968                     34,l               33.1               1.0                    .2                     1.6
      1969                     37.3               36.0               1.3               -7,0                        2.7
      1970                     42.7               39.9               2.8               -4.7                    -10.7
1
 The liquidity    balance is intended to be a broad indicator of potential pressures on the dollar resulting from changes in
  our liquidity   position, and is measured by changes in United States official reserve assets and in liquid liabilities to all
  foreigners

2The official settlement balance is intended to be an indicator of immediate exchange market pressures on the dollar
 during the reporting period. It is measured by changs in United States official reserve assets and changes in both
 liquid and certain nonliquid liabilities, but only those to foreign official agencies.




                                                               39
APPENDIX II


                                                 SCHEDULE OF COMMERCE-SPONSOREDEXHIBITIONS              HELD

                                                           DURING FISCAL YEARS 1969 AND 1970

               Year    and date       '                     Location                                         Product     theme

DEVMPFD         COUNTRIES--FISCAL         YFAR 1970

  1.    June.fl-24,       1970                                                Instrumentation            for Chemical            Industry
  2.    3un.s a-12, 1970                         ““F do: ’ Gemany             Marine and Shipbuilding                   Equipment
  3,    thy 20-22,      I.970                                                 Servo Svstems and Cowonents
  4.    Apr?l ~&l&y         3, $970              Hannover       , Germany     Aircrafi      Components &d Ground Support                       Equipment
  5.    April    X-19,      1970                 Frankct.          Germany    Hi-Fi     and Stereo !+quipment
 -.6.   Melkh 16-20,        1970                                              Materials       for Electronics               Industry
  7.    February     16-20,       1970.                 do.                   Nuclear     Instrumentation               and Raiement
                                                                                                                                  . .
        uecwlber 1-5,         1969                      do.                   Geophysical         Equipment
 -t :   November 10-14,           1969                  do.                   Equipment       for     Plastics        Industry
        Gcfob&ZO-24,           1969                     do.                   Electrical        Connectors          and Electromechanical             Components
.E:     October     U-25,      1969              Cologne,    Germany          Industrial        Process Control               Equipment
 12.    September. 22-26,          1969          Frankfurt,     Germany       Compuser Counmmication                 6 Display        Equipment
13.     September 20-28,           1969          ELlsen, Germany              Welding Rquipment
 14.    June 22-26.       1970                   London,    Fa-agland         Packaging       Equipment
 15.    June 8-12;1970                                  do.                   Vacuum and Cryogenics                 Equipment
 16.    Mav.ll-15.      1970                            do.                   Electra-Optical            !Zquipment
 17.    Ha? 11-16;      1970                            do.                   Instruments,          Electronics,            and Automation        Rquipment
 18.    April    6-10, 1970
                          197C                          do.                   Pulp and Paper Products                   Instrumentation          and Controls
19.     February     16-20,       1970      '                                 BiochemFcal         Test and Control               Equipment
        January. 19-23, 1970   1                          2:                  Data TransmissLon
2:      December B-12, 1969    1                          do.                 Metallurgy
22.     November 10-14,           1969                    do.                 Dynamics Testing             Equipment
23.     September 22-26,           1969                   do.                 Thermal Instruments
24;     June 16-20, 197c  1970                   Milan,     Italy             Transducers
        Hay 19-23, 1970                                  do.                  Chromatography           and Spectroscopy              &uipment
2:      April    14-25. 197019i                         do.                   Machinery       & Equipment/Meat,                Fish   6 Poultry      Rocessing
27.     March 1-8, 1970                                 do.                   Industrial        Air Quality           Treatment       Equipment
28.     February     10-14,       1970                  do.                   Photography         in Science          and Industry
29.     iiovgber     M-22.        1969                  do.                   Advanced Components and Microcircuits                           Equipment
        October     21-25,      11969                   do.                   Advanced Training              Aids
2       Satember       7-11. 1969                       do.                   Hi-Fi     and Stereo Equipment
32.     bfiy 27-June 4;1970                      Paris,     France            Measuring        and Testing          !Zquipment
        l4ay 11-z.      1970                             do.                  Advanced Medical             Equipment
E:      March 17-21,        1970                         do.                  Printing       and Bookbinding              iZquipment
35.     Januarv     2630.        1970                    do.                  Production         mipment          for Electronics           Industry
36.     Now&r        17-2i.       1969                   do.                  LaserE@uipFc+!nt
37.     Eiarch 2-f.      1970                    Madrid,      Spain           Refrigeration.           Air Conditioning,              Food   Processing     6
                                                                                 Packaging        Rquipment
38. November lI-15,         1969                 Amsterdam, Netherlands       Shipbuilding          and Harine Equipment
     October    6-11. 1969                       Bawl,     Switzerland        Nuclear      Instn5e11tetion
2:: June 10-16, 1970                             Stockholm,     Sweden        Advanced Reprographic                 Equipment
41. Mey 20-26, 1970                                    do.                    Outdoor Life.           U.S.A.
42. April    13-18,     1970                           do.                    Materials        H&dling        Equipment
z.1 March 11-17,        1970                           do.                    Electronics         Production          and Test Esuioment
                                                                                                                                       - .
     Febpuary 18-24,        1970                       do.                    Scan-Build
     November 26-December         2, 1969              do.                    Advanced Medical             Equipment
4:: Octchr      10-15,    1969                         do.                    Rwironmetltel           Pollution         Control
47. September 17-23,         1969                      do;                    Parts for Machinery               end Vehicles
     June 29-July      3, 1970                   Sydney, Australia            Comuter       Grarahic       Fauimeent
ii:  June 29-July      4, 1970                   Tokyo, Japan                 Met&ials        Testing        @equipment
50. l-fey 18-23,     1970                              do.                    Metal Surface Treatment                   Equipment
     April   10-20.    1970                                                   Electronic         Fair
::-I Febrwry
53. January
                  23-28,
                26-31,
                            1970
                          1970
                                                          2:
                                                          do.
                                                                              Industrial        Assembly Systems and Equipment
                                                                              Vacuum and Cryogenics                 Equipment
54. Nomember 17-22,         1969                       do.                    Advanced Aerosoece              Euuinment
     October    l-7,   1969                      Osaka,  Japan                Electronics         P&duct&             iZquipment
:z: September 29-October          4, 1969        Tokyo,  Japan                Automotive        Diagnostic          and Service         Equipant
     July 21-26,      1969                             do.                    Specialized         Graphic       Art Equipment
2;: July 21-25,       1969                       Osaka, Japan                 Catering      and Food Processing                  Equipment
DEVELOPING COUNTRIES--FISCAL               yEAR 1970

