If you think trade doesn’t matter to SMEs, think again…
Small- and medium-sized enterprises (SMEs) are the backbone of the world economy. Globally 95% of enterprises are SMEs, representing around 60% of private sector jobs. In Europe, official estimates suggest that SMEs play an even greater role in promoting employment and social cohesion—providing two out of every three jobs in the private sector.
You may be familiar with the argument that trade agreements only benefit big businesses. The idea goes that small firms lose out to multinational companies when markets are opened up to international competition—destroying local industries and shifting good jobs to other countries.
TPP is part of a global race to the bottom to boost the profits of large corporations and Wall Street by outsourcing jobs.
2016 Democratic Presidential Candidate
The available research paints a very different picture…
Evidence from a broad range of sources suggests that exporting can provide a huge boost to SME growth. One recent study showed that small businesses that trade internationally on average grow more quickly, pay better salaries and create more jobs.
It’s also important to understand the symbiotic relationship between big and small firms in today’s global economy. Around 80% of global trade occurs in global value chains coordinated by multinational companies, but close to half of “added value” within these chains is contributed by local SME suppliers. So when you think of big global brands like Unilever or Walmart, remember that their supply chains contain a huge number of small businesses supplying a vast array of components, products and services.
The contribution of small businesses to global value chains doesn’t seem to be accurately captured in international trade statistics at the current time. Estimates for the United States show that the export share of SMEs increases from approximately 30% to more than 40% when valued added exports are taken into account. This means that trade matters more to SMEs than official data might at first suggest.
Despite their growing presence in global value chains, SMEs still often face significant barriers when it comes to accessing global markets.
SMEs often lack the time, budget and in-house expertise to deal with trade roadblocks. Studies show, for instance, that many small businesses are discouraged from trading internationally as a result of complex paperwork and unnecessary bureaucracy at borders. What’s more, an increasing number of SMEs are held back from exporting by difficulties accessing cost-effective finance.
All this means that there is huge potential to use trade agreements and other policy levers to enable new waves of SME trade. The G20 group of leading economies has long acknowledged the need to support and empower small businesses: now is the moment to turn words into action…