e cooperative approaches to promoting sme participation … · to promoting sme participation in...

Cooperative approaches to promoting SME participation in tradeThe previous sections of this report identified the benefits that SMEs derive from participating in international trade (Section C) and the obstacles they face (Section D). This section discusses existing international cooperative approaches that directly or indirectly facilitate SMEs’ participation in trade. These include SME-related initiatives in regional trade agreements (RTAs), in regional institutions (e.g. the African Development Bank) and in multilateral institutions (e.g. the World Bank), as well as in the WTO.

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Contents1. Why support SMEs and seek to cooperate on them

in trade agreements? 114

2. SMEs in regional trade agreements 116

3. SMEs in other international organizations 126

4. SMEs in the WTO 130

5. Conclusions 146

Some key facts and findings

•• Reference•to•SMEs•in•RTAs•has•increased•over•the•years.•Almost•half•of••the•notified•RTAs•currently•in•force•include•at•least•one•provision•relating•explicitly•to•SMEs.

•• The•importance•and•scope•of•SME-related•provisions•has•also•increased•in•recent•years.•The•two•most•common•categories•of•SME-related•provisions•are•cooperation•activities•and•exemptions•for•SMEs•from•certain•provisions••of•the•RTA.

•• Although•SMEs•are•not•always•specifically•mentioned•in•WTO•Agreements,•multilateral•rules•have•the•effect•of•levelling•the•trading•field,•alleviating•some•major•constraints•faced•by•SME•traders•and•thereby•fostering•SME•participation•in•international•trade.

•• Multilateral•rules•reduce•both•the•variable•and•fixed•costs•of•trade•that•hinder•SMEs•from•entering•foreign•markets.•Since•the•establishment•of•the•WTO,•members•have•successfully•reduced•average•MFN•applied•tariffs•to•an•average•of•9•per•cent,•representing•a•cut•of•nearly•a•third•since•1998.••The•SPS•and•TBT•agreements,•among•other•WTO•Agreements,•include•information-related•provisions•that•reduce•the•fixed•costs•of•accessing•foreign•markets•and•thereby•help•smaller•firms.

•• WTO•rules•include•a•number•of•flexibilities•that,•in•a•similar•fashion•to••the•exemptions•included•in•RTAs,•address•the•public•policy•concerns•of•governments•wishing•to•support•SMEs.•They•make•it•easier•for•a•member••to•exercise•its•rights•when•it•acts•on•behalf•of•SMEs;•allow•them•to•continue•providing•financial•contributions•to•SMEs;•give•members•greater•leeway•to•promote•the•technological•development•of•their•SMEs;•and•allow•members••to•provide•preferential•treatment•to•their•SMEs.

WORLD TRADE REPORT 2016

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Thissectionisorganizedasfollows.SectionE.1seekstoanswerwhygovernmentsintervenetosupportSMEsand include provisions on SMEs in trade agreements.Section E.2 analyses how RTAs have addressedthe issue of SMEs. This is followed, in Section E.3,by a discussion of the activities of internationalorganizationsthatareactiveontheSMEfront.SectionE.4 then examines how the issue of SMEs featuresin WTO agreements, work programmes and technicalcooperationactivities.SectionE.5concludes.

1. WhysupportSMEsandseektocooperateonthemintradeagreements?

This section begins by asking two questions. First,why would governments intervene to support theirSMEs?Second,whatreasonsarethereforcountriestocooperateonSMEsandinparticular inthecontextoftradeagreements?

To answer the first question, there are at least twomotivations for government intervention and support.One involves the belief that supporting SMEs willimprove the distribution of income, although it is fairto point out that some researchers find no evidencethat the existence of a large number of SMEs in agiveneconomyalleviatespovertyordecreasesincomeinequality(Becketal.,2005).ThesecondinvolvestheviewthatcertainmarketfailuresmoreadverselyaffectSMEsandrequirepublicintervention.

To takeoneexampleofmarket failure,creditmarketsareproneto imperfectionswhere lendersdonothavegood information about borrowers (e.g. asymmetricinformation), particularly if the enterprises concernedare small and have no track record (van der Schans,2012). Some lenders try to get around the problemof information asymmetry by imposing collateralrequirementsonborrowers.However,thisisunlikelytoworkforSMEsthathavefewassetstobeginwith.Asaresult,smallerenterprisesstruggletoobtainfinancingtomeettheirworkingcapitalrequirementsortoexpandthescaleoftheirproduction.ManygovernmentsinbothdevelopinganddevelopedcountriesattempttoremedytheconsequencesofthismarketfailurebyestablishingcreditfacilitiesdedicatedtoSMEs.1

Smallfirmsoftenlacktheresources,scale,experienceorwherewithal to stayabreastof the latestemergingtechnologies, manufacturing processes, or businessmanagement practices (Ezell and Atkinson, 2011).In principle, the “market” — in this case the businessservicessector—canprovidevaluableinformationandadvisoryservicestoSMEs.

However,anumberoffactorsarelikelytoraisehurdlestotheabilityofthemarkettorespond.Forexample,theextentorscaleoftheneedsofanSMEmaynotbeknownin fullbyaproviderofbusinessservicesAlternatively,the SME may not have complete information aboutthe available business services in the market. Otherhurdles include adverse selection, presence of publicgoods, presence of mixed goods (a partly public andpartly private good) and externalities (Atherton et al.,2002).Thesefailuresjustifythegovernment’sprovisionof“extensionservices”totheirSMEs,totrainthemoninnovation,howtodevelopnewproducts,andhowfindnewcustomersandnewmarkets (Ezell andAtkinson,2011).

Marketsmaybe imperfectly competitive,wherea fewlarge enterprises dominate, while small firms occupythefringe.Ideally,governmentsshouldusecompetitionpolicytoolstocurbanti-competitivepractices,butsomecountries,especiallydevelopingones,maynotyethavethe legislation and institutional capacity to effectivelyuse these instruments.2 In cases like these, SMEsupport programmes act as an imperfect substitutefor competition policy by tilting the conditions ofcompetitioninfavourofthesmallerenterprises.

Amajorproblem thatplaguesdevelopingcountries isunemployment and underemployment, leaving a largefraction of their labour force not productively utilized.Thisrepresentsahugewasteofhumanresourcesthatgovernmentsinpoorcountriesmaybeunabletotackleeffectively because they lack the appropriate policytools. In industrialcountries, there isoftenanarrayofpolicy instruments available – from macroeconomicpolicies to education and skills enhancementprogrammes–toboostemployment.GiventhatSMEsare a large source of employment, SME supportpoliciesactas(second-best)policyresponsestoacuteemployment challenges in the face of a scarcity ofgoodpolicyinstruments.

BecauseSMEsupportprogrammesrespondinparttounderlyingmarketfailures,thegovernmentsconcernedhave a reason to want to preserve them even if theysignuptointernationalagreements.

Moving on to the second question, at present theliterature on trade agreements provides us with atleast three explanations for why countries need tocooperateontradepolicy.Itenablescountriestoavoidterms-of-trade wars (Bagwell and Staiger, 2003); itprovidesweakgovernmentswithameanstoovercomedomestic opposition to trade reforms (Maggi andRodriguez-Clare, 1998); and in some cases it mayhelp solve a coordination problem (Hoekman, 2014).There are papers that look at the implications of firmheterogeneity for trade policy and international trade

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LEVELLING THE TRADING FIELD FOR SMES

cooperation (see Box E.1 for a short survey). Thisliteraturecanprovidesomeinsightsintowhycountriescooperate on SMEs in trade agreements. As shall bedocumented in Section E.2, more and more regional

trade agreements now include provisions on SMEs.Hopefully,thistrendwillfuelinterestinthequestionsothattradetheoristsdevotemoreattentiontotheissueinthefuture.

Box E.1: Firm heterogeneity, optimal trade policy and trade agreements

Trade theorists have begun to look at the implications of firm heterogeneity for a country’s trade policy(DemidovaandRodriguez-Clare,2009;Ossa,2011;Felbermayretal.,2013;Costinotetal.,2015).Giventhatfirmproductivity iscorrelatedwith firmsize, this literaturemayprovidesome insights,albeit indirectly,on thereasonsforcooperationonSMEsintrade.

Itisusefultosummarizethereasonswhyawelfare-maximizinggovernmentmightbeledtoimposeatariffonimports (theoptimal tariff ). In thestandardperfectcompetitionandconstant returns toscalemodelof trade,countries impose protection to capture terms-of-trade benefits (Johnson, 1953). If one allows for imperfectcompetitionandincreasingreturnstoscale,asinthenewtradetheory,welfare-maximizingpolicy-makershavetwoadditionalreasonstowanttoerectbarriersagainst imports:(i)theycaninduceadditionalentryorsupplythat leadsto lowerprices inthetariff-imposingcountry(Venables,1987),and(ii) theycanreducethewedgebetweenpriceandmarginalcost (themark-up)createdby imperfectcompetition (FlamandHelpman,1987).Thefirsteffectcomesfromincreasingreturnstoscaleinproductionsothatanyperturbationthatincreasesthevolumeofproductioninagivencountry,suchastheimpositionofatariffonimports,canleadtolowerprices.Thesecondeffect,thereductioninthemark-uporinthemarketpowerheldbydomesticfirms,occursbecausethetariffleadstoaswitchindemandtodomesticvarietieseventhoughtheirpricesmayremainfixed.3

Howdoestheexistenceoffirmheterogeneityaffectthesevariousmotivestoincreasethelevelofprotection?Toput itsimply,onemustworkouthowproductivityandselectioneffects interactwith the threemotivationsforprotection(termsoftrade,entryandmark-up).DemidovaandRodriguez-Clare(2009)showthat,withfirmheterogeneity and selection, the mark-up and entry motives lead to a higher optimal tariff. Felbermayr et al.(2013)showthatbycombiningallthreemotivations,theoptimaltariffwillbehigherinaworldwherefirmsaremoreheterogeneousandself-selectthaninaworldwherefirmsaremoresimilar.Furthermore,themagnitudeoftheoptimaltariffispositivelyrelatedtoacountry’srelativesizeaswellastorelativeaverageproductivity,sosmallandpooreconomiessetloweroptimaltariffsthanlargeorrichones.Lowertransportationcostsorsmallerfixedmarketentrycostsalsoinducehighertariffs.

WhilethisdiscussionoffersnoexplanationforwhycooperationinSMEsshouldbeinscribedintradeagreements,one implicationthatdeservestobehighlighted is that theauthorsseetheWTOasevenmore important inaworldcharacterizedbyfirmheterogeneity.

Theseanswersareobtainedinaveryspecificenvironment:constantelasticityofsubstitutionutilityfunctions,fixedcostsofexportingthatareconstantacrossfirms,firm-levelproductivitythathasaParetodistributionandtradetaxesthatareuniformacrossfirms.Costinotetal.(2015)relaxalltheseassumptionsandderivealmosttheoppositeconclusions.Theoptimaltariff,onaverage,islowerwithfirmheterogeneityandselection.Perhapsmorestrikingly,ifacountryisallowedtoapplyfirm-specifictariffs,theoptimaltariffschedulewouldbeonethatappliesa lower tariff rateon lessproductive firms,which,given thepositivecorrelationbetweenproductivityandfirmsize,onecanassumetobeSMEs.Thisreflectstheimportingcountry’sneedtopromotetheentryofunproductiveforeignproducers(sincevarietyincreasesconsumerwelfare),who,iftheyweretofacethesametariff,wouldprefernottoexportatall.

Theresultisintriguingbecauseitsuggeststhatacountrywouldfinditoptimaltogivemorefavourabletreatmentto foreign goods produced by less productive or small and medium-sized firms. While the paper’s result isconfinedtotariffs,itmightapplymoregenerallytoothertradepolicyinstrumentsandrules.

Theanswertothequestionofwhetherfirmheterogeneityleadstoahigheroptimaltariffappearstobesensitivetothespecificationofthetrademodel.Moreanalyticalworkisneededinthefuturetohelpdifferentiaterobustfromnon-robustoutcomes.


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2. SMEsinregionaltradeagreements

Trade agreements, including RTAs, can benefitSMEs by reducing or eliminating tariff and non-tariffbarriers, simplifying customs procedures, promotingelectronic commerce (e-commerce), and enhancingthetransparencyoftrade-relateddomesticregulation.Yet the literature issilentonthedifferentapproachesadopted to explicitly address SMEs in RTAs.4 Thissubsection aims to fill this gap by identifying bothcommonalities and the differences involved inaddressingexplicitlytheissueofSMEsinRTAs.

Thefollowinganalysiscovers the270RTAscurrentlyin force that were notified to the WTO between1957 and May 2016 under Article XXIV (“TerritorialApplication – Frontier Traffic – Customs Unions andFree Trade Areas”) of the General Agreement onTariffs and Trade 1994 (GATT 1994), the EnablingClause (officially called the “Decision on DifferentialandMoreFavourableTreatment,ReciprocityandFullerParticipation of Developing Countries” and adoptedunder the GATT in 1979), Article V (“EconomicIntegration”) of the General Agreement on Trade inServices (GATS) or the Transparency Mechanism forRegional Trade Agreements.5 The main text of the

RTAs, but alsoanumberof sidedocuments, suchasprotocols, annexes, communication letters and otherdocuments associated with the RTAs, have beenconsideredintheanalysis.

Unlessspecifiedotherwise,SME-relatedprovisionsaredefined as any provisions mentioning explicitly micro,smallandmediumenterprises(MSMEs).Thefollowingkeywords have been used to identify SME-relatedprovisions: small, medium, micro, SME, and start-up.In addition to SME-related provision, there are manyprovisions in RTAs potentially relevant to SMEs, eventhoughtheseprovisionsdonotmakeexplicitreferencetoSMEs.SomeoftheprovisionsrelevanttoSMEswillbe discussed in Section E.2(b), which presents thetypologyofSME-relatedprovisions.

(a) OverviewandtrendsofSME-relatedprovisions

Ashighlighted inFigureE.1, thenumberofRTAswithSME-related provisions has increased steadily sincethe late 1990s and early 2000s. As of May 2016,136 RTAs, representing half of all the notifiedRTAs, have included at least one provision explicitlymentioningSMEs.ThistrendmirrorstheexpansionofRTAsinthelast25years,bothintermsofnumberand

Figure E.1: Evolution of RTAs with provisions explicitly mentioning SMEs

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Source:ComputationsbasedonWTORTAdatabase.

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scope (WTO, 2011). While only 17 RTAs entered intoforcebetween1970and1990,RTAshaveproliferatedbetween1990andMay2016withtheentryintoforceof256RTAs.

In addition, and as depicted in Figure E.2, the shareof RTAs incorporating SME-related provisions hasbeentrendingupwardtothepointwhereprovisionsonSMEsareincludedinalmost80percentofalltheRTAsthatentered into forceover the last five years (2011-15). This trend is in linewith thegrowingdiscussionsin thepolicyagendaofmanyregionalandmultilateralforumsandorganizationsoftheparticipationofSMEsininternationaltrade.

As shown in Figure E.3, the evolution of RTAs withSME-relatedprovisionscanbecharacterizedby threedistinct periods. Prior to 1990, only two RTAs withSME-related provisions were negotiated. The SouthPacific Regional Trade and Economic CooperationAgreement(SPARTECA)isthefirstRTAtoeverincludeaprovisionexplicitlyreferringtoSMEs.Theagreementspecifies that Australia and New Zealand’s bilateraland regional development assistance measures andprogrammes may include those which contribute

to investment in industries, including agro-basedindustries, with a particular emphasis on those of asmaller or medium size. The Cartagena AgreementestablishingtheAndeanCommunityisthesecondRTAwithSME-relatedprovisionsstipulating, interalia, thattheCommissionandGeneralSecretariatshallconsider,intheapplicationofindustrialintegrationprogrammesand projects, the situation and requirements of smallandmedium-sizedindustries.

Between 1990 and 1999, the number of RTAs withSME-related provisions increased slightly, but thenumber of specific provisions on SMEs remainedlimited, with a few exceptions, such as the NorthAmerican Free Trade Agreement (NAFTA) and theCommon Market for Eastern and Southern Africa(COMESA). From 2000, the number of RTAs withSME-related provisions has accelerated significantly.This increase in the total number of RTAs with SME-relatedprovisionsisdrivenbythesurgeinthenumberofsuchagreementsinvolvingdevelopingcountries.AsofMay2016,65percentand31percentoftheRTAsincorporatingSME-relatedprovisionswereagreementsnegotiated, respectively, between developed anddeveloping countries (88 North-South RTAs) and

Figure E.2: Percentage of RTAs with provisions explicitly mentioning SMEs

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betweendevelopingcountries(42South-SouthRTAs).OnlysixRTAsnegotiatedbetweendevelopedcountriesincorporateSME-relatedprovisions.

In addition to the rise in the number of RTAs withprovisions mentioning explicitly SMEs, the numberand level of detail of the SME-related provisions inthese agreements has also increased significantlysince2000.TheJapan-Thailandeconomicpartnershipagreementiscurrentlytheagreementwiththehighestnumber of SME-related provisions. These provisionsare found in the RTA’s chapters on intellectualproperty and cooperation, as well as in the chapteron cooperation in the field of SMEs included in theassociated implementing agreement. The RTAs towhichJapan is apartywithMalaysia, thePhilippines,Singapore and Viet Nam also incorporate a relativelyhigh number of provisions on SMEs. Similarly, thefree tradeagreementbetweenColombia,ElSalvador,Guatemala and Honduras includes detailed SME-related provisions in the chapters on e-commerce,cooperation, administrationof the treaty andannexesto the chapters on government procurement andcooperation. More recently, the EU-Central Americaassociation agreement also incorporates severalprovisions on SMEs, including a specific article oncooperation. The RTAs negotiated by the European

Union with South Africa and Cameroon also containseveralSME-relatedprovisions,mainlyoncooperation.OtherRTAswithvariousSME-relatedprovisionsmainlyinvolveChina.