  1.    June 22-26,      1970                    Bangkok, Thailand            Office     !a@ipment
  2.    April   zv-May 9, 1970                          do.                   Data Processing
  3.    January 19-24,       1970                       do.                   Water Supply and Sanitation
  4.    October    29-November    11,     1969          do.                   5th Touring       Exhibition
  5.    September 19-29, 1969                           do.                   Furniture      Packaging        Plant and Woodworking
  6.    May 25-June 9, 1970                      Tel Aviv, Israel             Industrial       and Commercial        Equipment
  7.    October    5-10, 1969                            do.                  Medical      and Hotel Equipment
  8.    May 16-21,     1970                      Tehran,     Iran             Industrial       Machinery        and Equipment
  9.    October    5-24,    1969                        do.                   Construction,          Agriculture,     and Material  Handling              Equip-
                                                                                 men t
10. November 11-15, 1969                          Ankara, Turkey              General      Industrial       Equipment
11. August ZO-September  20,              1969    Imir,   Turkey              General      Industrial       Equipment
                                                                                                                                         APPENDIX II


                   Year        and date                                    Location                                         Product     theme

12. Hay U-15,                   1970                            Mexico     City,      Mexico   Printing     and Graphic      Arts     Equipment
13. September                  18-26,             1969                   do.                   Advanced     Machinery     Tools

D!ZVEXOPRDCOWIRIES--FISCAL                               YEAR 1969

    1. June 6-10,               I.969                           Rankfurt.   Germany            Advanced Medical           Equipment
       May 19-23,               1969                                   do.                     Electronic        Measuring      Equipment
    2 May W-16,                 1969                            Dusseldorf,  Germmy            Packaging       Piachinery     and Equipment
    4: April  26-&y                   4,         1969           EIemover , Germany             Fluid Power and Transfer                Equipment
           Harch      17-21,   1969                             Frankfurt,  Germany            Metal Surface         Treatment      Equipment
    6':    February     13-27, 1969                                                            Graphic      Arts
    7.     January 20-24.         1969                                   2:                    Chromatography          and Spectroscopy
    8‘     December 2-6, 1968                                            do.                   Laser Equipment
 9;        November     7-13, 1968                                       do.                   Production        Equipment      for Electronics        Industry
10.        November 4-0, 1968                                            do.                   Climate      Control     Equipment
11.        October     14-19. 1968                                                             Metalworking         Equipment
12;        September 16-10,         1960                                2:                     Fluid Power Eouioment
13.        June U-18,        1969                               London, England                Marine Equipment'
14.        May 14-21,      1969                                          do.                   Industrial        Fasteners
15.        April    14-18,     1969                                      do.                   Fluidics       and Switching        Devices
16.        February     17-21, 1969                             Brighton,         Englaod      Oceanographic         Equipment      and Instrmceots
17.        February     10-14.     1969                         London, England                Transducers
           January     13-17, 1969                                       do.                   Computer Graphics
it:        December 4-12. 1968                                           do.                   Avionics       Equipment
           October     16-24, 1968                                       do.                   Automotive        service     Equipment
22::       September 18-26,         1968                                 do.                   Nuclear      Instruments       and Components
           June 12-16, I969                                     Milan,       Italy             Security       and Protection        Equipment
2          May 22-26,      1969                                          do.                   Vacuum and Cryogenics              Equipment
           nptil    14-25, 1969                                          do.                   Material       Handling      Equipment
2          March l-7,      1969                                          do.                   Material       Testing     and Control        Equipment
           February     17-22, 1969                             Rome, Italy                    Desalination         end Water Purification            Equipment
E:         February     5-11, 1969                              Milan,       Italy             Reprographic         Equipment
           November     20-26,     1968                                  do.                   Industrial        Process Control          and Computers
;;:        October     5-13. 1968                                        do.                   Plastics       Production      and Control        Equipment
30.         September l-6,        1966                                   do.                   Electronic        Pieasur-t         Equipment
31.        Mep     29-.kle           6,     1969                Paris,       France            lMonics-Thematic             and Instrumeotal
           May     29-June           6,     1969                         do.                   Avionics-cmnponents
ii-;       Harch 22-M,        1969                              Brussels.          Belgium     Plastics       Equipsent
           October     16-23,    1968                           Amsterdam, Netherlends         Chemical       and Petrochemical           Epuipment
2          September 19-28,        1966                         iielsioki,         Finland     International          Trade Fair
           3une   11-17,     1969                               Stockholm,           Sweden    Data Processing           Equipment
z:         May 19-24, 1969                                               do.                   Electro-Ootical           Pbotopraohic        Ewimneot
           April      16-22.              1969                           do.                   Electroni&         Camp-t;            -         - .
2:         March      20-26,              1969                           do.                   Fulp. Paper, and Converting                  Equipment
           January  15-21,                  1969                         do.                    Shipbuil'ding       and Marine Equipment
2:         December 4-10,                   1968                         do.                   Metallurgy        gngineering       Equipment
42.        November          6-12,           1968                         do.                   Industrial       Fasteners
43.        September 18-24,      1968                                     do.                  Rioting        sod Bookbinding          Equipment
           June 10-14, 1969                                     Tokyo, Japan                    AutoParts        Equipment
2:         May 12-17,    1969                                            do.                   Analytical        Laboratozy       Equipment
46.        February   24-March    1. 1 969                               do.                    Photographic        Quipmeot
47.        January 27-February       1, 1969                              do.                  Packeging        Machinery      and Equipment
46.        December 9-14, 1968                                           do.                   Advanced Medical            Equipment
49.        November 11-16,      1968                                      do.                   Rwiro-tal             Testing     Equipment
           October   7-12, 1968                                           do.                   Plant     Maintenance       QuipmerIt
 2::       September 17-23,      1968                                     do.                   Electronics        Show
 52.       July 22-27,     1968                                           do.                  Document Processing             and Reproduction         Equipment
DiVElOPING              COUNTRIES--FISCAL                 YEAR 1969

   1. June 23-27,       1969                                    Bangkok, Thailand              Data Recessing
      June 2-6, 1969
      2.                                                               do.                     Aluminum Technology          and Reduction
      May 1969
      3.                                                               do.                     Touring    Exhibition
      April
      4.      28-May 2, 1969                                           do.                     Electrical      Equipment
   5. January    26-February      5, 1969                              do.                     Touring    Exhibition
   6. December 12-29,        1968                                      do.                     Industrial     and Agricultural         Equipment
   7. October    l-6,    1968                                          do.                     Cargo and Material         Handling     Equipment
   8. August 19-31,        1968                                        do.                     Tourine    Exhibition
   9. May 9-19.      1969                                       Yugoslavia                     Farm and Food Processing            Equipment
 10. May 8-17. 1969                                             Seoul.     South Korea         Hiscellaneous        Processine     and Packaeinn         Eauioment
 11. O&be=       i5-25,     1968                                Sao P&lo,       Brazil         Miscellaneous        Processing     and Packa$g           !&&ment
 12.  August 20-September         20, 1968                      Iznir,    Turkey               Industrial      Equipment
 13.  November 4-8, 1968                                               do.                     Business     Office     Machines
 14.  November 9-30, 1968                                       San Salvador,       El
                                                                   Salvador                    Miscellaneous        Processing        and Packaging      Equipment




