Group Of Nations Seeks To Boost Help For Small Companies At WTO

Micro, small and medium-sized enterprises represent the bulk of the global economic fabric, but they face many impediments to joining the global marketplace. An informal group of countries is bringing the conversation into the World Trade Organization, to see how it can help small companies integrate international trade. They submitted a draft decision for the upcoming WTO Ministerial Conference in December. A workshop this week looked at challenges and possible remedies at the national and international level.

The so-called Group of Friends of Micro, Small and Medium Enterprises (MSMEs) organised a workshop at the WTO on 31 October aimed at sharing national, regional and multilateral experiences. The group includes: Argentina, Brazil, Brunei Darussalam, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, the European Union, Guatemala, Honduras, Japan, South Korea, Malaysia, Mexico, Moldova, Pakistan, Panama, Paraguay, Peru, the Philippines, Russia, Singapore, Switzerland, Chinese Taipei, Uruguay and Viet Nam.

On 30 October, the group submitted a draft ministerial decision [pdf] on establishing a work programme for MSMEs in the WTO. The 11th WTO Ministerial Conference will take place from 10-13 December in Buenos Aires.

The draft decision calls for the establishment of a working group under the WTO General Council to conduct discussions on a range of topics, including how to improve access to information on trade requirements, regulations and markets for MSMEs, ways to promote a more predictable regulatory environment, and how technical assistance and capacity building initiatives could take into account the trade needs and challenges of MSMEs.

A member of the group told Intellectual Property Watch that the group’s proposal is not seeking to launch a new negotiation, or create a new category. The main purpose of the working group will be to “look deeper into the issue of MSMEs to identify horizontal and non-discriminatory measures that could benefit MSMEs in international trade … and bring these issues to the attention of the wider membership.”

MSMEs the ‘Backbone of Many Economies’

WTO Director General Roberto Azevêdo, opening the workshop, underlined the economic role of MSMEs. He called them the “backbone of many economies, representing more than 90 percent of all companies worldwide and accounting for 60 percent of employment … and a key driver for innovation” according to his statement.

However, he said, “their participation in world trade does not reflect their importance domestically. In developing countries, for example, exports represent less than 10 percent of MSMEs’ total sales.”

Barriers affecting MSMEs’ participation in international trade include the lack of appropriate information and skills, difficulties in accessing trade finance, burdensome customs procedures, and high fixed costs, he said, noting, “The smaller the companies, the greater the challenges seem to be.”

However, he said, the WTO “has not been sitting idle on this issue,” and cited the WTO Trade Facilitation Agreement which he said “will have a huge impact in cutting trading costs for MSMEs.” He also cited capacity building support that WTO delivers with partners such as the United Nations Conference on Trade And Development (UNCTAD) and the UN International Telecommunication Union (ITC).

Business engagement in the WTO has soared in recent years, said Azevêdo, “and one common theme has been helping MSMEs to trade.” In collaboration with the International Chamber of Commerce, the WTO launched the “ICC-WTO Small Business Champions” initiative. The initiative, launched in August, is a platform for companies and private sector organisations to propose innovative and practical ideas to encourage MSMEs to do business across borders.

“We’ve had a huge amount of interest from all over the world,” Azevêdo said, revealing that the first successful proposal was from Google and the second from the Union of Chambers of Commerce of Macedonia.

Regional Experiences: Similar Issues, Finance, Information

The workshop was divided into several sessions focusing on particular regions: Asia, Africa/Middle East, Latin America, Europe/North America. One session looked at multilateral and global platforms supporting MSMEs.

Sierra Leone Ambassador Yvette Stevens, summarising the session on Africa and the Middle East, said a lot of MSMEs in those regions work in the informal sector and that adds to their difficulty to enter regional and global markets.

In many African countries, she said, MSMEs are in the informal sector, which represent an additional issue when it comes to knowing how to get information and support. She applauded efforts being made to facilitate inter-African trade as they will “provide a great potential for MSMEs”, as companies in small countries need to be able to expand outside of their country’s borders, she said.

There is a need to concentrate on industrialisation and trade development, for effective and cost-effective distribution channels, and to improve competitiveness, she said.

