On 29 June 2017 the WTO’s Director General spoke during an informal dialogue on Micro, Small and Medium Enterprises (MSMEs). These entities face greater barriers to cross-border trading and WTO members have put forward some ideas to deal with the obstacles. Helping MSMEs to participate in trade flows will be a topic for discussion at the Global Review of Aid for Trade in July 2017.
MSMEs are important to the global economy because they are responsible for most of the job creation worldwide, are major employers of women and young people and foster entrepreneurship and innovation. Measures to assist more MSMEs to join global trade flows will build a more inclusive trading system by helping more agricultural firms and people in LDCs to benefit from trade, contributing to the achievement of the Sustainable Development Goals.
MSMEs face greater trade barriers than larger entities as they often do not have sufficient resources, ability to absorb risk or the necessary expertise. MSMEs have difficulty accessing trade finance and globally 58% of trade finance requests from MSMEs are rejected compared to 10% from multinationals.
The costs of trade are also an obstacle for MSMEs. Fixed costs connected with trade can be difficult for MSMEs as they have to deal with standards, border procedures and other non-tariff barriers. It has been estimated that increases in regulatory burdens have twice as much impact on MSMEs as on larger entities. The WTO has also found that variable costs are an issue and tariffs are considered by MSMEs to be a major obstacle.
To help MSMEs organizations such as the WTO, UNDESA and ITC can help to disseminate information on regulations and standards in global markets. Last year the ePing notification alert system was launched to alert members about new measures and promote dialogue on addressing potential trade problems. These organizations could look at new ways to make available relevant data to their members.
The WTO is working with the IMF and regional development banks to help MSMEs access resources required. Trade finance is a very low risk form of finance and the default risk on short term trade credit is only 0.02%. The issue of trade finance is to be discussed at the Global Review of Aid for Trade later in 2017.
Local initiatives to support MSMEs could be shared with a wider audience to give an idea of the practical measures that work well and those that do not. Information sharing at a technical level could be constructive. This would also help the WTO to identify areas where it could be of help to MSMEs.
General measures to improve global trade
Measures to generally improve the trading system also help the firms facing the greatest barriers to participation in the system. So MSMEs are benefiting from the general work of the WTO including the Information Technology Agreement that facilitates access to new technologies. They also benefit from moves to strengthen capacity building to help people develop the skills and tools required to trade successfully.