                                                                                          41
APPENDIX III

          COMMENTS
                 MADEBY EXPORTERSCONTACTEDBY GAO

        Our company goes into international         and local country
fairs at costs far in excess of Commerce's charges,                 We go
into these exhibitions       whether they are sponsored by Com-
merce or not.        If Commerce no longer sponsored any exhibi-
tions it would not greatly hurt our company's overseas ac-
tivities.       In fact, our company actively       solicits    the inter-
national     sales of other companies' complementary products.
We provide all the services required to sell these products
in foreign markets.        In a broad sense we offer many of the
same services as Commerce plus, we can offer instant                success.
Cur company,      however,  will  continue   to  be  interested     in
participating      in South American, African,       and Southeast Asian
fairs sponsored by Commerce because we lack knowledge of
these market areas for some new products.              Commerce offers
an economical means of getting          into these markets.        Even
here, however, we will move into these new markets without
Commerce as long as we have the needed information                and ex-
perience to facilitate       entry.

       Where our company does not have any subsidiaries              and
only distributors,      such as in developing      countries,    we will
sometimes use Commerce's exhibitions,           Normally, we prefer
to use local country shows when they are available.                 Eli-
mination of Commerce's fairs and other exhibitions              would
not hurt our company even in developing countries.                If Com-
merce's exhibitions      were discontinued    we would continue to
use alternatives     such as local and international          exhibitions
and would put on our own exhibitions.           In the absence of
Commerce's exhibitions,      our growth would continue at the
same rate.      The major role that Commerce plays in assisting
our company is in its ability       to deal with local Governments
on such things as trade restrictions.          Commerce has general
knowledge about doing business in a foreign country which is
helpful.     We prefer to do our own market analysis and do not
use Commerce's analyses.       When moving into a new country we
use our own staff from neighboring         countries.      We do use in-
formation    from the embassies in the country, American as
well as others.

       Our company has participated  in several of Commerce's
exhibitions.     We do not find much value in these exhibitions,
but we participate    to keep our name in the marketplace,     The

                                    42
                                                          APPENDIX III


big value our company sees in the exhibitions        is the nominal
cost.     Participation in the exhibitions    cannot hurt us, it
might not help-- but it cannot hurt.       If prices were raised,
say doubled, it is questionable     whether we would continue to
participate.

        If Commerce was to discontinue     its fairs our company
would be hurt a little     but not significantly.          The fairs
biggest benefit     to our company is their cost.          They are so
relatively    inexpensive  that they are not even an economic
consideration     to our company. If they were discontinued           we
would rely more on local and international          fairs.     Govern-
ment action, however, is certainly       necessary as a prelude to
East-West trade laying the groundwork for normal commercial
transactions,      Without official  Government sponsorship an
American exporter is hard pressed to consummate business in
most of the Eastern European countries.

       The benefits   derived by our company from participating
in Commerce's fairs and trade center shows vary between di-
visions.    In general,     if Commerce was to stop sponsoring
trade centers and fairs we would not suffer greatly.              It
would cost us more to promote our goods but not to the ex-
tent that it would put us in a bind,           We feel that Com-
merce's real benefit      to exporters    is its knowledge of the
various countries.      With this knowledge it can set-up con-
tacts with potential      customers and inform U.S. companies
about local business conditions        and rules.     Commerce also
offers our company one more means to introduce           products in
new markets.      But we only use Commerce's programs for pro-
duct introduction     when these programs are available        at the
right time and place.         We feel that timeliness    is a very
important factor in product introduction          and, therefore,    we
do not plan our entry of a market around Commerce's exhibi-
tions schedule.

       If Commerce stopped sponsoring trade fairs and trade
centers our company would not be affected.        We participate
in several international     trade fairs and local exhibitions
sponsored by trade associations      catering  specifically      to our
industry.     It is felt,  however, that if Commerce sponsored
trade exhibitions     in some of the developing   and lesser de-
veloped countries    we would be interested    in participating.
Generally,   our ability   to cover these quasi remote areas is

                                   43
APPENDIX III

not as strong as the developed sector's.         For this reason,
an assist from Commerce would be looked        upon favorably.

      If  Commerce were to no longer sponsor fairs it would
affect our company in terms of introducing         new products and
entering new markets.      We feel the fairs are a good initial
contact method.    Without the fairs we would have to spend
more to introduce    new products.     After establishing     our-
selves in a market, we are much more selective          in our use
of Commerce's exhibitions.        We are very willing     to enter
developing markets even if immediate returns are not fore-
seen. We have done this in most countries          in Africa,    South
America, and Southeast Asia already.         We have a system
whereby we establish     subsidiaries   in developed countries      and
work through distributors      in developing countries.       We would
not want to see Commerce stop putting        on trade fairs,

        Our company took part in Commerce-sponsored exhibitions
at Trade Centers in London and Paris during 1966 and 1967.
Both exhibitions      were considered failures     by the company,
This was due in part to what the company considered too much
 "flag waving,"     The exhibitions    seemed to be more oriented
toward selling     the United States than products.        Also, the
exhibitions    were not oriented to the needs of a company
like ours.     They were oriented toward the sales of the
original    equipment manufacturer's     products,   not to those
companies who supply parts to those types of manufacturers.
Due to this orientation,       our company feels Commerce's exhi-
bitions    are of no use to us.      Our sales representatives
have taken part in fairs sponsored by organizations            in for-
eign countries    and international     fairs but have avoided
Conrmerce's exhibitions.

      Our company feels that Commerce has been a big help in
gaining exposure for our products,        opening markets, and
generally   getting  into foreign trade.       We think the exhibi-
tions and market research sponsored by Commerce has been
very good, The exhibitions       are economical, well planned,
and offer good research information.         We participate     in
nearly all Commerce exhibitions       which are even remotely re-
lated to our product line,       We feel that Commerce's exhibi-
tions are beneficial      in all types of markets.       We have, how-
ever, reached a point in some markets where we are going
into international     fairs without using Commerce's assistance.