As depicted in Figure E.4, the RTAs negotiated byChina, Colombia, El Salvador, Guatemala, Honduras,Japan and Panama have, on average, a highernumber of SME-related provisions. The inclusion ofSME-related provisions remains, however, a dynamicprocess. For instance, the RTAs concluded by theEuropean Union prior to 2011 tended to include alimitednumberofprovisionsonSMEs,while themostrecent agreements to which the European Union is aparty incorporate, on average, relatively more SME-related provisions. Ultimately, the decision to includeSME-relatedprovisionsinRTAsdependshighlyontheparties negotiating the agreement, as well as on theactualcontentoftheseprovisions.

(b) TypologyofSME-relatedprovisions

RTAprovisionsareknowntobeheterogeneousacrossagreements (WTO,2011),andSME-relatedprovisionsarenoexception.Althoughthereis,inrecentyears,anincreasing number of RTAs, namely 38 agreements,

Figure E.3: Evolution of the number of SME-related provisions in RTAs

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incorporating specific article(s) on SMEs, the mostcommon structure of SME-related provisions consistsofanarticlereferringtoanissueorissuesthatmentionSMEs as a particular case. For instance, a largenumber of cooperation provisions list SMEs, amongother themes, as a (potential) area of cooperation.The RTAs to which Japan is a party with Malaysia,thePhilippines,VietNam,SingaporeandThailandarethe only agreements to include a specific chapter oncooperationinSMEs.

SME-relatedprovisionsdiffer considerablynotonly intermsof structureand location in theagreement, butalsointermsoflanguage,scopeandlegalcommitments.More than460differentSME-relatedprovisionshavebeen identified. This large number of SME-relatedprovisions ispartlyexplainedby the terminologyusedto identify SMEs. More than 50 different expressionshavebeendevisedtorefertoSMEs,includingartisans,start-up,individualcreatorsandmicroenterprises.

As shown in Figure E.5, the scope of most SME-related provisions refers to small and medium-sizedenterprises, businesses or companies, although anincreasing number of provisions also cover explicitlymicroenterprises.Insomecases,theterminologyusedstems from the provision’s location in the RTAs. For

instance, the concept of individual or small investorsand creators is only mentioned in a specific articleon intellectual property of the Japan-Thailand RTA,which commits the parties to stimulate the creationand development of intellectual property by eachparty’s persons, particularly individual inventors andcreatorsandSMEs. Incertaincases, theSME-relatedprovisions refer toa specific sector.For instance, theimplementing agreement associated with the Japan-Peru economic partnership agreement identifiessustainabledevelopmentofsmall-scaleagricultureandruralareaasapotentialareaofcooperation.

Despite the high heterogeneity characterizing mostSME-relatedprovisions,thecomparativeanalysisofthe136 RTAs with provisions referring explicitly to SMEsallows eight main forms of provisions to be identified.As highlighted in Figure E.6, SME-related provisionsrange from the recognition of the important role ofSMEs to cooperation activities to firmer commitmentsand exemptions. Cooperation is the most commonform of SME-related provisions, incorporated in92 agreements. The second most common forms ofSME-related provisions, found in 57 RTAs, consists ofspecifyingthatSMEsordomesticprogrammesaimedatsupportingSMEsareeithernotcoveredbyorassumedtobeconsistentwiththeobligationssetforthintheRTA.

Figure E.4: Number of RTAs with provisions referring to SMEs by country

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Figure E.5: SME terminology used in RTAs

"Small and medium-sized (business) [company] {enterprise} |undertaking|"

Small {[(business)]} [enterprise] {supplier}|economic operator|

Micro, small and medium-sized (enterprise)[company]

Small-scale (farmers) [agriculture] {fishery}|mining| ¦trade¦

Micro and small (business) [enterprise]{sized company}

Small and medium{|[scale]|} ([enterprise])|industry| {mining}

Small-scale (contractor) [enterprise]{entrepreneur} |industry|¦unit¦

[Rural and urban] Micro, small and medium[(enterprise)] {industry}

Micro (and craft) enterprise

(Individual) [Small] investor and creator

Artisans

Start-up

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Figure E.6: Main forms of SME-related provisions in RTAs

Cooperation/Promotion

Exemptions/Flexibilities

Recognition/Affirmation/Agreement

Institutional arrangements

Commitment/Obligation

Recommendation

RTA's impact review

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TheremainingformsofSME-relatedprovisionsareonlyincorporatedinalimitednumberofRTAs.SeveralSME-relatedprovisions,includedin14RTAs,areformulatedin mandatory terms. Some of these provisions, foundin thechapterson trade facilitation, transparencyandintellectualproperty,callonthepartiestotakemeasurestoensureeconomicoperators,includingSMEs,arenotnegatively affected. SME-related provisions includedin four RTAs, aimed at establishing a customs union,tend tobe themost far-reaching insupportingSMEs.For instance, the Economic Community of WestAfricanStates(ECOWAS)specifiesthattheeconomiccommunity shall, by stages, ensure the adoption ofmeasures for the integration of the private sectors,particularlythecreationofanenablingenvironmenttopromoteSMEs.

Other SME-related provisions are couched in bestendeavour language by encouraging rather thanrequiring.Certainprovisionsrecognise,affirmoragreeontheimportanceofSMEs.Fewprovisionsarewordedasarecommendation.

Finally,alimitednumberofRTAsestablishinstitutionalarrangements related to SMEs, such as a committee,to discuss and oversee the implementation of theagreement’s commitments, including cooperativeactivities. In that context, several RTAs review thepossibilityfortheinstitutionalbodytoreviewtheRTA’simpactonMSMEs,includinganyresultingbenefits.

SomeofthedifferentformsofSME-relatedprovisionscan be explained by different locations of theseprovisionsinRTAs,includingagreementsnegotiatedbythesamecountry.Adifferentlocationintheagreementusually also implies different areas addressed. Ashighlighted inFigureE.7,SME-relatedprovisionsrefermainly to (1) cooperation on SMEs, followed by (2)servicesandinvestment,(3)governmentprocurement,(4) e-commerce, (5) trade facilitation, (6) intellectualpropertyand(7)transparency.

(i) CooperationonSMEs

AidforTrade(AfT)cooperationprovisionsarenotonlythemostcommonformofSME-relatedprovisions,butarealsoby far themostheterogeneous typeofSME-related provisions across agreements. Ninety-twoRTAs include at least one provision on cooperationmentioning SMEs. Part of this high heterogeneitystemsfromthescopeofthesecooperationprovisionsin terms of issues addressed and cooperation form.Certain AfT cooperation provisions address generalissues which are not limited to SMEs. Other AfTcooperation provisions address more specific issues,forwhichSMEsreceiveaparticularfocus.

Similarly, some cooperation provisions refer to SMEsin general, while a limited number of provisions applyspecifically to SMEs engaged in export activities.For instance, the EU-Central America association

Figure E.7: Main areas of SME-related provisions in RTAs

SMEs cooperation

Investment and services

Government procurement

Electronic commerce

Trade facilitation

Intellectual property

Transparency

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agreement specifies that cooperation and technicalassistance on technical barriers to trade mayinclude activities to facilitate the comprehension andcompliance with the European Union’s requirements,in particular by SMEs. In other provisions, SMEs areonly listed as a general area of cooperation withoutprovidinganyadditionaldetails.Conversely,otherAfTcooperationprovisionsaremorespecificandmentionexplicitlythetopicand/orformofcooperationactivitiesrelatedtoSMEs.

Promoting and facilitating investments, includingjoint ventures, between SMEs of the parties is oneof the most frequently covered issues in cooperationprovisions. Other issues addressed in cooperativeactivities include the development of opportunitiesfor business partnerships, alliances and clusters,information networks, innovation, including in somecases technology transfer, and competitiveness.Access to finance for SMEs and the developmentof financial intermediaries are also the object ofcooperation in several RTAs. In terms of cooperationform,themostcommoncooperationactivityconsistsofexchanging relevant information between the parties,including among SMEs. Other AfT cooperation formsinclude training, exchanges of experiences, visits andexchangesofprofessionals,aswellasorganizationofconferences,workshopsandtradefairs.

The RTA between the European Union and CentralAmerica includes themostdetailedprovisionsonAfTcooperationrelatedtoSMEs.Theagreementforeseescooperationand technical assistanceonSMEs in thecontextofemploymentandsocialprotection,services,technicalbarrierstotrade,artisanalgoodsandorganicgoods.Inaddition,aspecificarticleoncooperationonMSMEsidentifiesanumberofcooperationactions,suchas the promotion of the productive linkages process,an exchange of experiences and best practices,encouragementof joint investments,partnershipsandbusinessnetworks, the identificationandreductionofobstaclestoaccessfinancialsources,andthecreationofnewfinancingmechanisms.

Other RTAs with relatively detailed SME-relatedprovisions on AfT cooperation include the agreementbetween Colombia and the Northern Triangle (ElSalvador,Guatemala,andHonduras),aswellasseveralagreements negotiated by China with Chile, CostaRica, Hong Kong (China), Macao (China) and Peru.The economic partnership agreements concluded byJapan with Malaysia, Singapore, Thailand and VietNamlistalsovarioustopicsandformsofcooperation.These RTAs further establish a joint committee, sub-committee or working group on SMEs in charge of,inter alia, reviewing and discussing issues concerningthechapteroncooperationonSMEs,exchangingviews

andinformationonthepromotionofSMEcooperation,as well as identifying and recommending avenues offurthercooperation.

(ii) Servicesandinvestment

An increasingly large number of RTAs includesprovisions on services. While most servicescommitments in RTAs go beyond those establishedunder the GATS, these RTAs share relatively similardisciplines to those set forth in the GATS. A limitedbut growing number of RTAs have gone beyondthe GATS with provisions on domestic regulationand transparency (WTO, 2011). Small and medium-sized service providers can potentially benefitfrom increasing market access in sectors in whichrestrictionshavebeeneliminated.

In addition to these provisions, some of the servicescommitmentsundertakenbythepartiesin30RTAsaresubject to certain limitations or reservations explicitlyrelated toSMEssetout in theannexesof theparties’servicesschedules. Inmanycases, theseSME-relatedreservations are limited to financial services. Forinstance,theannextotheserviceschapterofthetradeagreementbetweenCanadaandtheRepublicofKoreaexplains that the measure requiring Korean insurancecompaniestoextendloanstoSMEsisnotinconsistentwiththearticleonmarketaccessforfinancialinstitutions.Fishingandminingareothersectorsforwhichalimitednumber of RTAs include SME-related reservationmeasures. For instance, the free trade agreementbetween Chile and the United States specifies thataccesstosmall-scalefishingactivitiesshallbesubjecttoatypeofregistrationonlygrantedtoChileannaturalpersons and foreign natural persons with permanentresidency,ortoChileanjuridicalpersonsconstitutedbytheaforementionedpersons.Similarly,theRTAbetweenMoroccoandtheUnitedStatesspecifiesthattheminingof lead,zinc,andbariteoresintheTafilaletandFiguigregionsofMorocco is reserved for small-scaleminersfromthatregion.

Besides reservation measures, 33 RTAs alsoincorporate cooperation provisions focused either oninvestmentforSMEsand/orSMEsprovidingservices.As explained above, the level of detail in cooperationprovisions differs considerably between agreements.For instance, the EFTA-Egypt RTA specifies thatcooperation may include the development ofmechanisms for joint investments, in particular withSMEs.Theeconomicpartnershipagreementbetweenthe Caribbean Forum (CARIFORUM) states and theEuropean Union stipulates that the parties agree tocooperateandfacilitatesupportinthedevelopmentofInternetmarketingstrategies forSMEs in the tourismservicessector.

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(iii) Governmentprocurement

Provisions on government procurement have beenincreasingly covered in RTAs, and access to, andparticipation in, public procurement markets bySMEs has been identified by many governments asa crucial element in fostering sustainable economicdevelopmentandprosperityworldwide.Fromageneralpointofview,whenRTAscontaindetailedchaptersongovernmentprocurement,theRTAproceduralrulesanddisciplinesbroadlytrackthoseoftheWTOAgreementonGovernmentProcurement(GPA).Asaresult,intheintheareaofgovernmentprocurement,RTAsgenerallyintroducerelativelylittleinthewayof“spaghetti-bowl”effectsand,overall,arefavourableto theproliferationofprocurementreformsandcommonrules(Andersonetal.,2015).

Specific SME-related provisions on governmentprocurement, included in 43 RTAs, range from therecognition of the importance of SMEs’ participationin government procurements, to the exemption ofprogrammes aimed at supporting SMEs from theRTA’sobligations, tocooperation in theestablishmentof a specific committee on small businesses. SeveralSME-related provisions on government recognisethe importance of the participation of MSMEs ingovernment procurement. A related provision furtherrecognises the importance of business alliancesbetweensuppliers,andinparticularofSMEs,includingthejointparticipationintenderingprocedures.

Several RTAs include cooperation provisions aimedat facilitating access of MSMEs to governmentprocurement market. For instance, the RTA betweenthe Republic of Korea and Peru specifies that theparties shall endeavour to work jointly towardsexchanging information and facilitating access forSMEs to government procurement procedures,methods and contracting requirements, focusing ontheirspecialneeds.AlimitednumberofRTAs,namelytwo agreements, also establish an institutional bodydedicatedtoSMEsunderthegovernmentprocurementchapter,withtheaimoffacilitatingactivitiesrelatedtothe promotion of SMEs’ participation in governmentprocurement opportunities. Under NAFTA and theColombia-Mexico RTA, a committee on SMEs is incharge, inter alia, of facilitating the identification ofSMEs interested in becoming trading partners of theother party’s SMEs, as well as developing databasesofSMEsineachparty’sterritoryforusebyentitiesofthe other party wishing to procure from these SMEs.Insteadofestablishingaspecific institutionalbodyonSMEs, six other RTAs establish a specific committeeon government procurements to address any matterspertaining to the implementation of the governmentprocurementchapter,includingSMEs.

Furthermore, the annexes to the governmentprocurement chapters of 38 RTAs include provisionsexplaining that the chapter does not apply toprocurement programmes on behalf of SMEs. Forinstance,theannexlistingthegovernmentprocurementschedulesofthetradeagreementbetweenCostaRicaand Peru explains that the government procurementchapter does not apply to procurement programmesto support MSMEs. Similarly, most RTAs negotiatedbytheUnitedStatesandCanada includeat leastoneprovisionspecifyingthat thegovernmentprocurementchapterdoesnotapplytoset-asidesonbehalfofsmallandminoritybusinesses,whereset-asidesmayconsistof any form of preferences to benefit SMEs, such asthe exclusive right to provide a specific good and/orserviceorapricepreference.

SeveralRTAswithasimilarprovision,towhichColombiais a party, further consider measures conduciveto facilitating the transfer of technology and sub-contracting. Other provisions are more specific, suchasthearticleonSMEsinthegovernmentprocurementchapterof theRTAbetween theCooperationCouncilfor theArabStatesof theGulf (GCC)andSingapore,which stipulates that the parties reserve the right toapplya10percentpricepreferenceforSMEsintheirrespectivecountries.

(iv) E-commerce

Overthelast15years,provisionsone-commercehaveincreasinglybeenincorporatedinRTAs,inparticularinaspecificchapterone-commerce.Thetypeof issuesandcommitmentscovered inRTAsdiffersubstantiallyacross agreements. A moratorium on customsduties on electronic transmissions between theparties, transparency commitments and cooperationactivities are among the most common provisions one-commerce.AlimitedbutincreasingnumberofRTAsalsoaddressspecificdomesticregulationissues,suchasregulatorybarriers,electronicauthentication,onlineconsumer protection, online personal data protectionand unsolicited commercial electronic messages(Herman, 2010). Provisions promoting and facilitatingthe development of e-commerce can potentially helpSMEstoreachnewcustomers.Besidestheseprovisionsthatapplytofirmsofanysize,alimitedbutincreasingnumber of RTAs also incorporate different provisionsexplicitlymentioningSMEsinthee-commercechapter.

SME-relatedprovisionsone-commerce,includedin21RTAs, refer to facilitating the use of e-commerce bySMEs,orovercomingobstaclesencounteredbySMEsin the use of e-commerce. Many of these provisionsare specific to one or a couple of trade agreements.The most common type of SME-related provisions one-commerce specifies that the parties recognise the


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importance of facilitating the use of e-commerce byMSMEs.TheremainingtypesofSME-relatedprovisionsone-commercerefertocooperationamongtheparties.

For instance, the parties to the trade agreementbetween Singapore and Chinese Taipei recognisethe importance of working together to overcome theobstacles encountered by SMEs. A relatively similarprovision, included in the RTAs to which Canada is apartywiththeRepublicofKoreaandPeru,affirmstheimportanceofworkingtogethertofacilitatetheuseofe-commercebyMSMEs.Theprovision included inthefreetradeagreementbetweenCanadaandPanamaisslightlymoredetailed,statingthatthepartiesrecognisetheimportanceofsharinginformationandexperienceson laws, regulations and programmes in order tofacilitatetheuseofe-commercebyMSMEs.

The language of other SME-related provisions one-commerce is firmer.For instance, theRTAbetweentheRepublicofKoreaandPerumentions theparties’commitment to working together to facilitate the useof e-commerce by SMEs. Similarly, the free tradeagreementstowhichJapanisapartywithAustraliaandSwitzerland stipulate that the parties shall cooperatetoovercomeobstaclesencounteredbySMEsinusinge-commerce.

The trade agreement between the European Union,ColombiaandPeruistheonlyagreementthatexplicitlyforesees the possibility for the agreement’s tradecommittee to establish, to the extent necessary andjustified,aworkinggroupwiththeaimofrecommendingmechanismstoassistMSMEsinovercomingobstaclesfacedbythemintheuseofe-commerce,amongothertasks.