The future of development and economic progress lies in the growth of MSMEs, and is linked with digital innovation and digital trade (electronic commerce), said Pakistan Ambassador Syed Tauqir Shah, talking about the Asia session.

He also underlined the lack of access to financing, the lack of skills, lack of access to digital technology as major impediments for MSMEs and said the digital divide needs to be broken, infrastructure developed, and technological and production capacities need to be built.

He said the WTO can provide a forum for explanatory discussions directed at specific challenges met by developing countries, and help with capacity building and technical assistance.

Uruguay Ambassador José Luis Canala Gómez said the session on Latin America underlined the importance of online platforms, of finding niche markets, the need to decrease the amount of bureaucracy for MSMEs, and the role of good governance. He underlined the importance of internet and electronic channels to enhance the performance of companies.

The WTO could contribute to develop and spread information about best practices, and think of a way to make information accessible to MSMEs, he said.

Swiss Ambassador Didier Chambovey said affluent countries are able to mobilise resources better than developing countries, but there are commonalities between the obstacles faced by MSMEs in both. The panel on the Europe/North American experiences showed that MSMEs have difficulties in accessing information, accessing the market, finding partners, and with trade financing, he said.

A holistic approach would be beneficial to MSMEs, said Chambovey, and the regulatory environment in every country has to be appropriate and responsive to the needs of MSMEs. Such a holistic approach is a challenge and there is a long way to go, he said, adding the WTO could play a role in developing such approach.

Multilateral Experiences and Global Platforms

Berna Ozsar Kumcu, secretary general of the World SME Forum, a 2015 private sector-led initiative supporting the development of small and medium-sized enterprises worldwide, said the forum seeks to address issues faced by MSMEs such as the difficulty to find information on markets and supply chains, access to finance, and access to skills.

The gap between SMEs in developed and developing countries “is expanding at an alarming rate,” she said, adding that in developing countries awareness, access and ability are limited.

The forum is working on an SME-targeted global online platform called eWSF, to help SMEs in the digital economy, she said. According to the forum’s website, e-WSF “will be a one-stop-shop for SMEs to: (i) increase their access to finance; (ii) increase their access to skills, training, knowledge, innovation, expertise and information; and, (iii) increase SME matchmaking opportunities in their Global Value Chains (GVC).”

Mondher Mimouni, chief, Trade and Market Intelligence, Division of Market Development at the International Trade Centre (ITC), said even when information is available for MSMEs, it is often fragmented, incomplete, confusing, sometime erroneous, and spread across different portals, agencies and institutions.

The ITC is working on a one-stop shop for economic operators, which will integrate all the information that is available, and help companies export to other markets, he said. This facility would reduce transaction costs, improve the business environment, and support both MSMEs and policymakers, he added.

The full value chain of information will be provided through this portal, he said, including information about tariffs, taxes, rules of origin, trade agreements, regulatory requirements, standards, market requirements, and trade procedures.

Azevêdo said in his statement that the WTO is working on an Open Data Initiative to improve the architecture of WTO data. “It will establish a Single Information Point to simplify access to information stored at the WTO. And it will ensure that our data is open and that it can be easily retrieved,” he said.

Annette Ssemuwemba, deputy executive director of the Enhanced Integrated Framework (EIF), underlined the importance of investing in MSMEs. According to its website, the EIF is a global partnership between least-developed countries, donors, and international agencies providing financial and technical support to build trade capacity in 48 LDCs and three graduated countries.

EIF works around three main pillars, she said: institutional capacity building, analytical work, and productive capacity building. She underlined access to finance, poor skills, complex business environment and high trading costs as main challenges for many MSMEs. Leveraging resources from partners and governments is essential to provide support to MSMEs in LDCs, she said, adding that institution and frameworks building is key for sustainability.

Access to growth capital is a major problem for companies wanting to get into the global market, said Kati Suominen, founder of TradeUp Capital Fund. Companies tend to globalise earlier than they did, some of them are born global and born digital, she said, as they get discovered online by foreign customers. This trend changes the financial needs that companies have to internationalise.

Companies cannot get capital from a bank or hire an investment bank because it is too expensive, she said. But they need growth capital to build the capacity to go after international market opportunities, she added.

 

Image Credits: Catherine Saez