                                  44
                                                            APPENDIX III

We feel that if Commerce provided an up-to-date                list of all
computer owners in each country,         exhibitions      in Europe and
Japan could be eliminated        without nzuch effect on us.         If
this were combined with assistance         in getting       into local and
international       fairs we would not miss Commerce's exhibi-
tions.     Alternatives    to Commerce's exhibitions,          while exist-
ing in the developed countries         of Europe and Japan, do not
exist in the lesser developed countries.              This is due to a
lack of organizations        that can sponsor fairs and less so-
phisticated      media. We feel, therefore,        that in some of the
developing markets Commerce should remain active,
         Our company does not currently        use Commerce's trade
centers or fairs in either Europe or Japan.                Instead we use
locally     sponsored fairs and international         trade fairs which
are available        in abundance,   In fact, to have a permanent
facility     such as a trade center in a highly developed city
like Tokyo seems a waste of money. There are always some
type of trade fairs or shows going on in these cities                 and a
trade center is not needed. However, our feeling                 about ex-
hibitions     in Latin &nerica, Africa,        Southeast Asia, and the
Middle East is different.          We have found that few exhibi-
tions, directed        toward our products,     exist in these areas.
As a result,      we will go into any kind of fair that is even
remotely related to our products,            We feel that it is in
areas like these that Commerce could help us by sponsoring
fairs,     especially    fairs with relatively      specific    product
themes.

       The Department of Commerce's Commercial Exhibition         Pro-
gram plays a very minor role in our company's foreign promo-
tion efforts.     Divisions    of our company do use Commerce's
exhibitions    but they are not a big item in their foreign
operations.     In our opinion,     being in a fair as a U.S. com-
pany actually    does more harm than good, We want to create
an image of being a local company, not a U.S. company. In
summary, Commerce's trade exhibitions          do not increase our
exports.    Elimination     of these exhibitions    would have no
effect on our company.

         Commerce's exhibitions      did help us when we were first
entering international        trade,     Currently,    however, these
exhibitions     play a small role in our overall          promotion ac-
tivities    and, therefore,      elimination     of them would have

                                    45
APPENDIX III


little   or no effect on our company. This is mainly because
the potential     customers for our products are not the ones
attending    Commerce's exhibitions.        The most beneficial      part
of the promotion activities        sponsored by Commerce is the
market research done before the show, the results               of which
are provided to participants.          We participate      in many local
and international      technical  fairs which cost much more than
Commerce's fairs,       These are very helpful        to our company
because they are organized and sponsored by people who use
our products.      We would like to use Commerce's exhibition
programs to introduce       new products or to get into new mar-
kets because of their inexpensiveness.             But, seldom is there
the right kind of Commerce fair available             at the right time.
We feel that if Commerce was to offer a fair,             or other type
of promotion,     at the right time, right place, and aimed at
the right market we would be willing          to pay as mch as we
are now paying for the technical         non-Commerce fairs.        Cur
company goes into developing        countries    for long-range     sales.
Immediate returns are sought but long-range             potential   in
these countries     is the most important consideration.
       Cur company has found the use of Commerce's trade cen-
ters of little   benefit and has not made it a practice          to
take part in the centers'      exhibitions,      Commerce's trade
fairs,   on the other hand, have assisted our company in open-
ing new markets and introducing         new products.     We are em-
barking on a new, in country, manufacturing           program in some
of the developing    countries   of South America, Africa,       South-
east Asia, and in India.       Under this program about 40 per-
cent of our products will be built in the country and the
remainder will be exported from the U.S. in the form of
parts.    Commerce could help us introduce        this plan if fairs
were available   in these countries.        In general,    our company
feels a good commercial officer         at an American Embassy can
do more good for us than many of the fairs.            He can make
the difference   of whether or not our company enters a mar-
ket.

      Our company is essentially  an export merchant in that
we buy goods from U.S. manufacturers      and sell them to for-
eign customers.    If Commerce's exhibitions    were eliminated,
we would not be losing anything because we do not feel they
are productive  for us.   shows put on by private     interest
groups such as an organization   of purchasers of aviation

                                    46
                                                            APPENDIX III

material are very productive.   In the future,   these shows
and our own activities  are the promotion vehicles we plan
to use.
        Comercess exhibitions     were helpful    in introducing    our
company to international      trade.   Currently,    however, if
Commerce's fairs,     trade centers,   and other direct promotion
activities    were discontinued    our company would not be hurt.
We have many local country and international           fairs available
to us. We did participate        in a fair in Turkey not too long
ago because it enabled us to import goods into the country,
for the Commerce show, that we were not otherwise able to
get in due to local restrictions.
       The only type of exhibitions          of interest    to our company
are those with specific         themes dealing with optics and
optical-type      equipment.      In general, however, because of our
company's fairly       sophisticated    marketing system, we do not
consider fairs a major item in our market strategy.                These
include Commerce's fairs as well as those sponsored by other
groups.      There are so many fairs available           in Europe our
representatives      can be very selective        in their choice of
which ones to use.

       Cur company participates     in about five fairs each year
outside the United States.        We see all fairs,    Commerce's
and others, as a defense mechanism.         We show in them only
because our competition      does, not because they generate
sales.    If Commerce stopped sponsoring fairs we would have
plenty of others to get into if we wanted.          A fair in East-
ern Europe, however, would be a different         story.

       When our company was smaller and first        getting      into
foreign markets Commerce!s promotional       activities       were of
greater relative    importance in our company's international
marketing efforts.     Today, in areas where we have wholly-
owned or controlled    sales subsidiaries    operating      as local
companies, such as in the major countries        of Western Europe
and in Canada, Japan and Australia,        Commerce's exhibitions
are usually not used,      Locally sponsored, vertical          fairs
and expositions    are preferred   in such places on the basis
that foreign purchasers are more apt to visit           locally      spon-
sored shows and that participation       in these shows tend to
provide us with more of a local than a U.S. image. Trade

                                    47
APPENDIX III

centers are only occasionally          used, sometimes on a solo
basis between regular trade center shows. In areas where
we do not have sales subsidiaries           we tend to use Commerce"s
exhibitions     more frequently.       This is especially      true in
areas where the company's sales organization              is weakest,
usually    the lesser developed countries.            Overall then, if
trade fairs and trade centers were eliminated,               we do not
believe our company would be too adversely affected.                 We can
afford to use the many -alternatives          available,      These alter-
natives include dozens of other fairs,             mostly in Japan and
Europe, such as those at Hanover, Knich,               London, etc.      In
the lesser developed countries          where fewer specialized        fairs
are available,     the company would rely more heavily on the
use of personal contact and local media.               Our company feels
it is imperative       to get into the developing        and lesser de-
veloped countries        now in order to get American goods known
and used to whatever extent possible             so that in the future
these goods will become an integral           part in developing       in-
dustries.      We are presently     attempting     to set-up some tour-
ing eXhibitions      in Latin America.       These exhibitions      will
include programs to educate people in the use of our pro-
ducts,     We are, however, running into problems with customs,
locating    the people who would be best to have attend train-
ing classes, and finding        places to hold exhibitions         and
classes,     We feel that Commerce could be of real assistance
in solving some of these problems.             In summary, we feel the
Government should work with the smaller firms.                In working
with the larger firms, however, we feel the Government
should largely     take on the task of assisting          these companies
do what they want to do in promoting their products overseas
and not, as is the case with the smaller firms, tell them
what to do.