(v) Tradefacilitation

The number of RTAs with trade facilitation provisionshas not only increased very rapidly since the 1990s,butthecoverageoftradefacilitationmeasureshasalsoexpanded in the last 10 years. Similar to other areascoveredbyRTAs,provisionsontradefacilitationdisplayimportant disparities across agreements in terms oflanguage, coverage and levels of commitment (WTO,2015). Despite the heterogeneity characterizing mostprovisionsontradefacilitation,SMEscanbenefitfromthe reduction in transport costs and delays resultingfrom the implementation of the RTAs’ provisions onSMEs, by making it easier and faster to export, asdiscussedinSectionD.2.ThereductionintransactioncostscanalsopotentiallymakeSMEsmorecompetitiveininternationalmarkets.

Inadditiontothesetradefacilitationprovisions,whichapply indifferently to SMEs or large firms, several

different SME-related provisions on trade facilitationhave been included in 18 RTAs, mainly in the tradefacilitation chapter. The most common type of SME-related provisions on trade facilitation, found in 10RTAs, recommends taking into account the interestsof SMEs. For instance, eight agreements negotiatedbytheEFTAstates,includingwithCanada,HongKong(China),SerbiaandUkraine, stipulate that thepartiesshall consult their respective business communitieson their needs with regard to the development andimplementation of trade facilitation measures, notingthatparticularattentionshouldbegiventotheinterestsofSMEs.Inabroadercontext,theprovisionintheinterimagreement between Cameroon and the EuropeanUnion stipulates that the customs procedures shouldbe transparent, efficient and simplified in order toreducecostsand increasepredictability foreconomicoperators,includingSMEs.

Other SME-related provisions on trade facilitation arewordedinfirmerlanguage.TheassociationagreementstowhichtheEuropeanUnionisapartywiththeRepublicofMoldovaandUkrainespecifiestheparties’agreementthat their trade and customs legislation, provisionsand procedures shall, inter alia, aim to reduce costsand increase predictability for economic operators,including SMEs. The provisions on trade facilitation,included in the RTAs negotiated by the EuropeanUnion with Colombia and Peru, Côte d’Ivoire and theRepublic of Moldova, are more specific and stipulatesthatproceduresguaranteeingtherightofappealagainstcustoms administrative (actions,) rulings and decisionsaffecting imports, exports or goods in transit shall beeasilyaccessible,includingtoSMEs.

The remaining types of SME-related provisions ontrade facilitation refer to cooperation. Under the RTAbetween Colombia and the Northern Triangle, theparties agree to develop information exchange andinternshipprogrammesforofficialsandtechnicians inthefieldoftradefacilitationaspartofthecooperationactivities on SMEs. In a different context, theAssociationofSoutheastAsianNations(ASEAN)FreeTradeAreacommitsitsmemberstatestodevelopandimplementacomprehensiveASEANTradeFacilitationWork Programme. This programme sets out allconcreteactionsandmeasureswithcleartargetsandtimelines of implementation necessary for creating aconsistent, transparent, and predictable environmentfor international trade transactions that increasestrading opportunities and helps businesses, includingSMEs,tosavetimeandreducecosts.

(vi) Intellectualproperty

ThenumberofRTAswithintellectualpropertyprovisionshasacceleratedsincetheWTO’screationandtheentry

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intoforceoftheTrade-RelatedAspectsofIntellectualProperty Rights (TRIPS) Agreement. Similar to othertypesofprovisions,thenumberandtypeofintellectualpropertyprovisionsvarywidelyacrossRTAs.Althoughmost RTAs contain intellectual property provisionsof a general nature, a limited but increasing numberof agreements include explicit provisions on specificfieldsof intellectualpropertylaw,suchastrademarks,copyrights, patents, and geographical indications(ValdèsandMcCann,2014).

Similartootherareas,thefirstandmostcommontypeofSME-relatedprovisionsrelatestocooperationaimedatstimulating innovationand intellectualproperty.Forinstance,theRTAbetweentheRepublicofKoreaandPeru stipulates that the parties agree to exchangeviews and information on the legal frameworkconcerningprotectionandenforcementof intellectualproperty rights in accordance with their respectivelaws,regulations,andpoliciestostimulatethecreationanddevelopmentofintellectualpropertybypersonsofeachparty,particularlySMEs.Otherrelatedprovisionsarecouchedinslightlyfirmerlanguage.Theeconomicpartnership agreement between the European Unionand the CARIFORUM States mentions that researchcentres, higher-education institutions, and otherstakeholders, includingMSMEs, located in thepartiesshall be involved in cooperation on science andtechnologyasappropriate.

The Japan-Thailand economic partnership agreementistheonlyRTAnotifiedtotheWTOtoincludeaspecificarticle on SMEs in the intellectual property chapter.Thearticleonassistanceforacquisitionofintellectualproperty rights for SMEs stipulates that each partyshall,inaccordancewithitslawsandregulations,takeappropriate measures to provide assistance to SMEsforacquisitionofintellectualpropertyrights,whichmayincludereductionofofficialfees.

Inaddition,theagreementestablishesasub-committeeon intellectual property in charge of, inter alia,discussing any issues related to intellectual propertywith a view to enhancing protection of intellectualproperty and enforcement of intellectual propertyrights and to promoting the efficient and transparentadministrationoftheintellectualpropertysystem,suchas theutilizationandcommercializationof intellectualpropertyrightsforSMEs.

(vii) Transparency

In recent years, an increasing number of RTAs haveincluded a dedicated chapter on transparency withprovisions that aim to promote transparency anddue process in policy-making. Such transparencychapters are often complemented by more specific

transparencycommitmentsincludedinotherchapters,suchas technical barriers to trade (TBT) (MolinaandKhoroshavina,2015).

TheRTAstowhichtheEuropeanUnionisapartywithGeorgia,theRepublicofKoreaandUkrainearetheonlyagreementsnotified to theWTO to includea specificprovisionrelatedtoSMEsinthetransparencychapter.Although the language of this provision included inthe article on the transparency chapter’s objectivediffersacross the threeagreements, it stipulates thatthe parties shall provide an efficient and predictableregulatory environment for economic operators doingbusinessintheirterritories,especiallysmalloperators,includingSMEs.

(c) UpcomingSME-relatedprovisions

RTAs are sometimes viewed as a laboratory enablingcountries to devise new provisions and address newissuesandchallenges.Asamatteroffact,severalnewtypesofSME-relatedprovisionshavebeenincorporatedin recent mega-regional trade agreements that havenotyetentered into forceand/ornotbeennotified totheWTO.

(i) TheTrans-PacificPartnership

As discussed in Section D, access to informationremainsachallengeformanySMEs.ThismayexplainwhytheTrans-PacificPartnership(TPP),negotiatedby12countriesinthePacificregionandyettocomeintoforce,6incorporatesseveralnewtypesofSME-relatedprovisions on transparency in a chapter dedicated toSMEs.

In particular, each party commits to establish ormaintain a publicly accessible website containinginformationregardingtheTPP,includingasummaryofthe agreement and explanations of key provisions ofparticular relevance toSMEs. In addition, thewebsitemay provide any other pieces of information thatcould be useful to any person interested in trading,investing or doing business in its territory, such ascustoms regulations and procedures; regulations andprocedures concerning intellectual property rights;technical regulations, standards, and sanitary andphytosanitary measures relating to importation andexportation; foreign investment regulations; businessregistration procedures; employment regulations; andtaxation information.AcommitteeonSMEs is furtherestablishedand tasked, interalia,withdiscussingandexchangingbestpracticesinsupportingandassistingSME exporters and facilitating the development ofprogrammes to assist SMEs in participating in andintegratingeffectivelyintoglobalsupplychains.


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The text of the government chapter of the TPP alsocontains a specific article aimed at facilitating theparticipationofSMEsingovernmentprocurementwithmanynewprovisions.7AccordingtotheTPP,ifapartymaintainsameasurethatprovidespreferentialtreatmentfor SMEs, that party shall ensure that the measure,including the criteria for eligibility, is transparent. Theagreement further encourages parties to providecomprehensive procurement-related information viaa singleelectronic portal;makeall tender documentsavailable free of charge; conduct procurement byelectronic means; and consider the size, design andstructureof theprocurementtofacilitateparticipationbySMEs.

(ii) AdditionalProtocoltothePacificAllianceFrameworkAgreement

The Additional Protocol to the Pacific AllianceFramework Agreement between Chile, Colombia,Mexico and Peru, which entered into force on 1 May2016, incorporates in its government procurementchapteraspecificarticleonfacilitatingtheparticipationofMSMEs.ManyoftheprovisionsinthisspecificarticlearerelativelysimilartotheonesfoundintheTPP.Forinstance, the party maintaining measures providingpreferentialtreatmenttodomesticMSMEsiscommittedto ensuring that such measures, including eligibilitycriteria, are transparent and objective. Another noveland unique SME-related provision further stipulatesthat each party shall endeavour to reduce measuresmaintainedtogivepreferentialtreatmenttoitsMSMEswithrespecttoMSMEsoftheotherparties.

(iii) ComprehensiveEconomicandTradeAgreementbetweenCanadaandtheEuropeanUnion

The Comprehensive Economic and Trade Agreement(CETA) between Canada and the European Unionincludes new types of SME-related provisions on theresolution of investment disputes between investorsand states, where the investor is a SME, such as thepossibility to hold consultations via videoconferenceor other means and the possibility of having a solemember of the tribunal hear the claim. The jointcommittee established under the CETA shall alsoconsider supplemental rules aimed at reducing thefinancialburdenonclaimantswhoarenaturalpersonsorSMEs.

(d) Conclusions

Provisions mentioning explicitly SMEs have beenincorporated into an increasing number of RTAs. Inparallel,thenumberofdetailedSME-relatedprovisionsincludedinagivenRTAhastendedtoincreaseinrecent

years. Most provisions explicitly mentioning SMEs donotfollowaspecifictemplate.

As a result, SME-related provisions are veryheterogeneousintermsofstructure,location,languageand scope. The two most common categories are,in order of frequency, provisions: (1) cooperationprovisionsonSMEsinageneralorinaspecificcontext,such as e-commerce and government procurement;and (2) exemptions for SMEs and/or programmessupporting SMEs from the RTAs’ obligations, related,for instance, to services, investment and governmentprocurements. The remaining types of SME-relatedprovisionsareincludedinalimitednumberofRTAsandcover-specificissues,suchasgovernmentprocurement,e-commerce, trade facilitation, intellectual propertyandtransparency.

A review of recent mega-regional trade agreements,such as the TPP and the CETA between Canadaand the European Union, that have yet to be notifiedto the WTO, further confirms the dynamic nature ofSME-related provisions with new types of provisionson government procurement, transparency and theresolutionofinvestmentdisputebetweeninvestorsandstates.Inthisdynamiccontext,SME-relatedprovisionsinRTAsarelikelytokeepevolvingandbeincreasinglypragmatic.

3. SMEsinotherinternationalorganizations

Several international organizations are active inthe area of SMEs. This subsection discusses theiractivitiesandshowshowtheycomplementtheroleoftheWTO.The focus ison the followingorganizations:the International Trade Centre (ITC); the World Bank;UNregionalcommissionsanddevelopmentbanks;theUnitedNationsConferenceonTradeandDevelopment(UNCTAD);theOrganisationforEconomicCo-operationandDevelopment(OECD);theInternationalChamberofCommerce(ICC);theInternationalTelecommunicationUnion (ITU); the European Bank for Reconstructionand Development (EBRD); the World SME Forum(WSF); and the Asia-Pacific Economic Cooperation(APEC). SME-related activities by these internationalorganizations are clustered around two major themesofresearch/action:integrationofSMEsininternationaltrade, in particular global value chains (GVCs), andmoregeneralSMEsupportinitiatives.

(a) IntegrationofSMEsintointernationaltrade

Therehasbeena lotofworkandcollaborationat theinternational level to help SMEs to integrate into the

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global economy, including through GVC participation.The ITC, which was established in 1964 as a jointagency of the WTO and the United Nations, is “fullydedicated to supporting the internationalization ofsmallandmedium-sizedenterprises(SMEs)”.8That is,allITCactivitiesareorientedtowardtheintegrationofSMEsintotheworldeconomy.Moreover,theynaturallycomplement those WTO-administered multilateralrules, discussed in Section E.3, that have the effectofreducingboththevariableandfixedcostsoftrade,reducing information asymmetries between small andlargefirmsandalleviatingsomeofthemajorconstraintsfacedbySMEtraders.

In 2015, the ITC launched a new annual flagshippublication focusing on SME competitiveness (ITC,2015b). Current work in the framework of the 2016report focuses on standards and regulations, andon how they can be made to work in favour of SMEcompetitiveness. The ITC Trade and EnvironmentProgramme(TEP)alsosupportsSMEsinparticipatingin environmental markets and with compliance withenvironment-relatedstandards.9

AsstatedinITC(2015a),inthefutureITCwillcontinueto support SMEs in order that they may prosper ininternational trade, as well as benefit from availableopportunitiessuchase-commerce,GVCsandemergingmarkets.The ITCalso intends todevelop initiatives toremovebarrierstotradeandassistSMEstocopewithrisks related to international trade. A new African-Indianprogramme is themodel for ITC’sprogrammestargeted to expanding South-South possibilities forSMEs.TheITCisalsoactiveonthee-commerceside.A recent publication (ITC, 2016) aims to start public-private dialogue to address e-commerce bottlenecks,especially for small firms in developing countries.Otherinitiativesrelevantfore-commercebySMEsaredetailedinBoxE.2.

IntheframeworkoftheTurkishpresidencyoftheG20,theOECDandtheWorldBank(2015)producedareportontheinclusionofSMEsandLow-IncomeDevelopingCountries (LIDCs) in GVCs. The report shows twokey facts: i) participation in GVCs is heterogeneousand uneven, across and within countries; and ii) SMEparticipation in GVCs is mostly taking place through

Box E.2: ITC e-commerce solutions for SMEs

The ITC,withpartners in theprivateandpublicsectors,offers trainingcoursesandadvisoryservices tohelpSMEs indevelopingcountriesovercomebarriers toe-commercetrade(seeSectionD.4forareviewof thesebarriers).Theapproach ismodular,beingaimed tosolvespecificchallenges.Themodulescanbedistinctorcombinedandinclude:

• eMall:Onlineshopwhichallowsthecostsofpaymentsolutions,logisticsandmarketingtobeshared.

• ePayment:Paymentmodulesreadyto integrate intoe-commercesitesandmarketplaces;compliancewithforeignexchangerateregulations.

• eLogistics: Access to cost-effective outbound logistics, storage and management of goods delivery withintargetmarketsandreturnsmanagement.

• eTrade:PermitrepresentationservicesensuringconformitywithlegalandfiscalrequirementsinmarketssuchastheEuropeanUnion,JapanandtheUnitedStates.

• eTrust:InternationallyrecognizedqualifieddigitalsignatureandSSLcertificatesforSMEs.

• eCRM: Cloud-based solutions and support for sales and customer service to the standards expected byinternationalcustomers.

Recent examples include support for “Made in Morocco”, an economic interest group comprising more than300SMEs,andforITservicesinKenyaandUganda.“MadeinMorocco”benefitsfromanonlinemarketplace(www.made-in-morocco.ma),sharedpaymentsolutions,logisticsandmarketing.

InthecaseoftheITservicessectorinKenyaandUganda,theITChaselaboratedasharedonlineplatform(eMall).The objective is to enable IT services companies to compete more effectively for higher value internationalbusiness by: i) consolidating the resources of the various small vendors; ii) developing shared marketingapproaches;iii)implementingaplatformforqualitycontrol;iv)promotingdirectinteractionwithpotentialclients;v)buildingtrustinthetargetmarkets;andvi)enablingreceiptofinternationalpayments.


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indirect contribution to exports, rather than throughexporting directly. It further argues that policy actionthrough G20 leadership can help to achieve moreinclusiveGVCsthrough:i)aholisticapproachtoreformspanningtrade,investmentanddomesticpoliciesbothin G20 nations and in trade partner countries; andii) investment in expanding the statistical basis andanalysis of GVCs and in sharing knowledge on bestpracticesonenablingpoliciesandprogrammes.

The series of annual reports presented by the WorldBank’s“DoingBusiness”programmeisalsorelevantinthisarea.Someworkhasbeendoneontheregulationsthat affect SMEs in particular (World Bank, 2013). Inthelatest“DoingBusiness”Report(WorldBank,2015),high importance was given to the issue of tradingacross borders, including new categories such astradeoverlandbetweenneighbouringcountriesand,inparticular,regionaltradeagreements.TheWorldBankalso has several country-specific projects – such astheTradePromotionandQualityInfrastructureprojectin Armenia, the Third Export Development Project inTunisia and theLaoPDRSecondTradeDevelopmentFacility Project. Among their objectives, they seek tobenefitSMEsbyimprovingthetradeinfrastructureandbyenhancingthecompetitivenessofSMEs.

UN regional commissions have programmes andinitiativesaimedatfosteringSMEinternationalization.Forinstance,theUnitedNationsEconomicandSocialCommission for Asia and the Pacific (UNESCAP)convened an advisory group meeting on tradefacilitation forSMEs inSeptember2014aspartofalarger project aimed towards developing a guide forpaperless trade facilitation for SMEs and buildingthe capacity of national governments to implementpaperlesssystemsforcross-bordertradeandtransportfacilitation.

