The story of successful entrepreneurs who become business legends at home and abroad is uniquely American — from Nike founder Phil Knight who initially sold shoes out of his car to Jeff Bezos who launched Amazon in his garage. Knight’s shoes and Bezos’ books grew into iconic brands, two of the many Fortune 500 companies that started with “next to nothing.”
Many millions of entrepreneurs and small businesses have yet to attain global brand recognition, and most will not. Even so, these hard-working business owners and their employees collectively drive U.S. economic growth and innovation. Small businesses truly are the lifeblood of our economy. They provide quality jobs and critical services in every corner of the nation. And they play a vital role as suppliers to the thousands of larger companies they do business with.
Small businesses are impacted by almost every policy initiative or proposal that moves in Washington, D.C., or at the state and local level. At the Small Business & Entrepreneurship Council, we speak out if the livelihoods of small businesses and their employees are threatened. That is why we oppose a bill pending in the U.S. Senate, the Defending American Security from Kremlin Aggression Act (DASKA), and we urge Senators to make needed fixes.
DASKA and its sponsors have very good intentions: sanctioning Russia to crack down on Vladimir Putin’s bad behavior. Unfortunately, those good intentions are not to be found in DASKA. As written, DASKA would actually target U.S. companies, including many small businesses, instead of the Kremlin.
The legislation’s punitive approach would force U.S. companies to exit joint ventures with Russian firms and even leave the Russian market altogether. Russian companies would then take over those projects and reap the benefits of the massive American investments that have been already been made. Chinese and Saudi Arabian firms could stand to benefit too, and fill the void left by the departure of U.S. businesses and investments.
The outcome would embolden our adversaries abroad and do little to undermine Putin.
At home, DASKA would harm many of the nearly 3,000 companies doing business in Russia, across vital sectors such as aerospace, agribusiness and energy. The negative effects would cascade down the supply chain – and hit the vast numbers of small and medium-sized businesses that supply materials, parts and services to larger firms.
Of course, small businesses are often not equipped to handle such disruptions. They would react by laying off workers, cutting worker hours and, more broadly, dialing back investment or expansion plans.
Hurting small businesses and disrupting their operations will damage the larger U.S. economy. More than 95% of U.S. businesses employ less than 20 workers, with small businesses accounting for at least 60% of job growth. Small, entrepreneurial firms are the heart of the U.S. economy and many local economies.
Small firms fuel the supply chain of larger businesses in a significant way. The Business Roundtable found that the typical U.S. multinational buys goods and services from more than 6,000 American small businesses – and spends more than $3 billion on those purchases.
If DASKA sanctions force even a single large U.S. company out of the Russian market, the disruption to the supply chain would harm thousands of small businesses, and impact many local communities nationwide.
Among the sectors expected to be especially hurt by DASKA are aerospace, energy and agribusiness.
Boeing, for example, has invested billions of dollars in Russia, which is virtually the sole source for the titanium needed to build its planes. DASKA’s impact would make it much harder for Boeing to acquire this critical metal, causing economic harm to the more than 20,000 small businesses that supply the company.
DASKA would also significantly harm U.S. energy companies that employ thousands of workers at home and abroad, and who help to ensure energy security. For example, ExxonMobil employs 1,000 people in Russia and co-operates the Sakhalin-1 Project, which has produced more than 100 million tons of oil that has been safely delivered to international markets. U.S. energy industry investment and engagement internationally are very positive for global economic growth. But DASKA would force American companies to withdraw from energy projects that involve Russian firms in a great number of countries throughout the world.
With respect to agribusiness, Cargill started furnishing grain to the Soviet Union in the 1960s and now employs about 2,500 people in Russia. Hurting Cargill’s business would harm U.S. workers and cause spin-off damage to the U.S. small businesses in the company’s supply chain.
DASKA would hurt U.S. companies and our workers more than Putin or Russia, and that certainly includes the many small businesses across industries that would be hit by the unintended consequences.
We can find a way to punish Putin without penalizing U.S. business and investment in Russia. Congress needs to fix DASKA – and hit back at Russia, not American companies both large and small that would feel the ultimate pain of the bill’s misdirected sanctions.
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.
That is assuming supply purchases aren’t made locally in Russia or the EU. It’s wouldn’t hurt small businesses nearly as bad as this scorched earth scenario article is presenting.
Adapt and evolve, or you will no longer exist.