       Cur company is a technically-oriented         international
sales organization       representing   about 40 U,S. manufacturers.
We provide marketing know-how in 110 countries.              Besides
direct   sales and marketing efforts,       we promote products by
using direct mail, advertising,         and trade shows. Our trade
show participation       includes well-known technical       and indus-
trial   shows abroad as well as shows at U.S. Trade Centers.
We use Commerce's exhibitions         only when they fit into our
overall   promotion plan for a country.         If Commerce stopped
sponsoring its shows and fairs we would use some of the many
a?+ernatives     available    to us, especially    in Europe and

                                    48
                                                          APPENDIX III


Japan.    Europe has always been more fair oriented        than any
other part of the world.      If Commerce stopped sponsoring
its exhibitions    in developed countries we would miss them
mainly because of their low cost.          In developing countries,
where few specific    fairs exist,  Commerce can be of greater
assistance with its exhibitions.         General type fairs which
exist in these countries     are of little     value in promoting
goods.    A company like ours must be a pioneer and move into
new markets such as those in the developing countries.             It
is relatively   easy to sell in a country like Germany, but
it takes much more work to sell in the developing          countries.

      Cur company made its initial       entry into foreign mar-
kets through a Commerce trade center show in London last
year.    We are pleased with Commerce"s efforts          to get our
company into foreign markets.      As a result of the show our
company was exposed to many technical          people in the optical
field and signed agreements with representatives            in Germany,
Belgium, and Italy.     Without Commercess prompting we proba-
bly would not have made this initial         try at foreign markets
because we felt we had all the business we could handle just
in the U.S. From the standpoint        of cost, the fee paid to
Commerce was not the significant       cost of participating      in
the trade center show, It cost us about $6000, in total,
to participate;    of which transportation,       freight,    and
per diem were the most significant        costs.
       We use all exhibitions,       Commerce's as well as others,
to locate new representatives         and to bring existing      repre-
sentatives      together to keep them advised of changes in pro-
ducts and promotion activities.          The exhibitions     also pro-
vide an opportunity        to look at the market and become ac-
quainted with old and new customers,           We do not look upon
exhibitions       as a chance to make immediate sales, but rather
as a chance for exposure.          About one-half   of all exhibitions
we participate       in are sponsored by Commerce. Our company
also goes into several fairs which are sponsored by inter-
national    trade organizations.       We also use advertising        and
direct    selling    techniques to promote our products.         If Com-
merce were to stop sponsoring trade center shows and fairs
our sales would not be hurt.          Commerce's exhibitions       are
helpful    because of their low cost but there are many alter-
natives available        to promote our products.      In fact, Europe
and Japan are overloaded with trade fairs now. Commerce's

                                   49
APPENDIX III

exhibitions    can be helpful,    however, in the developing
countries    where there are fewer promotion means available.
In addition,    these exhibitions    can help in these countries
by assisting    in getting   through customs and language barri-
ers.

       Our company uses Commerce's exhibitions           to promote
our electronic     product lines.       We also go into non-Commerce
sponsored shows such as those in Hanover, Germany and Eng-
land.    Commerce's shows are an inexpensive,           easy way to ex-
pose our company's products.          It is hard not to participate
 in these shows because of their low price and the services
Commerce offers with them such as building             a booth and send-
 ing out invitations     to potentially     interested     customers.
We would prefer,      however, to see Commerce put on more shows
 in the less developed countries         because in countries      like
Germany, Japan, and the United Kingdom there are many alter-
natives available      to promote products.        We would welcome
Commerce*s exhibitions       in such developing      countries    as
Taiwan, Hong Kong, Korea, and those of Latin America.
      Cur company has been in business nearly two years and
has taken part in two Commerce-sponsored exhibitions.        We
are mainly concerned with underdeveloped      countries and we
are presently    active in Asia and the Arab World including
Pakistan and North Africa.      We plan to start promoting our
goods in Latin America in June 1971. Commerce has been
very helpful   in entering foreign markets.     The most impor-
tant help has come from the attaches at U.S. Embassies.         We
would like to use trade missions to enter the Latin American
area if they are available,      We would also use trade shows
in this area if they are specific      in theme. We would, how-
ever, continue our operation     in world markets without Com-
merce's exhibitions,     but it would probably cost more.

        The propulsion  division   of our company recently     par-
ticipated    in an exhibition    at the London Trade Center.       We
went into the show not to make sales but to find a licensee
to manufacture our product in the United Kingdom. We would
have entered the market without Commerce's assistance           but
not at that time.      Commerce made entry of the market nuxh
easier and aided in the location       of a licensee.     We would
like to see Cornnerce put on some exhibitions         in Israel and


                                   50
                                                          APPENDIX III

South America because we are interest   in setting-up          repre-
sentatives  for our mixers in these areas,

       Cur company has been in shows at all of Commerce's
trade centers except Bangkok. We feel they are the best
dollar value available         to the exporter for promoting his
goods in foreign markets.           Commerce sets up the basics for
showing a company's goods such as the booth and inviting
interested     potential     customers.    They also help get products
through customs.         Without the centers,       exposure of our pro-
ducts between the big international            fairs would be limited.
By participating       in trade center shows we keep our company's
name in front of the public.            We also use the shows to
bring our dealers together and train them in the use of new
products.
        Our company has been in only two exhibitions         sponsored
by Commerce, one in Tokyo and one in Australia.            It is hard
to assess the value we received from being in these shows.
Our company has on-going sales activities        in these countries
and to attribute     sales to being in Commerce's exhibitions
would be very difficult.      We would continue our overseas
activities    without Commerce's exhibitions,        There is a mar-
ket for our products in the developing        countries    of the
world but because of their protectionist        policies     doing
business with them is very difficult.         As a result,     we would
like to see Commerce's assistance     in breaking down some of
these import controls.

       Our company, a manufacturer     of repair equipment for
the electronics    industry,   has been in three Commerce-
sponsored shows, In January 1970 Commerce talked us into
entering the Paris Electronic      Production Equipment show.
Since then we have been in shows in Toronto and Munich.             If
it had not been for Commerce, we probably would not have en-
tered foreign markets on a personal basis.         The participa-
tion fee Commerce charges for its exhibitions          is very inex-
pensive.    The big costs are transportation,      per diem, and
freight.    At this time we see Commerce's exhibitions        as a
crutch.    We would go into foreign markets without them but
it would be mch more difficult.         In the future,    we plan to
use non-Commerce fairs.       Our company is also interested      in
developing countries      such as Taiwan, Korea, and Mexico.       We
would like to see some market research on these countries

                                  51
 APPENDIX III

 and if it looked good have Commerce put on exhibitions                  in
 our company's product area.