Theactivityofregionaldevelopmentbanksisalsoworthmentioning. The Inter-American Development Bank(IADB)helpsbusinesseswithoperationalandfinancialsupport. This includes export promotion, investmentattraction, trade facilitation and cross-borderintegration, support in negotiating and implementingtrade agreements, and management of foreign trade(IADB,2014a).TheIADBhasalsoconductedresearchwhichconcludesthatanewsetoftradepoliciesalongwith changes in operational practices of SMEs arerequiredforinternationalization(IADB,2014b).Multiplecountry-specificprojectstohelpmicrofirmsandSMEsare inplace.10TheAfricanDevelopmentBank (AfDB)seekstofacilitatemarketaccessforsmallfarmersandMSMEs (AfDB, 2013). The Asian Development Bank(ADB)hasseveralprojectsandinitiativestohelpSMEsin Asian countries. These include different studieson the importance of SMEs and the challenges and

policies of integrating SMEs into GVCs (ADB, 2015).Other initiatives include seminars with other regionalbanksonSMEinternationalization,11aswellasspecificprojects, such as the establishment of an onlineplatform to share information at the regional level onSMEexports.12

UNCTAD has several initiatives to support tradecompetitiveness of SMEs. During the eighth sessionoftheCommissiononEnterprise,BusinessFacilitationand Development, on the topic of “Policy options forstrengthening SME competitiveness”, it was decidedto continue work on the export competitiveness,particularly through possible links to internationalsupply chains (UNCTAD, 2004). Joint research withtheOECDwasconductedontheobstaclesthatSMEsface inenteringGVCs.Among theseare: (i) theneedtoupgradetechnologyandinnovationcapacity;(ii)thelack of adequate finance and human capital for thisprocess;(iii)thelackofcapabilitiestomeetstandardsand certification requirements; (iv) the necessityto better manage intellectual assets, including theprotection of intellectual property rights (IPRs) whenappropriate; (v) the difficult bargaining position SMEsface with large contractors; and (vi) the need fordiversification to reducedependenceononeora fewcustomers (UNCTAD,2007).UNCTADhasdevelopedguidelinesforSMEsindevelopingandleast-developedcountries willing to sell business process services(i.e. offshore) to organizations in the developed world(UNCTAD,2005).

More recent initiatives include the UNCTADEntrepreneurshipPolicyFrameworkandImplementationGuidance and the Business Linkage Programme,implemented in collaboration with UNCTAD’sEMPRETEC network to promote entrepreneurship andSMEupgrading(UNCTAD,2013).Bothseektohelppolicydevelopment and improve the business environmentto help SMEs increase their competitiveness. Anotherimportant contribution by UNCTAD has focused one-commerce opportunities for SMEs. A recent report(UNCTAD,2015)showsthatalthoughsmallenterpriseshavedifficultiesinusingsuchservices,thereareseveraloptions available to them. Additionally, it also providessome options for achieving improvements in the areaof e-commerce regulation, which might help SMEsovercometheobstaclestheyfaceinthisarea.

The ITU has several key areas of action, such ascybersecurity, broadband access, the digital divideandtheInternet,thatarerelevanttoSMEconnectivityand participation in international markets. The BASIS(Business Action to Support the Information Society)initiative of the ICC also deserves a mention in thiscontext. The purpose of such initiative is to serve asthevoiceofbusiness in theglobaldiscussionsonthe

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information society, with special attention devoted toSMEs(ICC,2010).

BeyondthejointstudywiththeWorldBankundertheaegis of the G20 (OECD and World Bank, 2015), theOECD has conducted various studies on the barriersto SME internationalization. The main finding of thisresearch is that multilateral, regional or bilateralagreements can help SMEs overcome trade barriers(Fliess and Busquets, 2006). Moreover, as part of ajointBIAC(BusinessandIndustryAdvisoryCommitteetotheOECD)-OECDinitiativetofacilitateSMEaccessto international markets, several proposals have beenmade.TheseincludethecreationofaBIACSMEWebportal to improve information flows to SMEs and amembers-only password-protected website to allowSME-multinational enterprise interaction (OECD,2008). More recently, the OECD published a report(OECD, 2013) aimed at identifying and suggestingwaystoovercomebarrierstoSMEinternationalization.

TheWorldSMEForum(WSF),establishedin2015asanoutcomeoftheTurkishG20presidency,hasstartedworkingontwoseparateyetinterlinkedinitiativesthat,amongtheirobjectives,includeSMEs’accesstoGVCs:i)thecreationofaone-stop-shopdigitalaggregatorforSMEs,e-WSF;andii)atechnicalassistanceprogrammeforSMEsoncertificationandstandards.e-WSFisbeingdesignedasanonlineplatformandaggregatortargetedat SMEs. It includes an online “GVC MatchmakingService”. The WSF Certification Program will includea comprehensive, country-delivered one-stop-shopendorsement system that leverages existing national,regionaland internationalstandards toaccelerate theconnectivityofSMEswithGVCs.

As discussed in Section D of this report, access totradefinanceisoneofthemajorobstaclesontheroadtoSMEinternationalization.TheWorldBank, togetherwith the WTO and ICC, as well as other internationalfinancialinstitutions,hassomeprogrammestopromoteaction on trade finance, such as the Global TradeLiquidity Programme (ITC and WTO, 2014). Regionalbanks such as the AfDB, the ADB and the IADB arealsoactiveinthisarea.

The AfDB seeks to help enterprises wishing to tradesecure financing, since they report high difficultiesacquiring financing, especially of the long-term type.The ADB established the Trade Finance Programto address the lack of access to trade finance fordeveloping member countries. The Trade FinanceProgramprovidesloansandguaranteestocommercialbankpartners insupportoftrade,helpingbanksofferimporters and exporters reliable access to tradefinance.AsimilarinitiativeistheIADB’sTradeFinanceFacilitation Program (TFFP), created in 2005 to

supportLatinAmericanandCaribbeanbankswishingto access international trade finance markets byofferingtechnicalcooperation,knowledgecreationandfinancialproducts(guaranteesandloans).

(b) OtherSMEsupport

AsshowninSectionAofthisreport,SMEsespeciallycontribute to their domestic economies in terms ofemployment. The International Labour Organization(ILO) has as its primary goal the encouragement ofdecent employment opportunities. Therefore, SMEsareamongthetopicsofILOinterest.TheILOprovidesadvisoryservicesonSMEpolicies,aswellasresearchon the quantitative aspects of job creation. Its SmallandMediumEnterprisesUnitprovidestraining,supportservices, advisory services and in-factory counsellingon four different areas: i) building entrepreneurshipand management skills;13 ii) providing access tomarkets (value chain development); iii) reforming theenablingenvironment;andiv)productivityandworkingconditions.14

The ILO’s Job Creation in Small and Medium-SizedEnterprises Recommendation was adopted by theInternationalLabourConferencein1998.Thepurposeof this recommendation is to guide members in thedesign and implementation of policies to promotejob creation in SMEs. Its latest report (ILO, 2015)highlights that working conditions tend to be worsein SMEs than in larger enterprises – with significantheterogeneity across sectors. Accordingly, Target 8.3of the United Nations’ new Sustainable DevelopmentGoals (SDGs) is related to SMEs and employment.Thegoalisto“Promotedevelopment-orientedpoliciesthatsupportproductiveactivities,decent jobcreation,entrepreneurship, creativity and innovation, andencourage the formalization and growth of micro-,small-andmedium-sizedenterprises,includingthroughaccesstofinancialservices”.

Other international organizations also have initiativesthat support SMEs in general (i.e., that are notexclusivelytargetedatinternationalization).TheEBRDhasaSmallBusiness Initiative,whichsupportsSMEsbyhelpingthemtoacquirefinancialresourcesthoughfinancialinstitutionsaswellasthroughdirectfinancing,offering business advice, and conducting policydiscussions with policy-makers in order to foster agoodeconomicenvironmentforsmallenterprises.TheICCrecentlyissuedaguide(ICC,2015)tohelpSMEsfulfil due diligence requirements. The OECD adoptedtheBolognacharteronSMEpoliciesin2000,withthepurposeoffosteringSMEcompetitivenessandgrowth.

ThebroadmissionoftheWSFistohelpSMEstoachievesustainable efficiency and competitiveness. Beyond


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its internationalization dimension discussed above,the e-WSF initiative broadly aims to increase accessfor SMEs to skills, training, knowledge, innovation,networks, expertise, information, and to improve theiraccesstofinance.TheWSFisalsoconductingresearchon the impact of global financial regulations on thedevelopmentandgrowthofSMEsandhasinitiatedworkto strengthen SME credit reporting systems globally.TheAPEChasaSmallandMediumEnterprisesWorkingGroup.Its2013-2016StrategicPlanprovidesaroadmapto address critical issues pertaining to the growth ofMSMEs in the APEC region, based on three pillars:i)buildingmanagementcapability,entrepreneurshipandinnovation; ii) financing; and iii) business environment,marketaccessandinternationalization.

Toconclude,itcanbearguedthatSMEsarenotanewissuefortheinternationalcommunity.Therearemultipleundertakings,withasubstantialnumberoftheseeffortsbeingfocusedontheinternationalizationofSMEs.Itishopedthatincreasedcoordinationamonginternationalorganizationswill reduceunnecessaryduplicationandmake these efforts more complementary with oneanother.

4. SMEsintheWTO

SectionDofthisreportidentifiedtheobstaclesSMEsface in increasing their participation in internationaltrade.Thispartofthereportexamineshowmultilateraltradecooperationhelpsreducetheseobstacles.Itdoesso inanumberofways:by reducingboth thevariableand fixed costs of trade; reducing the informationburden of some WTO agreements on SMEs; makingit easier for a member to exercise its rights when itactsonbehalfofSMEs;allowingmemberstocontinueproviding financial contributions to SMEs; givingmembersgreaterleewaytopromotethetechnologicaldevelopment of their SMEs; allowing members toprovidepreferentialtreatmenttotheirSMEs;alleviatingmajorconstraintsfacedbySMEtraders;andincreasingthe“supply-side”capacityofSMEs.

(a) WTOagreementshelpSMEsbyreducingthevariableandfixedcostsoftradeandincreasingtransparency

Oneof themainfindingsfromSectionD is that tradecosts, whether they are variable or fixed, adverselyaffect SMEs more than larger enterprises in theirabilitytoparticipateintrade.Thesameappliestolackof transparency about trading rules and regulations.Multilateral cooperation that lowers trade costs andincreasestransparencyshouldreducetheburdenofalltradingfirms(aswellasfirmsonthevergeofexporting)irrespectiveofsize,but thebenefitsmaybe feltmorebySMEs.

(i) Reducingvariablecostsoftrade

Since the establishment of the WTO more than 20yearsago,itsmembershavesuccessfullyreducedtariffbarriers to the current average of 9 per cent, whichcorrespondstoacutofnearlyathirdsince1998(seeTable E.1). The average applied most-favoured nation(MFN) tariff is 8.1 per cent on non-agriculture goodsand14.9percentonagriculturegoods.

There is one small blemish in this picture: boundtariffs continue tobesetat veryhigh levels. Thegapbetweenappliedandboundratescreatestradepolicyuncertainty since it is always possible for a WTOmembertoincreaseitsappliedratetotheboundrate.Thispolicyuncertaintycanbeasourceoftradecosts(Osnago et al., 2015) harming all firms, but perhapsSMEsmoreacutely.15

BeyondreducingMFNtariffsoverthelasttwodecades,manyWTOmembers(bothdevelopedanddeveloping)haveprovidedduty-freeandquota-free(DFQF)marketaccess to least-developed countries (LDCs).16 Tothe extent that these initiatives reduce tariffs facedby enterprises located in LDCs, these reductions invariable trade costs are likely to benefit SMEs morethanlargerenterprises.

Table E.1: Applied and bound MFN tariffs

Applied MFN Bound Tariffs

Products Average:

2012-14

Decrease

from 1998*

Average

duty

Binding coverage

Agriculture 14.9 2.9 55.7 100

Non-agriculture 8.1 4.1 29.6 76.4

All 9.0 3.9 38.8 79.5

*Percentagepoints.

Sources:WorldTariffProfiles,variousissues;WTOIntegratedDatabase.

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The decision on DFQF treatment for LDC exportswas spelled out in the 2005 Hong Kong MinisterialDeclaration. Developed countries, and developingcountries in a position to do so, are to provide DFQFmarket access on a lasting basis for all productsoriginating from all LDCs. WTO members that facedifficulties in trying to meet this mandate are toprovideDFQFmarketaccess forat least97percentofproductsoriginatingfromLDCs,definedatthetarifflinelevel.

There are very few studies that assess the causalimpactofthesedecisionsonLDCexports.Arelativelyrecent study by Vanzetti and Peters (2012) simulatestheeffectofmorewidespreadadherencetotheDFQFdecision by WTO members. It provides evidence thatpreferential treatment can have significant effects onLDCexports,andpresumablyalsoonSMEexportsfromLDCs,althoughthismatterisnotdirectlyaddressedinthe paper. First, Vanzetti and Peters note that about30 per cent of LDC exports in 2010 already receivepreferentialtreatment,whileanother54percentwere(MFN)duty free (seeFigureE.8).The remainingone-sixth of LDC exports faced an average tariff rate of7 per cent. Vanzetti and Peters use the Global TradeAnalysisProject(GTAP)modeltosimulatetheeffectofdevelopedcountriesandsomebigdevelopingcountries(Brazil, China, India and South Africa) providing duty-freetreatmenttoallimportsfromLDCs.Theyestimatethat it could increase LDC exports by betweenUS$4billionandUS$6billion,withallthedevelopingregions gaining, although the bulk of these gains areconcentratedintwoLDCs.

Restrictive rules of origin have sometimes made itdifficult for LDCs to take advantage of preferentialschemes.SoattheWTO’sTenthMinisterialConferencein December 2015, WTO members adopted new

provisions on preferential rules of origin to facilitateleast-developed countries’ export of goods to bothdevelopedanddevelopingcountrieswhichofferthempreferential access. The provisions provide detaileddirections on specific rules-of-origin issues, such asmethods for determining when a product qualifiesas “made in an LDC”, and when inputs from othersources can be cumulated into the consideration oforigin.Forinstance,theprovisionscallonpreference-granting members to consider allowing the use ofnon-originatingmaterialsupto75percentofthefinalvalueoftheproduct.

Beyond goods, the WTO has also allowed memberswho were willing to grant LDC services and servicesproviderspreferentialaccesstotheirmarketstodoso.At the WTO’s Eighth Ministerial Conference in 2011,membersadoptedadecisionallowingWTOmemberstograntLDCservicesandservicesproviderspreferentialaccesstotheirmarketsfor15years.Thiswasfollowedin 2013 by a decision to grant a waiver to thesememberssincebygrantingthesepreferencestheywillbedepartingfromtheirMFNobligations.Subsequently,at the WTO’s Tenth Ministerial Conference in 2015,thelifespanofthe2011decisionwasextendedforanadditionalfouryears,until31December2030.

Bytheendof2015,theWTOhadreceivedatotalof21notificationsofpreferentialtreatmenttoLDCservicesand service suppliers on the part of 48 members(counting EU member states individually). In theirassessment of the notifications, LDCs noted that asignificantnumberofthesectorsandmodesofsupplyin which they had sought preferences were reflectedin the notifications. However, there was a sense thatmore needed to be done to address requests onpreferential measures related to Mode 4 (referringto the presence of persons originating in one WTOmember in the territory of another for the purposeof providing a service) of the GATS, and on relatedmeasures regarding visas, work permits, residencepermits and recognition of professional qualificationsandaccreditation. It bearsnoting that suchmeasureshavebeenidentifiedinotherportionsofthisreportasconstituting issues of particular concern for SMEs intheireffortstoparticipateintrade.

(ii) Reducingthefixedcostsoftrade

Besides reducing variable trade costs, WTOagreements reduce the fixed costs of trade, and bydoingso,helpsmallerfirms.ThisdiscussionfocusesonthreeWTOagreementsbutthediscussioncouldapplymorebroadlytootheragreements.Inaddition,workinexisting committeesoverseeing theseagreementsontheissueoftransparencyprovidesfurtherinsightsintohowSMEsmightbebenefitted.

Figure E.8: Exports and MFN tariffs facing LDCs, 2010

Non-MFN free or non-preferentialexports (16%)

Preferentialexports (30%)

MFN duty-freeexports (54%)

Source:VanzettiandPeters(2012).


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Whileitisnotyetinforce,implementationoftheTradeFacilitation Agreement can reduce some of the fixedcostsarisingfrominefficienttradeprocedures,therebyincreasing SME participation in trade. As discussedinSectionD,onefindsapositivecorrelationbetweentheminimumsizeofexporting firmsandexport times(WTO, 2015). Additionally, SMEs are more likely toexport and increase their export shares than largerfirmsifthelengthoftimeneededtoexportisshortened.SMEsalsoprofit relativelymorewith trade facilitationimprovementsthatincreasetheavailabilityofcustomsinformationandallowforadvancerulingsandimproveappealprocedures(Fontagnéetal.,2016).

The other WTO Agreements to highlight are theAgreement on Technical Barriers to Trade (TBT) andthe Agreement on the Application of Sanitary andPhytosanitary(SPS)Measures.GovernmentsuseTBTand SPS measures to achieve important domesticpolicy objectives such as the protection of humanhealth, but they can have spillover effects on trade.One possibility is that complying with such measuresonly increasetradecostsandthereforereducestradeopportunities. Another is that such measures – whenthey address an existing market failure, such as lackof certainty in consumers’ minds about the quality orsafety of a product – can increase the demand forthe product, even if compliance raises costs, therebyincreasing trade instead. This ambiguity is reflectedin the empirical literature. There is a large body ofempiricalliteratureshowingthat,attheaggregatelevel,such measures might not reduce trade (Swann et al.,1996;TempleandUrga,1997;KoxandNordås,2007).Ontheotherhand,firm-levelstudiestendtoshowthatTBT and SPS measures reduce trade both throughlower trade volume and market entry, particularly forsmall firms (Maertens and Swinnen, 2009; Reyes,2011;Fontagnéetal.,2015).

An important point to make is that the TBT and SPSAgreements contain disciplines that limit the tradecost raising effects of these measures. The TBTAgreement stipulates that technical regulations shallnot be more trade-restrictive than necessary to fulfilmembers’ policy objective(s). It encourages membersto use international standards where these areappropriate.Similarly,theSPSAgreementencouragesWTOmemberstobasetheirmeasuresoninternationalstandards, guidelines and recommendations. If theymaintainor introducemeasureswhichresult inhigherstandards, there should be scientific justification forthem, or they shouldbebasedonanappropriate riskassessment.

The importance that the two agreements give tointernational standards is particularly pertinent toSMEs,asitislikelytobemoreburdensomeforthemto

complywithaplethoraofdifferentnationalstandards.Moregenerally,intheabsenceofthedisciplinesoftheTBT and SPS agreements, national authorities wouldhavegreaterdiscretiontodeterminethestringencyoftechnicalregulationsandSPSmeasures,whichwouldimposehigherfixedcostsontrade.

