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Participation of Small and Medium Enterprises (SMEs) in International Trade

As consultations are ongoing at the WTO to better integrate Micro, Small and Medium-sized Enterprises (MSMEs) in global trade, East African negotiators met to gather inputs and discuss the chalenges faced by their SMEs.

SMEs comprise the majority of firms globally and are the largest source of employment, especially in developing countries. Recent studies by WTO show that SMEs account for nearly 90 per cent of all firms, 50 per cent of value added, and 60 per cent of total employment globally. In the East African Community (EAC), SMEs are a major source of economic growth and employment, especially for marginalized groups such as women and youth.

Despite their importance at the domestic level, SMEs continue to lag behind in terms of regional and international trade with regard to level of productivity, competitiveness and ability to internationalize. Within the WTO, consultations are ongoing on how SMEs’ participation in international trade can be enhanced. Therefore, it is important that EAC negotiators are equipped with adequate information concerning the opportunities and challenges facing SMEs in their economies to inform their inputs to the ongoing consultations.

Country Update Notes in this respect were developed by national partners in the EAC based on views of various stakeholders on the opportunities for SMEs better integration in regional and international trade. In addition specific challenges affecting SMEs at regional and multilateral trade level, as well as suggested means of redressing those challenges especially in the context of multilateral rules are highlighted in the notes.

CUTS International, Geneva has also developed a technical note on "Promoting the Participation of Small and Medium Enterprises (SMEs) in International Trade: Creating SME Competitiveness in the EAC Economies" for information and discussion among the delegates.

Based on the above notes, EAC Delegates to the WTO, present at the forum meeting deliberated as follows:

  • To date SMEs and MSMEs from the EAC continue to lag behind large firms not only with regard to productivity but also in the level of competitiveness and ability to internationalize due to numerous challenges as highlighted in both the country update notes, and technical note
  • Never the less it is still unclear as to what could be the rationale of engaging on SME issues in the WTO. There is need to understand how and why disciplines at the multilateral level are necessary to promote integration of SMEs in international trade, more especially from the small developing countries and least developed countries perspective
  • Despite the critical role of SMEs for majority of WTO members including the EAC, careful analysis of the motive behind SME discussions in the WTO is necessary in order to avoid a possibility of taking on obligations that may in fact deter development and integration efforts of SMEs in international trade
  • Currently a number of challenges persist in the multilateral trading system, for instance the issue of nan-tariff measures such as private standards, it is difficult to foresee how these could be resolved through multilateral disciplines on SMEs specifically
  • In light of above concerns, there is need for continued monitoring and assessments of developments with regard to SME consultations and proposals at the WTO, so as to clearly understand how it would benefit EAC while avoiding any possible negative implications
  • It was also observed that SMEs in EAC are still faced with numerous challenges at the national level, which Governments are addressing through national and regional policies, and therefore the region is not ready to deal with the issue at the multilateral level
  • Although measures at the multilateral level usually come with much needed capacity building and technical assistance, other critical needs such as finance remain challenging. Building capacity without the means to implement it may not be very beneficial.

Finally Delegates present expressed their appreciation of the EAC Forum meetings at CUTS as they provide the opportunity to be appraised and reflect on these important issues. It was suggested that the next forum should consider the issue of government procurement.

 

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