        Our company is an international        sales and distribution
 organization     which represents    about 30 U.S. manufacturers,
 In the past two years Commerce's exhibitions          have made up
 about one-half     of all exhibitions     we have participated       in.
 We also use our own sales force, advertising          in export
 publications     and local media, and direct mailings        to pro-
 mote more sales for us than non-Commerce sponsored exhibi-
 tions.     Commerce's participation      fees are also about 40 per-
 cent less than those for other exhibitions.           We would hate
 to see Commerce stop sponsoring its trade centers and fairs
 but if it did there are plenty of other exhibitions             to go
 into.     In fact,   there are  far  too  many  shows going    on  in
 Europe now.

          Our company has only participated           in two Commerce-
  sponsored exhibitions,        one in Paris and the other in Israel.
  We have, however, taken part in many non-Commerce shows,
  We do not particularly        care for Co=erce's          fairs because
"they are too nationally          oriented.     We feel that U.S. com-
  panies should blend more into the local atmosphere rather
  than promoting their U.S. identity            as Commerce's exhibitions
  do. Our company is intent on setting up a world image and
  therefore    has not used Commerce's shows to any great extent.
  We went into the show at the Paris Trade Center to see if
  Commerce's shows would be of any benefit to us.                    In the
  process of signing up we found out that Commerce was having
  difficulty    getting   enough exhibitors        into the show. To
  help Commerce out of this jam we sent letters                  to our own con-
  tacts and, as a result,        were responsible        for getting      about
  50 percent of the exhibitors           to participate.         Commerce has
  built a bad reputation        for its exhibitions         by promising
  companies big sales which were never realized.                   Commerce
  would have better luck if they sought the help of trade and
  manufacturing     associations      and industry     publications       in de-
  ciding where,     when,   and  what    type of   exhibition      to  have.
  By doing this Commerce would have a better idea of what com-
  panies need in the way of promotion assistance.
        Our company took part in about 50 exhibitions in 1970,
 14 of which were sponsored by Commerce. Commerce's trade
 exhibition   programs were initially not meant for experienced

                                       52
                                                         APPENDIX III

exporters such as us. But, Commerce was having trouble
getting the programs started and asked us to help out by
participating       in their exhibitions.      Our company, in es-
sence, basks into Commercess exhibitions.            We analyze a
market and determine what we hope to accomplish there.               We
then develop a market approach to meet our goals, an ap-
proach which seldom includes Commerce's exhibitions.              After
this market approach is decided upon we might be approached
by Commerce to go into an exhibition.            Even though this
exhibition     is not part of our plan for that market we may
agree to participate        because Commerce has asked for our
support and the participation          fee is so low it is easy to
rationalize      taking part. . Elimination     of Commerce's exhibi-
tions %R developed countries would have a very small effect
on our company., In developing countries,           on the other hand,
there exist few organizations          capable of putting on trade
exhibitions.        In 1970 we had planned to enter 3 or 4 fairs
which were never put on. There are fewer ways to reach in-
dustrial     customers in the developing countries.          It depends
on the country0 but we would definitely           be interested   in
exhibitions      in the Middle East and Southeast Asia, if they
were specific       rather than general in nature.




                         0
                                  53
APPENDIX IV


                      SCHEDULEOF DRVELOPINGCOUNTRIES' IMPORTS OF&MNtJFAcTURES,

                           SHOWINGSHARE OF MARKETBY THE UNITEDSTATESAND

                           OTHER COUNTRIES FOR THE PERIOD 1964 TiiROucH 1969

              Total imports
             of manufactures
                Cnote 3                United     States share
             Vh.lE?                     Value                      Percent of other countries sham
 pear    hillions~         Percent   (millions)         Percent    Developed tkVdODiXl$t    C-St

 1964       $22,820          64.6      $5,650               24.8      59.7        7.6          7.9
 1965        24,810          65.9       5,657               22.0      61.3        7.7          8.1
 1966        26,%93          65.8       6,223               23.1      61.2        7.8          7.9
 1967        27,772          66.4       6,402               23.1      61.5        7.9          7.6
 1968        31>56>          68.1       7,253               23.0      61.9                     7.2
 1969.       35,770          69.0       7,639               21.4      63.1        8.3          7.3
 aImports      are    es reported by exporting countries and are valued f.o.b.          The term *@man-
   ufactures" refers to chemicals, machinery, transport equipment, and other industrial
  ,goods except mineral fuel products, processed food, fats, oils, firearms of war, and
  ammunit%on.




 Prepared by:
     International   Trade Analysis Division
     Bureau of International   Commerce
     United States Department of Comnsrce
     May 19, 1971

 Source :      U.N. Monthly Bulletin of Statistics,
               March 1971 and 1970
               Basic data of the Bureau of the Census




                                                       54
                                                                            APPENDIX V



                                THE ASSlSTARlT                SECRETARY   OF COMMERCE
                                Washington,        D.C.   20230




JUL 27 1971


Mr. Qye V, Stovall
Director
International   Division
General Accounting      Office                 '
Washington,   D. C. 20548

Dear      Mr.   Stovall:

This is in reply to your letter       of May 28, 1971,
requesting     comments on a draft  report     entitled
“Opportunities     For Increasing  Effectiveness        Of
Overseas Trade Exhibitions."

We have reviewed     the comments of the Bureau of
International   Commerce and believe    that they are
appropriately    responsive  to the matter   discussed
in the report.

Sincerely        yours,




Acting      Assistant     Secretary
    for    Administration

Attachment




                                              55
        APPENDIX V


                                                   U.S. DEPARTMENT                  OF COMMERCE
                                                   Bureau        of International     Commerce
                                                   Washington.      D.C.   20230




 JUL 6 1971

Mr. Oye V. Stovall
Director
International Division
U.S. General Accounting Office
Washington, D.C. 20%8
Dear Mr. Stovall:
The Secretary has asked me to reply to your letter   of May 28, 1971 enclosing
three copies of a proposed GAOReport to the Congress reviewing overseas
Trade Center shows and trade and industrial exhibitions   administered by
the Department of Commerce. You requested our comments,
The draft report has received our careful consideration.     Our reaction
generally is that the GAO review is a most penetrating and thoughtful
analysis of our overseas exhibitions   program. It examines a number of
points which fully merit careful study by the Department with a view
towards better meeting our national export expansion objectives.      The
thoroughness of the,report will certainly    result in improvement of the
Department's administration  of this effective program.
Our more specific comments are presented in attachments to this letter,
We have organized them by using as headings the six recommendations
presented in your report, beginning on page 7 thereof.
Members of the Bureau staff reported that it was a pleasure to work with
the knowledgeable GAOstaff members assigned to the project.      We hope
that their work, our comments, and the consideration which will surely
be accorded to your report by this Department and the Congress will
lead to an increasingly  effective international  trade promotion program.
Sincerely,
  ,/.    i,,)    c/K
         L I-          -.   --& '*---‘---.-
M. van Gessel
Acting Direct0
Attachments


                                              56
                                                                                  APPENDIX V

REPORT RECOkWiENDATIONTHAT THE SECRETARY CONSIDER:

(1)   "Shifting    the majority   of promotional    activities      from developed
      to developing    countries,     except to the extent that promotional
      efforts   are needed to introduce      new products      or to serve the
      needs of new-to-export      firms in developed countries."