(iii) Increasingtransparency

As noted above, standards and regulations alsohave welfare-enhancing effects, to the extent thatthey further legitimize policy objectives (such as toprotect human health and safety and environment).Nevertheless, despite good intentions, many of thesenon-tariff measures may be opaque and inefficient inachievingotherwiselegitimateobjectives(WTO,2012).Problemsmayariseinimplementation,forexample:theregulationmaybeunclear,givingrisetouncertaintyforsuppliers/producers;theimpactmaybedifferent,affectsmallerfirmsmorethanlargerones;orcompliancemaybetrickytoassessandverify.ThesearetypicalconcernsthatareregularlydiscussedintheWTO’sTBTandSPSCommittees.Whether in isolationorcombined, factorssuchasthesemaycreateunnecessarycostsandcausefriction in international trade.TwoanecdotalexamplesflowingfromworkattheCommitteelevelfollow.

IntheTBTCommitteethepotentialimpactonSMEsofthe European Union’s regulation on the “Registration,Evaluation,AuthorisationandRestrictionofChemicals”(REACH) was discussed at length. Several memberssaid that SMEs exporting chemicals to the EuropeanUnionwouldhavedifficultycomplyingwiththecomplex,burdensome, costly chemical registration rules inlight of their financial and human resource capacitylimitations. The requirement for importers – includingSMEs–tomaintainarepresentativeintheEUmarket(the so-called “Only Representative” provision) wasespecially prohibitive forSMEs, since they lacked themeanstofindappropriaterepresentatives.

SMEswerealsodisadvantagedintermsofparticipationin bodies established to share REACH compliancecosts between firms (in substance informationexchangeforums).17TheEuropeanUnionundertookareviewofREACHin2013,and,subsequently,reducedregistration fees for SMEs and launched a technicalassistance and outreach programme to engage withSMEsonthisspecificregulation.18

On the SPS side, some members raised concernsaboutanEUregulationaffectingtradein“novelfoods”.The potential adverse impacts of this new regulationon SMEs in developing countries was highlighted,including with respect to the amount of informationneeded and the cost implications for small-scalefarmers and exporters in undertaking the required

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scientific studies. Revisions to the regulation wereintroducedand,inDecember2013,anewregulationonnovelfoodswasadopted.Theproposednewregulationfocusedoneasingmarketaccessfortraditionalfoods,including those produced by small producers throughsimplification of approval procedures. The EuropeanUnion also undertook several other initiatives aimedat helping firms comply with the regulation, includingSMEs,e.g.thepreparationofaNovelFoodCatalogue,adocument indicatinghowinterestedoperatorscouldestablish whether a food or food ingredient had ahistoryofconsumptionintheEuropeanUnion.19

Obstaclesarisingfromstandardsandregulationsareparticularly pernicious for small firms. For example,smaller firmsmay lackthenecessaryresources: i) toseek information about foreign regulations that mayaffect their trade (see enquiry points below); ii) toengagewithtradingpartnerswiththeaimofensuringthatnewregulationsdonotunnecessarilyaffecttheirexports;iii)toengageinstandard-settingactivitiesathome or in an international contexts to ensure thatstandards being developed take into account theircommercial interests; or finally iv) to comply: smallerfirms may simply lack the capacity (human and/or financial) to adapt to regulations (irrespective oftheir legitimacy). In short, small firms may often beleft in the dark, may not have a collective/coherentvoicein internationalsettingsortradefora–andaremorelikelytoendupasstandards-takersratherthanmakers.

Aside from actually complying with the standardsand regulations, SMEs also face a heavy burdenin demonstrating compliance with regulations andstandards,throughconformityassessmentprocedures

such as testing and certification. Indeed, a growingnumber of concerns in the TBT Committee arerelatedtothesetypesofprocedures–ratherthantheunderlying requirements themselves. In a submissionto the TBT Committee, Chinese Taipei presented theresultsofasurveyhighlighting issues facedbySMEsfrom conformity assessment procedures in foreignmarkets,includinglackofinformationanduncertaintiesover the time and costs to complete the procedures,which imposes extra costs on SME exporters whoin many cases use a rapid turnover rate of goods toremaincompetitive.20

Both the WTO SPS and TBT Committees have putmuchemphasisondevelopingproceduresthatenableall members to make full use of the transparencydisciplines contained in their respective agreements.These provisions are essentially about enablingmembers, through “notifications”, to become awareof regulations in the pipeline before they enter intoforce. Indeed, lack of information about regulatorybarriers – or uncertainty about their effects – is themainreasonmeasuresareraisedfordiscussionintheSPS or TBT Committees in the first place. Receivinginformation about new regulations or standards at anearlystage,beforetheyarefinalizedandadopted,givestrading partners an opportunity to provide commentseither bilaterally or in the Committee, and to receivefeedbackfromstakeholders.Thisdialoguecanassistinimprovingthequalityofdraftregulationsandavoidingpotential unnecessary trade costs further down theroad.ThesubmissionofTBTnotifications,forinstance,has increased steadily since 1995 with a growingproportion of notifications coming from developingcountries, while those from developed countries haveremainedrelativelystable(seeFigureE.9).21

Figure E.9: New TBT Committee notifications by development status, 1995-2015

0

800

1,000

1,200

1,400

600

400

200

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

2015

Developed members Developing members Least-developed members

Source:WTOofficialdocumentG/TBT/38/Rev.1,Chart7,p.8(24March2016).


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While large firms may invest in human resourcesto gather information about TBT/SPS measures(dedicated regulatory affairs staff), SMEs lack theresourcestodoso.BoththeTBTandSPSAgreementsrequirememberstoestablishEnquiryPoints–toprovideinformationandanswerquestionsfromothermembersandinterestedpartiesonproposedoradoptedTBTorSPSmeasures.Inthismanner,theservicesprovidedbyTBTandSPSEnquiryPointshelp to level theplayingfieldforSMEsintermsofaccesstoinformationaboutTBTandSPSmeasures.

Recently there has been a push to further enhancethereachof informationonstandardsandregulationsthroughan“AlertSystemforSPSandTBTNotifications”.ThisstemsdirectlyfromamandategiventomembersintheTBTCommitteeattheendof2015.22TheAlertSystem(detailedinBoxE.3)willbeapubliclyavailableandself-subscribingserviceaimedatproviding timelyaccess to SPS and TBT notifications of particularinterest to users, based on criteria such as productcoverageornotifyingmembers. Itwillhelppublicandprivate stakeholders to track, consult and commenton measures that are being developed and/or adaptas necessary to changing regulatory conditions. It isparticularlyaimedatensuringareliableandsustainablesource of information for developing countries andLDCs.

The mechanism, which will be launched in November2016, is a joint effort between the WTO, the dataprovider,theUnitedNationsDepartmentforEconomicandSocialAffairs (UNDESA),whichwasresponsiblefortheinitialdesignandpilot,andITC,whichwillhostandmanagetheservice.

It is worth mentioning that transparency obligationsare included in most WTO agreements, and that theSPS and the TBT Agreements are not the only onesrequiringmembers toestablishenquirypoints.Article3.1 of the Trade Facilitation Agreement, for instance,mandates members to “establish or maintain [withinitsavailable resources]oneormoreenquirypoints toanswer reasonableenquiriesofgovernments, traders,and other interested parties on matters covered byparagraph 1.1” (procedures, rules, duties, fees andcharges and other provisions related to importation,exportation and transit). In addition, the enquirypoints shall provide forms and documents requiredfor importation, exportation, and transit procedures ifrequestedbyan interestedparty.As itwasargued inSectionD.2withreferencetotheresultsofFontagnéet al. (2016), small exporting firms profit relativelymore than large firms from these trade facilitationimprovementsrelatingtoinformationavailability.23

Box E.3: Alert system for WTO SPS and TBT notifications

Thesignificant increase in thenumberofSPSandTBTnotificationssubmittedbyWTOmembers,especiallydeveloping countries, in recent years has been a welcome development in terms of the transparency andavailabilityofinformationonstandardsandregulations.However,thishasalsoposedanewchallenge:thatofmonitoringandtrackingthisinformation,andreactinginatimelyfashiontotheevolvingregulatorylandscape.Therefore,therehasrecentlybeenapushtoimprovetheawarenessofinformationonregulationsthroughanalertsystemforWTOSPSandTBTnotifications.AsarguedinSectionC.3(a),thisstemsdirectlyfromamandategiventotheWTOSecretariatintheTBTCommitteeattheendof2015.Atthesametime,initsworkfocusingoninstitutionalcapacitybuildinginLDCs,UNDESAhasidentifiedaccesstorelevanttrade-relatedinformationasoneofthechallengesfacedbyLDCsandhaslaunchedaninitiativetofacilitatedisseminationofSPSandTBT notifications. The two organizations have now joined forces and also reached out to ITC, which alreadyoffersaseriesofonlineinformationtoolsontrade,inparticularforthebenefitofSMEs.Whilesomemembershavealreadydevelopedtheirownalertsystems,aglobalsystem,drawingontheexpertiseofthethreeagencies,willensurereliabilityofdataandsustainabilitywhileavoidingunnecessaryduplicationofeffort,especiallyfordevelopingcountriesandLDCs.

Thenotificationalertsystem(tobelaunchedinNovember2016)willbeapubliclyavailableandself-subscribingservice,wherebyuserswillbeabletoreceiveemail(eventuallySMS)alertsregardingSPSandTBTnotificationscoveringparticularproductsormarketsofinteresttothem.Inaddition,itwillofferanEnquiryPointManagementTooltofacilitatedomesticaswellasinternationalinformationsharinganddiscussion.Thesystemisexpectedtohelppublicandprivatestakeholders,inparticularSMEs,totrack,consultandcommentonmeasuresthatarebeingdevelopedand/oradaptasnecessarytochangingregulatoryconditions.Whenaccompaniedbycomplementaryeffortswithregardstocoordinationandcapacitybuilding,itmayconstituteasignificantcontributiontotheUN’sSustainableDevelopmentGoals(SDGs),forexampleGoal17,objective11onsignificantlyincreasingtheexportsofdevelopingcountries,inparticularwithaviewtodoublingLDCs’shareofglobalexports.

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(b) TheroleofotherWTOagreements,plurilateralagreementsandworkprogrammes

The special situation of SMEs is acknowledged andaddressedinanumberofWTOagreements,plurilateralagreement and work programmes. This sectiondescribestherelevantprovisions intheagreementsorworkprogrammesandexplainsthecontextordifficultybeingdealtwith.Althoughthereissomedangerinvolvedin attempting to categorize the provisions and workprogrammes thathaveabearingonSMEs, it alsohassome value as it enhances our understanding of howtheWTOtriestoalleviatethedifficultiesfacedbySMEs.

• WTO agreements often impose informationrequirements on members that trickle down tothe enterprise level. Some provisions in WTOagreements (e.g. the Anti-dumping Agreement)reducetheburdenoftheserequirementsforSMEs.

• Some provisions make it easier for a member tomake use of its rights under a WTO agreement(e.g.theAnti-dumpingAgreement)whenitactsonbehalfofSMEs.

• Under certain specified conditions, WTOagreements allow members to provide financialcontributions to SMEs (e.g. the Agreement onSubsidiesandCountervailingMeasures(SCM)).

• SomeprovisionsinWTOAgreementsgivemembersgreater leeway to promote the technologicaldevelopment of their SMEs (e.g. the Agreementon Trade-Related Aspects of Intellectual PropertyRights(TRIPS)).

• Some plurilateral agreements (e.g. GovernmentProcurement (GPA)) allow members to providepreferentialtreatmenttotheirSMEs.

• Some WTO work programmes (e.g. electroniccommerce, small economies) have a prominentSME focus examining how best SMEs might takeadvantageofe-commerceorconnecttoGVCs.

• SomeWTOinitiatives,suchasthatontradefinance,alleviateamajorconstraintfacedbySMEtradersinLDCsanddevelopingcountries.

• Finally,manyoftheWTO’scapacity-buildingeffortsbenefitSMEsinpoorcountriesbyenhancingtheirproductivecapacityorhelping them toconnect tomarkets.

Whilethisreportisabletoidentifyandhighlighttheseprovisionsandworkprogrammes,itisnotinaposition

to evaluate the effectiveness of these provisions inassistingSMEs.However,giventheinterestbypolicy-makers on the subject of SMEs and trade, furtheranalyticalworkalongtheselineswouldbewelcome.

(i) Anti-dumping

TheAnti-dumpingAgreementrecognizeshowsizemayaffect enterprises’ ability to obtain recourse to anti-dumpingwhentheyareinjuredbydumpedimportsor,inthecasewheretheyarethetargetsofananti-dumpinginvestigation,whentheyareburdenedbyinformationalrequirementsofinvestigators.

It is likely that an industry populated by a host ofsmall firms (“fragmented industry”) will have greaterdifficulty inobtaininganti-dumpingprotectionthananindustry that is composed of a few large enterprises.Notonlywill thecostoforganizingbemuchhigher inthe former case, but firms are likely to be burdenedbyafreeriderproblem.No individual firmwillwant totaketheleadsinceeveninthebestcasescenario,thatits initiative leads to a successful anti-dumping dutyappliedtoforeignimports,thebenefitsofanti-dumpingprotectionwillaccruetoeveryotherrivaldomesticfirm.Everyfirmwillprefertotakenoactionandfreerideontheinitiativetakenbyanotherfirm.

Another difficulty that is likely to be encountered bya fragmented industry in initiating an anti-dumpinginvestigationistherequirementfornationalauthoritiesto have determined that the application for aninvestigationhasbeenmadebythe“domesticindustry”.Fromaninformationalperspective,suchadeterminationiseasiertomakewhenthedomesticindustryismadeupofafewlargefirmsthanwhenitismadeupofalargenumberofsmallfirms.Whilethereisprobablyverylittlethat the Anti-dumping Agreement can do to remedythe free rider problem, at least on this second point,theAgreementallowsnationalauthoritiestodeterminesupport or opposition to an investigation through theuseof(statisticallyvalid)samplingtechniques,24whichwillreducethehurdleforfirmsinafragmentedindustry.

Article 5.6 of the Anti-dumping Agreement allowsnational authorities to initiate an anti-dumpinginvestigationevenintheabsenceofawrittenapplicationfromdomestic industryunder“specialcircumstances”.Although the Anti-dumping Agreement does notclarify the nature of these special circumstances, thenegotiating history of the Anti-dumping Agreementsuggeststhatoneofthosesituationsispreciselywhenthedomesticindustryishighlyfragmented.25

Whereexportersarethesubjectsofananti-dumpinginvestigation, information will be required from themby investigatingauthorities.Theyarealsoentitled to


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present evidence to authorities which they considerrelevant to the investigation. The information andevidentiary burden of an investigation may weighmore heavily on small exporters. The Anti-dumpingAgreement thus provides for authorities to “takedue account of any difficulties experienced byinterested parties, in particular small companies, insupplyinginformationrequested,andshallprovideanyassistancepracticable”.26

(ii) Subsidiesandcountervailingmeasures

ManygovernmentshaveprogrammesthatsupporttheirSMEsector,includingthroughtheprovisionofsubsidies.Under the Subsidies and Countervailing Measures(SCM) Agreement, subsidies that are not specific areexempt from being subject to countervailing dutiesimposedbyothermembers,or frombeingchallengedattheWTO(providedtheyarenotcontingentonexportperformance or the use of domestic over importedgoods).Asubsidyisnotconsideredspecificif(i)thereare objective criteria or conditions governing the

eligibilityforandamountofasubsidyand(ii)eligibilitytoreceivethesubsidyisautomatic.

The SCM Agreement clarifies that “objective criteriaor conditions mean criteria or conditions which areneutral, which do not favour certain enterprises overothers,andwhichareeconomicinnatureandhorizontalinapplication,suchasnumberofemployeesorsizeofenterprise” (italics added).27 This would suggest thatSMEsupportprogrammeswhichmeetthestipulationsspecifiedinthefootnote–neutral,economicinnature,and horizontal in application – and for which supportwould then be automatic on meeting the stipulations,will generally be exempt from countervailing dutiesimposed by other members, and also from thedisciplinesoftheSCMAgreement.28

TheissueofSMEshasalsosurfacedintheDohaRoundnegotiations on WTO rules. Box E.4 provides somedetailsofhowexemptionsforSMEsarebeingsoughtin certain areas of the current rules negotiations onfisherysubsidies.

Box E.4: Fishery subsidies and SMEs

At theWTO’sFourthMinisterialConference,whichwasheld inDoha,Qatar in2001,WTOmembersagreedon negotiations to clarify and improve WTO disciplines on fisheries subsidies. Subsequently, at the WTO’sSixth Ministerial Conference, held in Hong Kong, China, in 2005, members came to a broad agreement onstrengthening those disciplines, including through a prohibition of certain forms of fisheries subsidies thatcontributetoovercapacityandoverfishing.

Thescopeoftheprohibitionsofsubsidieswouldbemodulatedbygeneralexceptions,accesstowhichwouldbeconditionaluponcompliancewithcertainfisheriesmanagementprovisions.Fordevelopingmembers,inadditionto the general exceptions, there would be special and differential treatment, consisting of a sliding scale offurther exceptions from particular prohibitions, calibrated to the nature, scale and geographic scope of theactivities involved. As with general exceptions, access to most special and differential treatment exceptionswouldbeconditionaluponimplementingcertainfisheriesmanagementobligations.

Onetypeoffisherysubsidythathasbeenhighlightedforpossibleexemptionfromprohibitionisthatbenefitingthe artisanal or small-scale fisheries of members. While there appears to be general support for the idea,members are divided on whether the exemption should apply to the artisanal or small-scale fisheries of allmembersoronlytothoseofdevelopingcountrymembers.

Advocatesofexemptionfromanyprohibitionarguethatregardlessofthedevelopmentstatusofamember,small-scaleorartisanalfisheriestendtobeconductedbyindividualswhoareeconomicallyandsociallydisadvantagedandwho,duetotheirsmallscale,havelittleornopossibilitytocontributetoglobalovercapacityoroverfishing.

