Small and medium enterprises, defined variously in terms of both breadth and scope, have continued to remain in the margins of global trade. Although this genre of business activity, being hugely diverse in nature, has been recognised as one requiring facilitation to be able to establish itself as a key player in the trade arena, it's yet to shed symptoms of infancy, especially in the developing and poorer regions. This brings to question the participation of SMEs in international trade in a bigger way in the prevailing uneven and asymmetric trading scene.
World Trade Organisation (WTO) Director General Roberto Azevêdo, in one of his SME engagements recently, acknowledged this as a reality, saying, "Trade is sometimes thought of as an economic activity that only favours the big companies. And while we may disagree with that, we cannot deny that trading internationally is often much more costly and difficult for SMEs. The smaller the business, the bigger the barriers can seem."
While non tariff barriers of all hues are a perennial problem for small traders, tariffs also impinge highly on their trading, given the lesser volume of traded goods. The fixed costs required for meeting particular standards or other non-tariff barriers can be particularly difficult for SMEs. But tariffs are also a major issue. SMEs see tariffs as a greater obstacle than larger firms do, because they are more sensitive to changes in tariff levels. In addition, SMEs often struggle to access trade finance. Globally, banks reject over 50 per cent of all requests for trade financing placed by these firms - compared to just 7.0 per cent for big or multinational companies.
Despite the difficulties, especially in trading, the role that the medium and small enterprises are playing is not just laudable, but in many regions they are the ones capable of sustaining the economy at a reasonably stable level. "SMEs are responsible for the largest share of employment opportunities in most economies - up to 90 per cent in some countries. And they are big employers of women and young people. So, at the domestic level SMEs have major economic importance. But their participation in trade simply doesn't match up, said the WTO DG. This is true in both developing and developed countries. So, a truly inclusive trading system offering SMEs a chance to develop their potential could help transform many developing economies around the world.
Although the WTO has the mandate of looking after global trade as a whole, including among others, bringing about a level playing field not only for countries less advanced, its span of activities does include measures to provide facilitation for an important segment of the trade arena-the SMEs. There are provisions in the successive ministerial decisions, including the Nairobi Ministerial. However, we are yet to see much activity in this respect. The WTO DG, aware of the absence of sufficient discussions among member countries, has pointed out some issues that are likely to help examine the SME scene up-close in order for effective measures to be in place in future. These are: firstly, a detailed picture of the difficulties and barriers that the SMEs face, and identifying priorities. Secondly, what the WTO can potentially do to help. This could be through Aid for Trade support, through the regular work of the WTO, through negotiating new trade agreements, or a whole range of other avenues.
The WTO Trade Facilitation Agreement (TFA) promises to ease a good deal of barriers these firms face, particularly in complying customs formalities that in most cases they consider too burdensome. With a substantial cut on time and the procedures, these firms may find things a bit better than now. Experts across the globe are of the opinion that a good deal depends on empowering the SMEs to have a say in the affairs of national and international trade matters. To start with, this has to happen at home. It is here that emphasis is put on improving the regulatory environment for SMEs through the digitisation of government processes, improvement of access to public procurement and reduction of compliance costs, developing coordinated capacity-building and certification programmes to facilitate their inclusion in global production chain. The role of technology-enabled activities is also seen as very important for small firms to get integrated in a meaningful way. In this context, it is heartening to note that the WTO recently published a report setting out some of these issues. These included:
n working with partners to enhance existing trade finance facilitation programmes to reduce the gaps in trade finance,
n addressing the knowledge gaps in local institutions to help improve the capacity of local financial sectors,
n increasing dialogue with regulators to help ensure that trade and development considerations are fully reflected in the implementation of regulations,
n improving the monitoring of trade finance provision, as better market intelligence would enable us to be more responsive to problems as they emerge.
We look forward to meaningful engagement in this regard.