       The data and company opinions          contained     in the subject          study tend to
indicate    that a business demand exists          for greater        export promotion
effort    in the LDC'markets.       The study's      findings     tend to support the
Bureau's opinions       in this regard and lend additional              evidence to back the
Bureau's expanded LDC promotion          efforts.        The findings      do not, however,
support a conclusion       that a ma.jority      of the promotion         effort     should be
transferred     to the LDC's.      The company opinions         expressed,         while valuable,
say nothing     about near and medium-term export increases                  vs. long-term
export growth.       It is entirely     possible,      if not probable,          that most of the
companies interviewed        had longer-range      objectives       in mind.

        The companies interviewed,       moreover,   do not constitute       a valid
statistical       sample.    While their  statements    are interesting      and would
support the formulation         of a hypothesis    to be tested,     they do not in any
sense constitute        a valid enough base on which to make a firm conclusion.
A final     problem in this regard is in opinion         intensity.      Opinions may
frequently       be expressed without    a firm intention     of action.      This is why
the field      of depth research or "motivation       research"     had to be developed
in corporate       and consumer marketing,

        The Bureau's        own study of competitor       nation    export promotion     states
the hypothesis         that U,S. promotion       efforts    in the LDC's could be validly
expanded.       It also enables the postulation             of an increase      from 20% of total
promotion     effort      (the present    level)    to one of possibly      30-33X.    The Bureau's
study does not, however, support any conclusion                   that as much as or more than
509, of the effort          should be devoted to LDC markets.            The Bureau's    study,
incidentally,        found that our competitors          all regard LDC markets as having a
limited     short term potential,         but a large long-term        potential.     Accordingly,
much of their        promotion     effort   in these markets is designed at promoting              a
long-term     "national       image" expected to have a payoff in the future.                The
United Kingdom, which is most concerned about near-term                     results,   has cut
back its LDC efforts.            and has transferred      more of its promotion       effort    to
the developed nations.

        The Bureau's Exhibitions           Program, as originally          conceived,       was to be
essentially       a service     to the business community; particularly                  to firms not
in exporting       or not in certain        markets.      Over the span of time, our con-
tinuing     balance of payments problems resulted                in pressures       from various
Administrations          and the Congress to achieve the highest                possible     near-term
results     measured in dollar         sales and most favorable           cost/benefit       ratios,
This situation         led to the establishment          of priorities      for the Program with
emphasis on short-term            sales results      rather than the number of new-to-
market/new-to-export           companies with a conscqucnt            concentration       of our pro-
motional     activities      in developed markets.


                                                  57
APPENDIX V



REPORTRECOMMENDATION
                  THAT THE SECRETARYCONSIDER: (Continued)

      Consistent with the strategy indicated above, it should be pointed
out that U.S. companies new-to-export invariably   wish to start export
operations in highly developed markets where broad sales opportunities
and effective   distribution systems exist.  This would indicate that the
Department must maintain an adequate program in developed markets so that
it may place the emphasis indicated in the report on bringing new U.S.
companies into the export business, thus expanding the U.S. export base.
       Consistent with the general thrust of the report, the Bureau is
striving    to achieve a better balance in the Bureau's export expansion
programs as between developed and developing countries by stabilizing
our activities     in the developed areas at or near the current level while
increasing our efforts in the developing areas. In doing so, it must be
recognized that the resources and efforts applied to developing areas
will not result in short-term dollar sales results or highly effective
cost/benefit    ratios, and that normally, developing markets can be best
served by highly sophisticated      American foreign traders who can make the
necessary initial      investment and wait a substantial period for that
investment to bear fruit.
      On the basis of the findings incorporated in these two studies--
those of GAG and BIG--we feel a recommendation to increase the ratio
of export promotion resources devoted to less-developed markets (currently
standing at one-fifth)     is completely warranted.   We do not, however,
find sufficient   information in either study to support a firm recommen-
dation to devote a majority of export promotion resources to less-developed
markets. The available facts are sufficient       to indicate that an increase
in such promotion is needed --but are not sufficient      to indicate how much
of an increase.    We are trying at the present time to develop a sound
base for estimating the optimum proportion of export promotion resources
to be devoted to the less-developed markets.
                                                               APPENDIX V


Report Recommendation That The Secretary    Consider:
ITEH2 -
(2)   W&tiating    a continuing program to contact United States companies,
       State governments , and other internationally-oriented   organizations
       to determine what specific types of promotional services are needed,
       comparing these to the services that now exist, and filling     the gaps
       between the two.ll
       The Bureau concurs fully with this recommendation, and over the
last year or so has begun to develop programs in this direction.        Among
the first   actions taken in this area was the Bureau's domestically-
oriented export development activities    program which was the initial
 step to work more closely with domestic industries   and associations.
The Bureau has also established an increasing number of government-
 industry cooperative efforts within the National Export Expansion
 Council framework to determine the most propitious    export expansion
 actions for key industries.
      Recently initiated   actions in this area include a new effort
through the field offices to provide individual     counseling to--and
two-way communication with--new-to-export    and new-to-market companies
prior to their participation     in Commerce-sponsored exhibitions  abroad.
The Bureau has also begun to increase communication with state
departments +of commerce and with other organizations    interested in
international   trade.   Roth these efforts,  being new, will doubtless
require refinement and evolution.
      We recognize that the present efforts in themselves are not
enough. The GAO study confirms our own internal analyses in indi-
cating that further action is needed. Alternatives      are under
consideration,   and we qect    to initiate additional  efforts in the
near future.    The information contained in the GAOstudy will prove to
be of considerable value in assessing the alternatives.




                                      59
APPENDIX V



Report Recommendation That The Secretary   Consider:

ITEM 3
(3)   lTDeveloping a more vigorous and effective domestic program to
      sell American firms on the benefits of foreign trade; to inform
      these companies of the export services available;  to reduce the
      mystique of exporting; and to stinnAate the companies to use the
      services to expand their business and United States exports."

      The Bureau concurs fully in this recommendation. In addition to
the activities    mentioned in our comments for recommendation number 2
above, the Bureau has launched this fiscal year a very aggressive export
stimulation/domestic     awareness program. We currently have under contract
a U.S. advertising    agency for the execution of an appropriate all-media
program.




                                    60
                                                                                  APPENDIX V




Report    Recommendation      That The Secretary        Consider:

I’FEN4
 (4)     Y3valuating  the desirability       of maintaining permanent,  fixed-facility
         trade centers in light      of the need for alternative    promotional
         devices in developing     countries.f8

      As indicated   in our comment on recommendation number 1, the Bureau
believes    that it should achieve a more balanced promotional        program as
 between developed and developing      markets.    In this respect we believe
it essential     to continue the existing    trade centers now located in the
developed markets for both short-term        and long-term    trade development
reasons and as a primary means for introducing          new firma to export.