Others, however, see no justification for such an exception for developed members, considering that theirartisanalandsmall-scalefisheriesaremuchwealthierandbetterequippedthantheartisanalandsmall-scalefisheriesofdevelopingcountries.Thesememberstakethepositionthattherearenocleardescriptionsorcriteriaforidentifyingsmall-scalefisheriesofdevelopedmembers,noranyconvincingreasonswhythosefisheriesneedsubsidization. Their view therefore is that any exceptions for subsidies to artisanal and small-scale fisheriesshouldbestrictlylimitedtothespecialanddifferentialtreatmentprovisions.

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(iii) AgreementonTrade-RelatedIntellectualPropertyRights(TRIPS)

EveninthecaseofOECDcountries,evidencesuggeststhat SMEs are not always able to use the intellectualproperty (IP) system effectively (WIPO, 2010). Thereappear to be a number of reasons for this: they havelimited knowledge of the system, they have highcosts,and they lack the legal,businessand technicalknow-howtoleveragetheirIPassetsintoasuccessfulbusinessplan(WIPO,2010).

ThesituationforSMEsindevelopingcountriesislikelyto be even more challenging. This may explain whymanyWTOmembers,whetherdevelopedordeveloping

oftenhaveprogrammesthattrytoassistSMEsbetteraccesstheintellectualpropertysystem.Article8oftheTRIPS Agreement allows WTO members “to promotethe public interest in sectors of vital importance totheir socio-economic and technological development,provided that such measures are consistent with theprovisionsof[the]Agreement”.

Discussions at a number of meetings of the TRIPSCouncil, theWTObodyresponsibleformonitoringtheoperationoftheTRIPSAgreement,providearichveinof information about the many IP-related initiativestaken by WTO members to support their SMEs.29Table E.2 provides several examples of the initiativesdescribedbythemembers.

Box E.4: Fishery subsidies and SMEs (continued)

Asomewhatrelated issuethathasbeenraised inseveralproposals isademinimisgeneralexception,withahigherthresholdfordevelopingmembers,possiblydifferentiatedaccordingtotheirsizeand/orshareofglobalcapture. Under this approach, members would be able to provide subsidies of any type, up to the threshold(expressedeitherinabsolutetermsorasapercentageoftotalcatchvalueorsomeotherindicator).Advocatesofthisapproacharguethatitwouldbeasimple,easilyadministeredwaytoaddresstheconcernsofdevelopedaswellasdevelopingmembersinrespectoftheirartisanalorsmall-scalefisheries,withouthavingtograpplewiththedifficult-to-resolvedefinitionalissues.

Source:CommunicationfromtheChairmanoftheNegotiatingGrouponRules,WTOofficialdocumentnumberTN/RL/W/254,dated21April2011.

Table E.2: IP-related initiatives to support SMEs

WTO member IP-related programmes for SMEs

Chile Anewlawhadbeenintroducedonresearchanddevelopment(R&D),whichprovidedfortaxincentivestoenhancethecompetitivenessofChileanSMEs,withaviewtoencouragingdevelopmentandtheuseofnewtechnologies.Underthatlaw,thecostoftheresourcesusedbySMEsforR&Dmightbereducedby35percentthroughtaxbenefits.

Start-UpChileencourageshigh-potentialentrepreneurswithcompaniesinthestart-upphasetocometoChileandusethecountryasaplatformforinternationalbusiness.In2010,theprogramme,theninitspilotphase,broughtthefirst22start-upstoChilefrom14countries,providingeachofthemwithUS$40,000ofcapitalandaone-yearvisatodeveloptheirprojectsinthecountryforsixmonths.

RepublicofKorea TheRepublicofKoreaIPOfficehadprovideda70percentreductioninfeestoSMEs.Inaddition,variousmeasureshadbeenimplementedinKoreaaimedatsimplifyingtherequirementsforthefilingofevidentiarydocumentsofeachapplicationforSMEsandextendingtheirvaliditytoamaximumoffouryears.

IP-relatedconsultingforSMEs.

AssistanceforSMEstodeveloptheirbrands.

CustomizedsupportforpatenttrainingforSMEs.


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AnothermeasurethatsomemembershavetakenistochargeSMEsmuchlowerfeesthanlargerenterprisesforfilingpatentapplicationsandotherservicesprovidedby their patent offices. The information contained inTableE.3,while far frombeingcomprehensive,showswhichWTOmembershaveprovidedsuchassistancetotheirSMEs.ThisassistancelowersthecostsfacedbySMEsofapplyingforintellectualpropertyprotectionfortheirinventions.Thediscountscanbequitesubstantial– in the order of 50 per cent for “small” enterprisesandasmuchas75percentforenterprisesconsidered“micro”.

(iv) Services

AhostofissueshavebeenidentifiedbyWTOmembers,insubmissionsandinoralinterventions,asposingproblemstoSMEs’ servicesexports.The issuesmostcommonlycited include discriminatory and non-transparentregulatory frameworks, insufficient information aboutregulations, commercial presence requirements, lackof recognition of qualifications, difficulties in themovementofpersonnel,onerouslicensingrequirements,uncertainties regarding applicable laws, limited accesstopaymentmechanisms, lackofclarity regarding rules

Table E.2: IP-related initiatives to support SMEs (continued)

WTO member IP-related programmes for SMEs

ChineseTaipei TheIntellectualPropertyManagementSystemprovidesconsultationservicestoSMEs,suchasexperience-sharingsessions,workshops,trainingcourses,andthelike.

AnIPserviceplatformforSMEscalledtheInnovativeSMEsIPValueProjecthadbeenestablished.TheplatformisdedicatedtosharingIPconsultationmethods,enlargingSMEs’knowledgeandcapacity,andenhancingthequalityoftheirIPdecisions.Tailor-madeIPconsultationsanddiagnoseswerealsoprovidedtoindividualSMEs,withaviewtostrengtheningtheirpatentdeploymentintheR&Dphase,shorteningtheR&Dprocess.

UnitedStates UndertheAmericaInventsAct,whichwassignedintolawin2012,aprobonoprogrammeassistsfinanciallyunder-resourcedindependentinventorsandsmallbusinesses.

The“StartupAmerica”initiativeoftheUSadministrationaimsto:

• expandaccesstocapitalforhigh-growthstart-ups;

• expandentrepreneurshipeducationandmentorshipprogrammes;

• strengthencommercializationoffederally-fundedresearchanddevelopmentwhichcangenerateinnovativestart-ups;

• identifyandremoveunnecessarybarrierstohigh-growthstart-ups;and

• expandcollaborationbetweenlargecompaniesandstart-ups.

Table E.3: Special patent filing fees for SMEs of selected WTO members

Country Special patent fees for SMEs Links

Argentina Yes,forrenewalSMEsgetdiscount http://www.inpi.gov.ar/index.php?Id=107&criterio=2

Brazil Yes,discountformicroenterprises http://www.inpi.gov.br/arquivos/patentes.pdf

Canada Yes,discountforsmallentitieshttp://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr00142.html?Open&wt_src=cipo-patent-main

France Yes,discountforSMEshttps://www.inpi.fr/fr/services-et-prestations/aides-aux-pme-et-aux-centres-de-recherche

India Yes,distinctionforsmallfirms http://ipindia.nic.in/ipr/patent/patent_FormsFees/Fees.pdf

UnitedStates Yes,specialfeesforsmallandmicroenterpriseshttp://www.uspto.gov/learning-and-resources/fees-and-payment/uspto-fee-schedule

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for the electronic delivery of services, and difficultiesin obtaining access to much-needed supportingservicessuchastheInternet,legalservices,advertisingand accounting. As such, it emerges that members’observations regarding obstacles and challenges toSMEsinservicestradearelargelyconsistentwiththoseidentified in economic research, surveys and othermaterialcitedinSectionDofthisreport.

Throughout theearly yearsof theDohaDevelopmentAgendanegotiations,SME-relatedissuesinrelationtotradeinserviceswereoftenraisedbymembers.Therewerealsovoices,especiallyfromdevelopingcountries,advocating negotiating approaches that took intoaccountthesizeofthesupplieraswellasthetypeofeconomy involved; and approaches such as providingpreferential treatment for SMEs from developingcountries. Further discussion surfaced occasionallybetween2001and2005.Somedelegationscautionedthat negotiating perspectives based on firm size, forexample, that might discriminate between enterprisesof different sizes, might hinder competition and theefficientallocationofresources.Morerecently,in2011and 2012, the Swiss Delegation tabled submissionson the role of SMEs in the Swiss services economyand on the electronic delivery of services by SMEexporters.Turkeyalsoshared informationon tradebyits SMEs. However, the focus of services discussionsincreasinglyturnedtoproposalsthattheGATSshouldhaveamechanismtoextendpreferential treatment toLDCs,similartotheenablingclauseoftheGATT.ThetwotopicswerenotmutuallyexclusiveasmanyoftheultimatebeneficiariesofsuchamechanismwouldlikelybeSMEsactiveinorhopingtoenterexportmarketsforservices.

Classification talks to improve the certainty of market access undertakings

The GATS Committee on Specific Commitmentsdeals with, among other things, classification andscheduling issues that might enhance the clarity andpredictability of members’ schedules of commitmentsofmarketaccessandnationaltreatmentundertakingsonservicestrade.

For some time, the GATS Committee on SpecificCommitments has considered the issue of “newservices”. Background information provided by theSecretariat to assist members in their discussioncontained, for example, an illustrative list of servicesidentifiedbymembersintheirpreviousdiscussionsasnotbeingexplicitlyreferredtointheGATSclassificationsystem. Inmanycasessuchexamplesare informationtechnology (IT) services or IT-enabled services thathavebecometradable,ormoreeasilytradablethan inthepast,byvirtueofnewtechnologies.Further,inafew

cases,suchservicescanbelinkedtoactivitiessuchasbusinessprocessoutsourcingservices,whereinSMEshaveoftensuccessfullyenteredglobalvaluechainsinrecentyears.

TheGATSclassificationsystemdidnotnecessarilyattainalevelofspecificitythatwouldpermitmemberstoclearlyindicatesectorsintheirscheduleswheresuchactivitiesmight benefit from commitments. Call centre servicesandcloudcomputingwereamongsomeoftheexamplesdiscussed.Despite the importanceofmoreadequatelycapturing some such services in the classificationmost often used for scheduling, members expresseddivergent views.Somedelegationssuggested that fewservices were actually “new” because most could fitsomewhere within existing classification categories.Otherdelegationsworriedabouttheimplicationofsuchanapproachforapossiblebackwardre-interpretationofexistingGATScommitments.

Meanwhile, some governments, such as thoseparticipating in a plurilateral negotiating group oncross-bordersupply, ledbyIndia,havetriedtoidentifyspecific activities within the GATS classificationsystem,aswellassomemoreupdatedversions,whichwouldbelikelycandidatesforoutsourcingtoSMEsindevelopingcountries.SimilareffortswereconductedtoidentifyservicessubjecttorequestinthecontextoftheLDCwaiver.

Ongoing work on GATS rules

SME-related issues have also been raised in theWorking Party on GATS Rules, which addresses thepossibility of completing “unfinished” GATS rules inthe areas of safeguards, subsidies and governmentprocurement. In statementspromoting thedesirabilityof an emergency safeguard mechanism (ESM) inservices trade, delegations from ASEAN economiescitedpotentialexampleswherebytheviabilityofSMEsinretailtrademightbethreatenedbythesuddenentryof large retail competitors taking advantage of GATScommitments under Mode 3 (commercial presence);foreign chains might then replace small independentstores,causinginjurytothesmallbusinesses.

Accordingtotheproponents,anemergencysafeguardmechanism would provide breathing space for theSMEsupplierstoadaptandsurvive.Otherdelegationsremained unconvinced of the need for safeguardaction to address what they considered to be mostlya structural problem for which, if necessary, otherinstrumentsmightbeavailable.

(v) Workprogrammeone-commerce

When the WTO launched its work programmeon e-commerce in 1998, ministers agreed to a


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provisionalmoratoriumoncustomsdutiesonelectronictransmissionsanddirectedtheWTOGeneralCounciltodefinethework.Shortlythereafter,theGeneralCouncilcirculatedabackgroundnoteone-commerceandWTOagreements and designated issues to be examinedby theWTOCouncils for trade ingoods,servicesandintellectual property rights, as well as the CommitteeonTradeandDevelopment.Theworkprogrammehascontinued since that time, most recently extended bytheMinisterialDecision taken inNairobi inDecember2015, which also maintained the moratorium oncustomsduties.

Since the inception of the work programme,developmentwasclearlyamongtheissuesdesignatedfor discussion and, in that context, the relevance toSMEsdidnotgounheeded.SMEswerefirstexplicitlycitedattheministeriallevelasanissuefordiscussionin the Decision on Electronic Commerce of theSeventh WTO Ministerial Conference in 2009 (i.e. toextend themoratoriumon importdutiesonelectronictransmissionsuntiltheEighthMinisterialConference).

Althoughno formalconclusionshaveyetbeen issuedby the bodies conducting the work programme, anemerging consensus was that the provisions of theirrespective agreements appear to be technology-neutral, hence, applying to trade in all its forms,including trade via the Internet. There has also beenbroad recognition of the importance of the work one-commerce for SMEs in various bodies, particularlytheCommitteeonTradeandDevelopment (CTD)andtheServicesCouncil.

With the reinvigoration of the Work Programme in2011, services discussions on the subject resumed.During this period, members submitted some newmaterialforconsiderationunderthediscussions.Theseincluded, for example, possible ICT trade principles,theroleofSMEs,theevolutionofcloudcomputingandmobileapps, licensingpractices, consumerprotectionand authentication. In particular, Switzerland madea submission of the experience of SMEs and theiractivities related to e-commerce in Switzerland.30Amongitsfindingsarethat,thelargerthecompany,themoreitsellsviatheInternet.SMEsandlargecompaniesfacethesameobstaclestocross-bordere-commerce,which is lack of knowledge about the foreign market(consumer preferences, language, regulatoryenvironment, etc.). However, larger companies arebetterinacquiringtherequiredknowledge.

TheCouncilforTradeinServicesconsideredavarietyof submissions made by members over the course of2015, including one that aimed to increase focus onSMEs. In that submission, China proposed that theCouncil embark on a structured information-sharing

exercise on topics relevant to the work programme,andsuggestedthatchallengestoSMEparticipationine-commerce was a topic that such an exercise couldcover.China’sproposalwassubsequentlyacceptedand,bytheendoftheyear,interventionsonwerecontributedbyChinaandNigeriacoveringtheircountries’progressine-commerce,includingbySMEs.

On other issues, members reverted to a UScommunication on cross-border information flows,localization requirements, privacy protection andcloudcomputing,whichaimedat fosteringadialogueand information-sharing exercise on these topics. Asnoted in Section D, some of these topics, such ascloudcomputingandlocalizationrequirements,canberelevant to reducing tradecosts incurredbySMEsastheyseektoemploynewtechnologiestoincreasetheirparticipationintrade.

In 2015, the IP-related issues discussed by theCouncil for TRIPS included latest technologies andtheiruses,andhowIPRscanpromoteinnovationinITtechnologies.Accordingly,oneoftherecurringagendaitems of the TRIPS Council is “IP and Innovation”. Inparticular, ameeting focusingon this topicdiscussed“entrepreneurialism and new technologies”. Underthis item, members shared experiences and detailedexamplesofSMEsandstart-upenterprisesintheareaof new and mobile technologies to illustrate the rolethatIPplayedinbringinginnovationtothemarket.Thefocus lay, in particular, on start-ups commercializingmobile technologies and apps, including the benefitsthesecanhavefordevelopingcountries.

Other topics of interest managed by the Council forTRIPS, including discussion that took place in 2015,included the transfer of technology to developingcountries and overseeing technical assistance todevelopingcountries.

At the April 2012 meeting of the CTD, membersdiscussed the 2011 Ministerial Decision onE-commerce,which instructedmembers to “emphasizeand reinvigorate the development dimension in theWork Programme, particularly through the CTD, andto examine and monitor development-related issuessuchastechnicalassistance,capacitybuilding,andthefacilitationofaccess toelectroniccommercebymicro,small and medium-sized enterprises, including smallproducers and suppliers, of developing countries andparticularly least-developed members”. In July 2012,Ecuador and Cuba presented a paper titled “Terms ofReference:WorkshoponE-commerce,DevelopmentandSmallandMedium-sizedEnterprises”.InFebruary2013,the Secretariat and the CTD produced a backgroundnote in response to this request for a workshop. Thenotefocusedontherelationshipbetweene-commerce

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developmentandSMEs,andonhowsomeSMEshaveusede-commerce topromote,market, serviceandselltheirproductsnationallyandinternationally.

At the conference on E-commerce, DevelopmentandSMEsorganizedby theCTD inApril2013, itwashighlightedthatinternationalorganizationscanpromoteand address some e-commerce issues, for exampleissues relating to technical assistance and capacitybuilding, taking into account country-specific needs.Itwasalsosuggestedthat internationalorganizations,includingtheWTOandtheITC,couldhelpdisseminateknowledge and understanding and explain the issuesand challenges, and which models and approacheshaveworkedbest.

At the CTD’s meetingsheld in 2014, the Chair askedmembers to consider how to address some of theissues emerging in the discussions on e-commerce,such as how to enhance economic and developmentopportunities, with special consideration of thesituation in developing countries, particularly in LDCmembers and least-connected countries. Memberswerealsoasked tocontinue toexamineopportunitiesand challenges for access to e-commerce by micro,small and medium-sized enterprises, including smallproducersandsuppliers.

(vi) Tradefinance

AsnotedinSectionD,lackofaccesstofinancetendsto fall disproportionately on SMEs and these creditconstraintsareparticularlyreflectedinaccesstotrade

finance. The WTO has been working to keep financeflowingfortrade.SpecialattentionhasbeendevotedtothedifficultiesfacedbytradersinLDCsanddevelopingcountrieswherefirmsaregenerallysmall.

In2011, theWTODirector-Generaland thePresidentoftheWorldBank,alongwiththeheadsofmultilateraldevelopment banks, drew the attention of theinternational community to trade finance difficulties,an important concern among SMEs in low-incomecountries.Themainthrustofthisinitiativewastosupportmultilateraldevelopmentbanksinestablishingaglobalnetwork of trade finance facilitation programmes. Allinall,multilateraltradefinancefacilitationprogrammeshelped facilitate over US$ 30 billion in trade in low-income countries in 2014 (see Table E.4).31 Almostone-third of the International Finance Corporation’stotaloperationstookplaceinsub-SaharanAfrica,andtheADB’srisk-mitigationsupportmainlycaters to thepoorest regions in Asia, such as Bangladesh, Nepal,Pakistan,SriLanka,UzbekistanandVietNam.

Despitetheseefforts,overhalfoftradefinancerequestsby SMEs are rejected, against just 7 per cent formultinationalcompanies(DiCaprioetal.,2015).SMEsindevelopingcountriesfaceevengreaterchallengesinaccessingtradefinance.TheestimatedvalueofunmetdemandfortradefinanceinAfricawasUS$120billionintheyear2012(AfDB,2014)andUS$700billionindevelopingAsia(DiCaprioetal.,2015).

In an effort to mitigate these problems, the WTODirector-General issuedacall inApril2016foraction

Table E.4: Overview of the main multilateral development bank trade facilitation programmes

European Bank for Reconstruction and

Development

International Finance Corporation

Inter-American Development Bank

Asian Development Bank

Programme titleTrade Facilitation

ProgrammeGlobal Trade Finance

Program (GTFP)

Trade Finance Facilitation Program

(TFFP)

Trade Finance Program

Numberofcountriesinoperation

23 96 21 18

Programmecommencement

1999 2005 2005 2004

Numberoftransactionssincecommencement(yearending31December2012)

15,508 31,600 4,457 8,338

Valueoftransactionsin2013

€1.2billion US$22billion US$1.2billion US$4billion

Numberofconfirmingbanks

800+ 1,100 297 124

Claimstodate 2–nolosses zero zero zero

Source:ICC(2014),p.75.


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tohelpclosethegapsintheavailabilityoftradefinancethat affect the trade prospects of small and medium-sized enterprises (SMEs), particularly in Africa andAsia. Among the additional steps that the Director-Generalencouragedmultilaterallendingagencies,theprivatesectorandfinancialregulatorstotakeare:

• enhancing existing trade finance facilitationprogrammes to reduce the financing gap byUS$50billion;

• reducing the knowledge gap in local bankingsectors for handling trade finance instruments bytrainingat least5,000professionalsover thenextfiveyears;

• maintaining an open dialogue with trade financeregulators to ensure that trade and developmentconsiderations are fully reflected in theimplementationofregulations;and

• improving monitoring of trade finance provision toidentifyandrespondtogaps,particularlyrelatingtoanyfuturefinancialcrises.

(vii) Governmentprocurement

The WTO Agreement on Government Procurement(GPA)isaplurilateralinstrumentregulatingtheconductof international trade in government procurementmarkets. The GPA was recently renegotiated and therevisedAgreementcameintoforce inApril2014.TheGPA intends to bring more competition, transparencyandproceduralfairnessintheprocurementmarketsitcovers(asspecifiedintheannexestoitsAppendixI).TheGPAalsoservesbroaderpurposesofpromotinggoodgovernance,theefficientandeffectivemanagementofpublic resources,andtheattainmentofbestvalueformoneyinnationalprocurementsystems.

Initsapproach,theGPAencouragesthewidestpossibleparticipation in procurementmarkets and is thereforedesignedtohelpgovernmentsattractthebestpossiblesuppliers offering their goods and services at themost competitive prices. It aims to help governmentsachieve the best value for money, and suppliers togain access to markets that were previously closedto them, whether because of formal reasons such asdiscriminatory policies, or practical obstacles, suchasa lackof transparencyregardingopportunitiesandconditionsforparticipation.

The GPA’s role in facilitating the integration ofSMEs into procurement markets is important in tworespects (Nicholas and Müller, 2016). First, the GPA,like RTAs, ultimately derives its raison d’être from itsusefulness in facilitating private sector suppliers’accesstoprocurementmarketsabroad.Inthatregard,

SMEs contribute to rendering it effective, as SMEsrepresentalargemajorityoffirmsworldwide.Second,the GPA is part of, and is derived from, an emergingstandardofinternationalbestpracticesingovernmentprocurement,andseeksto increasegoodgovernanceand the efficiency of public procurement systems forthebenefitofgovernmentsandtheircitizens. Inorderfor these goals to be achieved, and to increase theeffectiveness of procurement systems worldwide, thebarrier-reducing measures that the GPA proposesneed towork in tandemwithSMEsupportmeasures.WhiletheGPAdoesnotcontainspecificprovisionsontheissueaspartofitscoreprovisions,theCommitteeon Government Procurement has adopted a DecisionestablishingaWorkProgrammeonSMEs.32

ThisDecisionrecognizestheimportanceoffacilitatingSMEparticipationingovernmentprocurementandtheneed toavoid introducingorcontinuingdiscriminatorymeasures that distort open procurement. The overallobjectiveoftheWorkProgrammeistoreviewmeasuresandpoliciesforSMEsthatpartiestotheDecisionmayuse to assist, promote or facilitate participation bySMEs in government procurement, and to prepare areportoftheresultsofthereview.

The Decision also contains a number of importantelements. One is transparency, as it requires partiesmaintaining specific provisions on SMEs in theirAppendix I schedules to notify such measures andpoliciestotheCommitteeonGovernmentProcurement.AsecondelementoftheSMEWorkProgrammeinvolvesthe conduct of an SME survey to collect informationon the measures and polices used to assist, promote,encourage or facilitate participation by SMEs ingovernmentprocurement.TheSMEsurveywillbeusedbypartiestotheGPAtoidentifythemeasuresandpoliciesthat they consider to be best practices for promotingandfacilitatingtheparticipationofSMEsingovernmentprocurement.PartiestotheGPAwillbeencouraged(i)toadoptthebestpracticesidentifiedintheassessmentofthesurveyand(ii)toreviewtheotherremainingmeasureswithaviewtoeithereliminatingthemorapplyingthemtotheSMEsoftheotherpartiestotheAgreement.

TheCommitteeonGovernmentProcurement initiatedits work on the Work Programme on SMEs in June2014 and several dedicated discussions have takenplace since then. The great majority of the parties tothe GPA have provided their responses to the SMEsurvey,andacompilationofallresponsesreceivedwascirculated to the parties in February 2016. The WorkProgramme is expected to be an important focus fortheCommitteein2016andsubsequently.

Asawhole,theGPAencouragesSMEparticipationandrelatedmeasuresinanumberofways.First,itishelpful

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in identifying measures by which the general featuresof procurement legislation and systems relating totransparency,integrityandcompetitionmaybeimproved.These“level theplayingfield” forallpotentialsuppliers,andcanbeexpectedtoremoveobstaclestoparticipation,ofparticularrelevancetoSMEs,asafirststep.ImportantsynergiesthereforeexistbetweenSMEpoliciesandtheobjectives,rulesandprinciplesoftheGPA.

The GPA actively encourages measures related totransparency, openness and integrity necessary inorder for SMEs to overcome barriers to participationin public procurement: in this regard, SMEs are verysimilar to international suppliers, whose participationin procurement markets SME policies and the GPAaredesignedtofacilitate.Consequently,thegoalsandspecificprocedural rulesestablishedbySMEpoliciesand the GPA, in encouraging broad participationand competition in procurement markets, are fullycompatiblewiththegoaltofavourtheinclusionofSMEsinthesupplierbaseofgovernmentsbysuchmeans.

TheGPAalsoprovidesflexibilityforpartiestoimplementspecific measures relating to procurement practices,which can be taken in the application of general rulesinordertofacilitateSMEparticipation.Examplesincludethe disaggregation of demand, the appropriate use offramework agreements and e-procurement systems,the creation of opportunities for subcontracting andjoint bidding, the prompt payment of suppliers, and theprovisionof training.SuchmeasuresmaybeneededtoovercomepotentialbarrierstoSMEparticipationthatmaypersistdespiteagenerallyopenandtransparentsystem.

In this regard, the basic approach of the GPA is toleave options for each government to decide on, aslong as general principles of transparency and non-discrimination are complied with. The choices andsolutionsadoptedcanhaveasignificantimpactonSMEprocurementandontheefficiencyoftheprocurementsystemasawhole,andthereforeneedtobereflectedupon. While the text of the GPA, as binding legalinstrument, carefully carves out policy space in thisregard, theWorkProgrammeonSMEsestablishedbytheGPACommitteepermitsrelatedpolicydiscussions.

The third area of interaction concerns preferentialmeasures or programmes designed to give SMEsprivilegedaccesstoprocurementcontracts.Inthatregard,somepartieshavescheduledtargetedexceptionstothenon-discriminationrequirementsandotherprovisionsoftheGPAintheirAppendixIschedules.

(viii) Development

NoexplicitreferencestoSMEsaretobefoundinPartIVoftheGATT,on“TradeandDevelopment”.However,

thedevelopmentdiscussionsandactivitiesintheWTOhaveunavoidablyhadaprominentSMEfocus.

As discussed above, SMEs in developing countrieswere a main focus of work in 2013 when the WTO’sCommittee on Trade and Development (CTD)examined links and challenges for SMEs in the areaofe-commerce.Awidevarietyofchallengeslinkedtoinfrastructure, skills-building and the services sectorswere identified. They were seen as crucial elementsforgovernmentstoaddressinordertohelpSMEstakeadvantageofthisnewandgrowingtechnology.

SMEs were one of the subjects examined in theCTD’s discussions of non-tariff measures in theWork Programme on Small Economies. Here, thefocuswasonhow industrialandagriculturalproductsfrom businesses in small economies can meet thetechnical regulations and sanitary measures requiredin key developed country markets. Work in this areahas continued in 2016 with a focus not only on howsmall businesses can meet international and privatestandards,butonhowtheycanusesuchstandardstointegrateintoandmoveupglobalvaluechainsinbothgoodsandservices.

The WTO, in collaboration with other agencies, hasseveral capacity-building initiatives designed toassist developingcountries andLDCsovercome theirconstraintsandtakeadvantageoftradingopportunities.Strengthening productive capacity and helpingexportersaccessorincreasetheirpresenceinforeignmarketsaresomeofthemainaimsoftheAfTinitiative.ForLDCs,aspecificprogrammeexists in the formoftheEnhancedIntegratedFramework(EIF),whichhelpsgovernmentsmainstreamtradeintotheirdevelopmentstrategies.AthirdinitiativeistheStandardsandTradeDevelopmentFacility(STDF),whichhelpsexporterstomeetSPSstandardsintheirfruitandvegetable,spicesandlivestocksectors.

Each of these initiatives underscores the wide arrayof assistance efforts available to governments, andthrough them to SMEs and the private sector ingeneral,sothattheycanrealisebenefitsfromtradingand development opportunities. These are furtherdiscussedbelow.

Aside from examining issues related to AfT supportforSMEs,governmentsalsonegotiatenewmultilateralagreementswhichmakeiteasierforsmallbusinessestoexport,especially fromLDCs.Asdiscussedearlier,these include the duty-free and quota-free initiative,the Ministerial Decision on Preferential Rules ofOrigin Requirements for Least-Developed Countries,concludedattheTenthMinisterialConferencein2015,and the services waiver which allows developed and


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developing countries to grant preferences to LDCservicesproviders,therebygivingthemgreateraccesstotheirmarkets.

Work programme on small economies

During the Fourth Ministerial Conference in Doha in2001,membersagreedtoaworkprogrammeonissuesrelatingtothetradeofsmalleconomies.Theobjectiveofthisprogrammeistoframeresponsestothetrade-related issues identified, for the fuller integration ofsmall,vulnerableeconomiesintothemultilateraltradingsystem.

At the Ninth Ministerial Conference in 2013, WTOmembers instructed the WTO Secretariat to providerelevantinformationandfactualanalysisfordiscussionamong members in the CTD’s Dedicated Session on,amongother things, thechallengesandopportunitiesexperienced by small economies when linking intoglobalvaluechainsfortradeingoodsandservices.

InOctober2014, the ITCand theWTO issueda jointcommunication note on the constraints that SMEsface in engaging in international trade, notably thosehighlighted by SMEs in LDCs, and reviewed how AfTisaddressing theseobstacles.Discussion focusedonthefactthatdevelopmentfinanceinstitutionsandAfTalonecannotbridgetheSMEfundinggaporaddressallofthetrade-relatedconstraintsofSME.Thejointnoterecalled the need for close collaboration withpartnercountrygovernmentsandwiththeprivatesector,bothinimplementationandinfindinglong-termsolutionstomarketfailures.

The joint ITC-WTO workshop on AfT and SMEcompetitiveness, held in October 2014, was the firstof a series of workshops foreseen by the 2014-15AfT Work Programme. It built on the joint ITC-WTObackground note and dealt specifically with the issueoftheintegrationofSMEsintoGVCs.

AttheCTDDedicatedSessioninMay2015,theWTOissued a background note on the challenges andopportunities experienced by small economies whenlinking intoGVCs in trade ingoodsandservices.Thisbackground note highlighted challenges faced bySMEs insmalleconomies,suchasaccess to finance,workforceskills,marketinformationandsmallmarketsthat prevent them from growing. Several challengesfaced by small economies point to the important roleofWTO-relatedinitiativesandpolicies,suchasAfTandtradefacilitation.

(ix) Capacitybuilding

The WTO seeks to ensure that all its memberseffectively participate and benefit from world trade.

One of its challenges is to get the many existingdevelopmentassistancemechanismstoworktogethermoreeffectivelytohelpdevelopingandLDCmembers.In that sense, the WTO has a catalytic role to play –ensuringthattheagenciesresponsiblefordevelopmentunderstand the trade needs of WTO members, andencouragingthemtodeliversolutions.

ThefollowingsubsectionwillprovideSMEcasestudiesor stories falling under the umbrellas of AfT, the EIF,and the STDF, all of which help SMEs increase theirsupply-sidecapacity.

Aid for Trade (AfT)

TheAidforTradeinitiativehelpsdevelopingcountries,especiallyLDCs,toimprovetheirtradecapacitieswhenengagingwithglobalmarkets.ItispartofoverallOfficialDevelopment Assistance (ODA) targeted at trade-relatedprogrammesandprojects.Itincludestechnicalassistance, infrastructure and adjustment assistance.The initiative has raised awareness among LDCs,developing countries and donors about the positiverolethattradecanplayinpromotingeconomicgrowthanddevelopment.BoxE.5providesacasestudyofaprojecttargetingmicroenterprisesinJamaica.

The Enhanced Integrated Framework (EIF)

TheEIFisamulti-donorprogramme,involvingtheWTO,International Monetary Fund (IMF), ITC, UNCTAD,United Nations Development Programme (UNDP) andWorldBank,whichhelpsLDCsplayamoreactive rolein the global trading system. It operates in 48 of theworld’spooresteconomies,aswellasthreewhichhavegraduated from LDC status, across Asia, the Pacific,AfricaandtheAmericas.Itissupportedbyamulti-donortrustfundwithafundingtargetofUS$250million.

Its Diagnostic Trade Integration Study (DTIS) helpsLDCs identify, prioritize and address constraints tocompetitiveness, growth potential or supply chainweaknesses. These constraints include those facedby SMEs, such as access to logistic infrastructuresandservices,finance,technologiesandskills.BoxE.6highlightstwoprojectsthatshowhowtheEIFhasbeenaddressingtheseSMEconstraintsinBurkinaFasoandZambia.

The Standards and Trade Development Facility (STDF)

The STDF was established in 2002 by the WTO, theFood and Agriculture Organization of the UnitedNations (FAO), the World Organisation for AnimalHealth (OIE), the World Bank and the World HealthOrganization(WHO)tosupportSPScapacity-building

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Box E.5: Productive integration of micro enterprises in the Jamaican craft and agro-processing sectors

MicroandsmallenterprisesinJamaicaaccountfor80percentofallbusinessesand36percentofemployment.In both the agro-processing and craft sectors, some micro enterprises are engaged in export, acting as thesuppliers to larger enterprises. The government sees these sectors as having great potential for economicdevelopment.Itwasforthisreasonthataprojectwasdevelopedtargetingtheagro-processingandcraftsectorsandlaunchedin2006tohelpthembecomemorecompetitiveandsellmoreproductsabroad.

Thespecificobjectiveoftheprojectwastoimplementanintegratedprogrammefor14groupsofmicroenterprisesinthecraftandagro-processingsubsectors,utilizingasustainablemodelofproductiveintegration.Thetargetgroupcomprisedcommunity-basedorganizationsorinformalgroups,oftenoperatingatasubsistencelevelandcooperativelyproducingandsellingarangeofagro-processingproducts(jams,jellies,confectionary,fermentedfoodstuffs)andcraftitems(madeofwood,strawandnaturalfibres).Theprojectsoughttoworkwithproducerstoaddresschallengesthatinhibitedthegroupsfromoperatingefficientlyandprofitably.Theseincludedproductdesign,productdevelopment,businessmanagementandmarketing.

Attheconclusionoftheprojectin2011,thetechnicalassistanceprovidedresultedin14improvedproductsandtheintroductionofthreenewproducts.Threegroupsfromthecommunityhaveimprovedsignificantlythequalityandstandardsoftheirproducts.Theseproducersarenowproducinggoodswhicharecommerciallymarketable.Mostoftheremaininggroupsareworkingtowardshavingtheirproductsreadyforthemarket.Finally,allofthegroupshaveincreasedtheirlevelofsales.