      In this regard, we are considering            fewer organized exhibitions               to
provide more time and resources           for individual.      new-to-export        company
endeavors.      This policy    adjustment      would also tend to permit a greater
allocation     of resources to developing          countries    without     sacrificing         our
most effective      technique   in developed markets.           Through our new domestic
export stimulation/awareness          activities      and other efforts,        we confidently
expect to achieve higher new-to-market              and new-to-export        participations
in the trade centers.         We are currently        considering     various      alternatives
for setting     more specific     new-to-export       and new-to-market       targets       for
these operations.




                                               61
  AWEmIX     v


Report Recommendation That The Secretary    Consider:


(5)   llAdopting new and more useful measures of the benefits of trade
        promotion programs than the cost/benefit ratios now used. These
        measures should recognize that the groundwork that must be laid
        if the United States is to compete in promising markets cannot
        always produce immediate results.f1
       The Bureau could not concur more fully with the need to develop
more useful means of evaluating promotion programs. The great
difficulty,   of course, is that of separating normal export growth from
promotion-induced growth. The Bureau is working on this problem, which
is similar to the problem corporations face in trying to evaluate their
advertising,   but has not yet been able to develop an actionable and
credible system.
      It had been hoped that the study of competitor nation export
promotion efforts would uncover innovative means of measurement.
Regrettably,  no such measures were found. Instead, it was found that
other nations make little   or no effort to evaluate their programs--
some as a matter of policy, and others because of an inability       to solve
the measurement problems. The Bureau's study concluded that while the
U.S. measurement effort still   had to undergo evolution,    the U.S. was by
far the most conscious of the need for rational    evaluation and had devoted
the most effort in that direction.
       One possibility    being explored by the Bureau is that of employing
multiple-year    measurements. These would possibly have validity     for
new-to-export and new-to-market companies --but unfortunately     would not
solve the problem of separating normal from induced export growth. The
Bureau would welcome any suggestions or innovations in this regard.
This is not to imply that the problems involved in obtaining more
useful measurements than those presently used is insoluble.        It is not;
and we are hopeful that meaningful progress can be made in the near
future --esnecially
             _         with regard to the new--to-export and new-to-market
firms.




                                     62
                                                                            APPENDIX V



Report   Recommendation     That The Secretary       Consider:

ITEM 6

(6) "Establishing  a flexible     fee structure giving recognition    to
    using minimal fees as an inducement to attract       new companies,
    and to charging higher fees to repeat exhibitors       and established
    international  trading    firms."

      We concur with the intent          of this recommendation           to provide
special incentives        to new-to-export      and new-to-market           firms.
Differential     exhibitor    contribution      rates have been previously
considered     by the Bureau, with the conclusion             that differential
rates pose serious operational            and administrative        difficulties.
We now have under consideration            a number of internal          proposals
which, hopefully,       could surmount the difficulties             previously
encountered.      We have under consideration,            for example, a proposal
to increase the share of costs borne by old-to-market                       firms
by eliminating      the government return         freight    obligation        for
these firms.

     Further,    we have been providing    special incentives     to the
new-to-export     and new-to-market   firms by rendering    more personal
promotional     assistance   to these firms in the target     overseas
market.

     Additionally,      in establishing    the contribution    rates for trade
center and trade      fair participation,     we are mindful     of the need to
keep these rates      attractive     to the small, medium-size     and new-to-
export firms.




                                             63
                          DEPARTMENT                 OF   STATE
                               Washington,    D.C.    20520




                                                                   JUL 2 1971

Mr. Oye V. Stovall
Director
United   States   General
   Accounting    Office
Washington,     D. c. 20548

Dear Mr.    Stovall:

The Secretary    has asked me to reply       to your letter
of May 28, 1971, by which you transmitted           copies of
the proposed   report     to the Congress    on the review by
the General   Accounting       Office of overseas   trade   center
shows and trade     exhibitions.

While the programs           dealt with in the report            are
administered        by the Department           of Commerce, we in
State work closely          with Commerce personnel            toward the
formulation        of the U.S. Government           trade promotion
programs.         We agree with the recommendation               for
increased       promotional      activities       in the developing
countries.         However,     we also feel that         it is equally
important       to preserve      the U.S. trade         share in the
industrialized         markets.       On balance,      we feel that the
report      prepared    by your office          is a commendable
analysis       of our overseas        exhibition      program and pro-
vides valuable         guidance     for future      planning.


                              Sincerely                   yours,
                               .---I



                              Richard W. Murray          : .)
                              Deputy Assistant  Secretary
                              for Budget and Finance

                                             64
                                                              APPENDIX VII

                             PRINCIPAL OFFICIALS OF
                             DEPARTMENTOF COMMERCE
                             AND DEPARTMENTOF STATE
                         RESFONSIBLEFOR ADMINISTRATION OF
                    ACTIVITIES DISCUSSEDIN THIS REPORT

                                                  Tenure of office
                                                  From            -To
                             DEPARTMENTOF COMMERCE
SECRETARYOF COMMERCE:
   Maurice H. Stans                            Jan.    1969   Present
   Cyrus R. Smith                              Mar.    1968   Jan. 1969
UNDERSECRETARYOF COMMERCE:
   James T. Lynn                              Apr.     1971   Present
   Rocco C. Sicilian0                         Jan.     1969   Apr. 1971
   Joseph W. Bartlett                         Aug.     1968   Jan. 1969
   Howard J. Samuels                          Nov.     1967   July    1968
ASSISTANT SECRETARYFOR DOMESTIC
  AND INTERNATIONAL BUSINESS:
    Harold B. Scott (acting)                  Aug.     1971   Present
    William R. McLellan                       July     1970   Aug. 1971
    Kenneth N. Davis, Jr.                     Mar.     1969   July    1970
    Vacant                                    Jan.     1969   Mar. 1969
    Lawrence C. McQuade                       Aug.     1967   Jan. 1969
DEPUTYASSISTANT SECRETARYAND
  DIRECTOR, BUREAUOF INTERNA-
  TIONAL COMMERCE:
    Harold B. Scott                            %Y      1969   Present
    Lawrence A. Fox                            Sept.   1965   Apr. 1969
                               DEPARTMENTOF STATE
SECRETARYOF STATE:
   William P. Rogers                           Jan.    1969   Present
   Dean Rusk                                   Jan.    1961   Jan. 1969
 U.S. GAO. wash.. D.C.                  65
                       ___ a’-..   ,   _.__,   c.,-   ._   -..,   ,_   _c---   ,   ,   .-_.   --.a,   ,.   ,-.   .,   I
.   i,.;   -....   _




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