Box E.6: Small-scale sesame value chain in Burkina Faso, and honey and beekeepers in Zambia

TheEIFprojectinBurkinaFasoseekstobringimprovementstothesesamesectoranditsactors,manyofwhomaresmall-scaleoperators,bysettingupinter-professionalorganizations,increasingthetechnicalcapabilitiesofproducers,andfacilitatingaccesstofinancing.Italsoseekstocontributetothegrowthofthesesameexportrevenuesandimprovetheincomesofruralfarmers,producersandentrepreneurswhoareinvolvedinthesesamevaluechain.Thesesameprojectstronglyemphasizesemploymentoffemalefarmers,whorepresent43percentofthesector.

The project has allowed Burkinabe sesame operators to explore market opportunities and develop businessrelationshipswithcountriesfromAfrica, theAmericas,Asia,EuropeandtheMiddleEast. Ithas improvedthecrop yield of more than 5,000 producers and extension agents, leading to an increase in sesame yield perhectare of from 521 kg in 2012 to 602 kg in 2014, and a more than three-fold expansion in sesame seedproductionbetween2012and2014.Thecapacityof102femalestakeholderstocomplywithSPSmeasureshasbeenimproved.Inaddition,sevenSMEswerehelpedtodeveloptheirbusinessplansfor2014and2015,andmeetingswereorganizedduring2015withlocalfinancialinstitutionsandsesamesectorstakeholderstodiscussissuesrelatedtoaccesstofinance.

In the EIF project in Zambia, which commenced in January 2013, training was provided to more than 5,000small-scalehoneyproducersacrossthecountry,withafocusonyoungpeopleandwomen.Thishasenabledthemtobelinkedwiththemainbuyersofbeeproducts.Inaddition,theprojecthasfacilitatedtheconstructionofbulkingcentresusedforstorageandassellingpoints,whichhavesignificantlyreducedtransactioncostsandimprovedhoneymarketingandproductivity.Thehoneyandbeekeepingprojectalso looksat the investmentspossibleineco-friendlybusinesssolutionsforruralhouseholds,withthepotentialtobuildtheirabilitytotradewhilemanagingtheforestenvironment,andtostimulateandincreaseyieldsofvariouscrops,treesandplantsthroughbeepollination.Sofartheprojecthasincreasedtheproductioncapacityofbeekeepersfrom500tonnesofhoneyto753tonnes.

indevelopingcountries.ItoffersprojectgrantfinancinguptoamaximumofUS$1million.

Over the years, it has evolved from being a financingmechanismtoacoordinationandknowledgeplatform.

BybringingtogethertheSPSexpertiseandskillsofitsfoundingpartnersandotherorganizationsanddonors,theSTDFprovidesauniqueforumtoraiseawareness,exchange information, identify and disseminate goodpractice, encourage collaboration and synergies, and


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Box E.7: CocoaSafe: SPS capacity-building and knowledge-sharing in the cocoa sector in Southeast Asia

TheproductionandexportofcocoaprovidesalivelihoodforthousandsofsmallholderfarmersinSoutheastAsia.InIndonesia,thethird-largestproducerandexporterofcocoaintheworld,500,000smallholderfarmersaccountforapproximately87percentofcocoaproduction.However,producersfacethreemainproblems.First,mostofthecocoabeansproducedinSoutheastAsiaareofamoderategrade.Second,theproductivityofsmallholderfarmersistypicallylow.Third,theseSMEstendnottoimplementthebestproductionpractices.Asaresultcocoabeanscanbecontaminatedduringtheproductionprocessaswellasduringthedrying,storageandprocessingprocedures.

EnsuringcontinuedaccessbySoutheastAsiancocoaproducerstohigh-valuemarketssuchastheEuropeanUnion,JapanandtheUnitedStatesrequiresthemtominimizecontaminationofcocabeansandcomplywithanincreasingnumberoffoodsafetyandSPSmeasures.Tohelpthemachievethesegoals,theSTDF,alongwithanumberofpartnerorganizations,establishedtheCocoaSafeproject.Theprojectpromotesgoodagriculturalandmanufacturingpracticesandotherbestpracticesatallstagesofthecocoavaluechain,sothathigh-qualitycocoa beans, which comply with food safety and international SPS standards, are produced. In addition, thesafetyoffarmersisalsoexpectedtoimprovethankstotheprovisionoftraininginhowtohandleproduce,applychemicalsmoresafelyandintegratebetterstoragepractices.

Addedtothisistheexpectationthat,bydevelopingtheknowledgebaseandcapacityofproducers,evenothernon-producerSMEstakeholdersalongthevaluechain,suchasagriculturedealers,willbenefitfromtheproject’straining programme because their ability to offer effective advice to farmers and to sell targeted inputs tofarmerswillbeimproved.InIndonesia,forinstance,facilitatorsareprovidingtrainingeventsforsmallprocessors,while project experts from Malaysia are supporting medium-scale processors and traders in Indonesia. TheexperienceandknowledgegainedfromthiscocoaprojectcanbeappliedtosupportSMEsoperatinginothercommoditysectors,suchascoffeeandrice.

generallyenhancetheeffectivenessofSPScapacity-building. Recent examples of topics addressed bythe STDF include: (i) assessment and prioritizationof SPS needs; (ii) public-private partnerships to buildSPS capacity; and (iii) enhancing the effectivenessand efficiency of SPS border controls, in the broadercontext of trade facilitation. Results of this and otherSTDFworkaresummarized inshortpracticalbriefingnotes highlighting recommendations and lessonslearned,includingforSMEs.

As an example, based on regional research inSoutheastAsiaandSouthernAfricaandotherprojects,theSTDFissuedabriefingnotein2015thatidentifiedgoodpractices to improve the implementationofSPScontrols and reduce trade costs.33 Simplifying SPSprocedures may also entice more small-scale tradersto utilize formal channels, which may have additionalhealth benefits. In October 2015, Zambia reported totheWTOSPSCommitteeonhowsomeofthefindingsand recommendations of the STDF work are beingimplemented, and that benefits included increasedparticipation of Zambian SMEs and small traders ininternational trade and more support for integrationintoglobalagrovaluechains.

BoxE.7givesanexampleofaSME-focusedprojectinthecocoasectorinSoutheastAsia.

5. Conclusions

This section has documented the multiple layersof international cooperation directed at SME tradeparticipation.TheoverarchingconclusionisthatSMEsfigure prominently in multilateral and preferentialtrade agreements and in the work programmes ofinternationalorganizations.

Theanalysisof269RTAscurrentlyinforceandnotifiedtotheWTOasofMarch2016suggeststhatalmosthalfofallthenotifiedRTAs(133agreements)incorporateatleastoneprovisionmentioningexplicitlySMEs,mostlycouched in best endeavour language. In parallel, thenumber of detailed SMEs-related provisions includedin a given RTA has tended to increase in recentyears.A limitedbut increasingnumberofagreementsincorporate specific provisions in dedicated articlesor even chapters on SMEs. If the Trans-PacificPartnershipandEU-CanadaComprehensiveEconomicandTradeAgreementareanyindication,thelanguageandformsofSMEs-relatedprovisionsinRTAsarelikelytocontinuetoevolveandbecomemorepragmatic.

ThemostcommoncategoryofSMEs-relatedprovisionsis that which promotes cooperation on SMEs ingeneral or ina specific context, suchase-commerceand government procurement. Provisions exempting

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measures relating to SMEs and/or programmessupporting SMEs with regard to RTA obligationsare the second most common. This is not surprising,giventhatSMEsaremoreadverselyaffectedbytradecosts and market failures than larger firms. Manygovernments, particularly in developing countries,may lack theappropriatepolicy tools tocorrect thesemarketfailures.Instead,SMEsupportprogrammesareused as second-best policy tools to remedy marketfailures.Consequently,governmentsprefertopreservethese programmes even as they sign internationalagreements.

AlthoughSMEsarenotalwaysspecificallymentionedinWTOAgreements,multilateralruleshavetheeffectof levelling the trading field, alleviating some majorconstraintsfacedbySMEtradersandtherebyfosteringSME participation in international trade. Multilateralrulesreduceboththevariableandfixedcostsoftradethat hinder SMEs from entering foreign markets, andtheyhelpreducetheinformationburdenofsomeWTOAgreementsonSMEs.TheWTO’swork intheareaofcapacity building, which tries to expand the tradingopportunitiesofitsdevelopingcountrymembers,hasaprominentSMEcomponent.

WTOrulesalsoincludeanumberofflexibilitiesthat,ina similar fashion to the exemptions included in RTAs,address the public policy concerns of governmentswishing to support SMEs. They make it easier fora member to exercise its rights when it acts onbehalf of SMEs. They allow members to continueproviding financial contributions to SMEs. They givemembersgreaterleewaytopromotethetechnologicaldevelopment of their SMEs. They allow members toprovidepreferentialtreatmenttotheirSMEs.

There are a number of areas in which cooperation atthemultilateral levelcouldcontributetounlockSMEs’tradingpotential.

Oneareawherethereisprogresstobemadeisthatoftransparency.Thisreporthasshownthattransparencywould be of particular benefit to SMEs.34 Whilealmost every WTO Agreement includes transparencyprovisions, their objective is not necessarily to informSMEs. Providing relevant information to firms in theprivatesectorandSMEsinparticularistheresponsibilityof the ITC (see Section E.3). There are, however, anumberofareasinwhichchangesinthetransparencymechanismscouldhelpSMEsparticipateintrade.TheAlertSystemforSPSandTBTNotificationsdiscussedin this section is one example of an important stepin the direction of increased transparency, notablyon standards and regulations, with the potential tofosterSMEtradeparticipation.TheAlertSystemcouldbe further improved by specifically facilitating the

involvement of small firms in tracking, consulting andcommentingondraftregulationsofinterest.

Also, transparency procedures could be furtherenhanced. Currently, only draft technical regulationsand standards that are not based on internationalstandards have to be notified. The SPS and TBTCommittees have recommended notifying even thoseregulations thatarebasedon international standards.Memberscouldagreetomoveinthisdirection,andalsotonotifytheirfinalregulations.

Moreover, as argued in this section, various WTOAgreements include the obligation to provideinformation on relevant measures through enquirypoints. There is already a de facto expansion in theuse of enquiry points. Domestic enquiry points, forinstance,aremoreandmoreusedbyhomefirms(largeand small) to obtain market access information, i.e.enquirypointsareprogressivelybecomingrepositoriesof informationaboutexportmarkets.This isusefulforfirms, in particular SMEs, wanting to diversify acrossexport destinations. Instead of seeking informationfromeachenquirypointinthetargetedexportmarket,they can collect all this information from their owncountry’senquirypoint.

A second area for improvement is cooperationamong international organizations that deal withSMEs, and in particular, with their participation intrade. The WTO Director-General’s initiative of April2016 – aimed at enhancing existing trade financefacilitation programmes to reduce the financing gapthat particularly affects SMEs – is a prime exampleofhowtheWTOcanserveasacatalystforenhancedinter-agency cooperation. Other such examples arethe aforementioned Alert System for SPS and TBTNotifications, involving the WTO and UN DESA; theEIF, involvingtheWTO,IMF,ITC,UNCTAD,UNDPandWorld Bank; and the STDF, involving the WTO, FAO,OIE,WorldBankandWHO.

Even in areas where there are no formal collaborationarrangements or joint work programmes, increasedcoordinationamonginternationalorganizationsisdesirableto reduce unnecessary duplication and make effortsmore complementary with one another. For instance, ine-commerce,whichhasthepotentialtogreatlyincreaseSME participation, there is a natural division of labourbetweentheWTOandtheITC.Theformerisaforumfornational governments to negotiate commitments basedon the basic principles of non-discrimination. The latterisdirectlyengagedwiththebusinesssector,inparticularwithSMEsindevelopingcountries.

Finally, further researchwouldbewelcome inat leasttwoareas.First,itisimportanttobetterunderstandhow


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SMEs could benefit more from technical assistanceaimed at fostering their internationalization. Second,studies are needed to analyse the effectivenessof the provisions related to SMEs in RTAs and WTO

agreements, in other words, to determine whatprovisions work and what provisions do not. Theoutcomeofthisresearchwouldbeinvaluabletopolicy-makersandtotradenegotiators.

Endnotes1 Oneshouldemphasizethatbothdevelopinganddeveloped

countriesoffertargetedfinancingassistancetotheirSMEs.Totakeanexampleofanindustrialcountry,theUKGovernmenthasarangeofpoliciesforincreasingthesupplyoffinancetoSMEsandaddressingthemarketfailurespreventingsomeviableSMEsfromraisingfinance.OnesuchfacilityistheEnterpriseCapitalFunds,whicharecommerciallymanagedventurecapitalfundsthatprovideequityfinancetohighgrowthpotentialSMEsinitiallyseekingupto£2moffinance.SeevanderSchans(2012).

2 ConsiderthecaseofthePhilippineswhichjustestablisheditscompetitionauthorityinJanuary2016.Seehttp://www.wsj.com/articles/philippines-hopes-to-unleash-its-entrepreneurial-upstarts-1460574000.

3 ThiseffectrequiresamuchmoreextendedexplanationwhichcanbefoundinFlamandHelpman(1987)orinHelpmanandKrugman(1989).

4 TheonlyexceptionisarecentstudybyCernatandLodrant(CernatandLodrant,2016)analysingSME-relatedprovisionsin28regionaltradeagreementsnegotiatedbytheEuropeanUnionandtheUnitedStatesbetween1990and2014.

5 TheWTO’sRTAdatabase(http://rtais.wto.org)containsdetailedinformationonalltheRTAsnotifiedtotheGATT/WTO.AsofMay2016,some629notificationsofRTAs(countinggoods,servicesandaccessionsseparately)havebeenreceivedbytheGATT/WTO.Ofthese,423areinforce.TheseWTOfigurescorrespondto458physicalRTAs(countinggoods,servicesandaccessionstogether),ofwhich270arecurrentlyinforce.AccessionstoanexistingRTAareexcludedfromtheanalysisinthisreport.

6 ThepartiestotheTPPareAustralia,BruneiDarussalam,Canada,Chile,Japan,Malaysia,Mexico,NewZealand,Peru,Singapore,theUnitedStatesandVietNam.

7 TheTPP’sgovernmentprocurementchapteriscloselyalignedwiththeGPA(AndersonandPelletier,2016).

8 Seehttp://www.intracen.org/itc/about.

9 Seehttp://www.intracen.org/itc/projects/trade-and-environment.

10 AnexampleistheexportpromotionprogrammeinArgentina(2011).OneofitsgoalswastodevelopexportpromotioninstrumentsforSMEs.

11 TheADBI-IDB(AsianDevelopmentBankInstitute-Inter-AmericanDevelopmentBank)2015LatinAmerica/CaribbeanandAsia/PacificEconomicsandBusinessAssociation(LAEBA)SeminaronSMEInternationalization,forinstance,tookplaceinTokyoinJanuary2015.

12 Seehttp://www.adb.org/projects/48342-001/main.

13 StartandImproveyourBusiness(SIYB);Women’sEntrepreneurshipDevelopment(WED);KnowyourBusiness(KYB).

14 SustainingCompetitiveandResponsibleEnterprisers(SCORE).

15 Theauthorsalsoprovideestimatesoftheadvaloremtariffequivalentoftheuncertaintycreatedbythegapbetweenappliedandboundrates.

16 AccordingtoAnnexFoftheHongKongMinisterialDeclaration,“developed-countryMembers…anddeveloping-countryMembersdeclaringthemselvesinapositiontodoso…shallprovideduty-freeandquota-freemarketaccessforatleast97percentofproductsoriginatingfromLDCs,definedatthetarifflinelevel”.

17 ASIEFisaforumtosharedataandotherinformationonagivensubstance.

18 TheREACHregulationwasdiscussedoverseveralyearsintheTBTCommittee–from2003till2014.FormoredetailonthelatestexchangesseeforexampleG/TBT/M/61(5February2014)paras2.44-2.48.

19 FormoredetailseeWTOofficialdocumentsG/SPS/GEN/733;G/SPS/GEN/735;G/SPS/R/69andG/SPS/R/74.

20 SeeWTOofficialdocumentsG/TBT/417/Rev.1andRD/TBT/123.

21 AsofMarch2016,atotalof45,000SPSandTBTnotificationshasbeenreceived.

22 SeventhTriennialReviewoftheOperationandImplementationoftheAgreementonTechnicalBarrierstoTrade(G/TBT/37,para.5.12.d).

23 TheestablishmentofenquirypointsisalsoarequirementoftheAgreementonPreshipmentInspection(Article7).ArticleIIIoftheGATSalsoincludestheobligationonallmemberstomaintainoneormoreenquirypoints.

24 Article5.4andfootnote13oftheAnti-dumpingAgreement.

25 SeeGATTSCM/162of19February1993.

26 Article6.13oftheAnti-dumpingAgreement.

27 Footnote2oftheSCMAgreement.

28 AsdiscussedatthebeginningofSectionE,somemarketfailuresdisproportionatelyimpactSMEsandmayprovideaneconomicjustificationforthisprovisionintheSCMAgreement.

29 SeeWTOdocumentsIP/C/M/71andIP/C/M/72.

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30 SeeWTOdocumentsS/C/W/340andS/C/W/345.

31 Tradefinancefacilitationprogrammescarryamaximum“limit”ofguaranteesandfinancingfortradethateachinstitutioniswillingtoextendatanypointintime.However,theseguaranteesanddirectfinancingonlyapplytoshort-termtradetransactionswithtypicalmaturitiesof60to90days.Hence,withinayearthevalueoftradetransactionsfinancedandguaranteedbytheseinstitutionsislargerthantheoveralllimit,since,forexample,guaranteesfor90-daytransactionscanbeusedfourtimesperannum(90daysX4=360days).

32 SeeGPA/113,AnnexCofAppendix2,pp.439-441.

33 Thenote,aswellasthereportsandotherrelevantdocumentation,isavailableontheSTDFwebsite:http://www.standardsfacility.org/facilitating-safe-trade.

34 Notethattransparencyisnofreelunch–inthesensethatnoteverydomesticconstituencyislikelytobenefitfromit(seeWTO,2012,subsectionE.4).

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