Topic of the 2017 Model WTO:
How to integrate SMEs into the international trade framework
“Micro firms and SMEs account for the majority of firms in most countries (95 per cent on average), and for the vast majority of jobs” (World Trade Organization, 2016, p. 3). Yet, trade liberalization rhetoric has not included the debate on SMEs on a large scale until now. Besides some regional agreements, the facilitation of international trade for SMEs is a challenge to be faced. Due to the fact that efficiency gains from international trade are generally only enjoyed by bigger players in the market, there has been criticism on the rule setting which is influenced majorly by these (Altomonte, 2008, p. 3). SMEs have therefore not been taken into account to the extent that they should be, considering their importance.
Taking the previous into consideration, the World Trade Report released by the World Trade Organization in 2016 addresses the issues that Small and Medium Enterprises face. This report further comments that “SME participation in trade is neither well documented nor well understood”. This of course, creates trouble for policy-makers which would like to address this issue. Nonetheless, as international trade regulations have evolved and stabilized over time, the dialogue about involving SMEs in these rules has increased.
It is in the interest of the WTO Secretariat to start discussion on this topic within the next few years and probably even starting at the Ministerial Conference in Buenos Aires 2017 (World Trade Organization, 2016). In general, the World trade report proposes 3 different approaches to increase the participation of SMEs in the international trade framework:
- Decreasing the fixed costs of trade: Such measures can be achieved by encouraging State subsidies for SMEs which want to trade abroad or by encouraging countries to further reduce Technical Barriers to Trade (TBTs).
- Decreasing the variable costs of trade: expand and increase quota and duty free market access to developing countries and maybe implement preferential treatment for SMEs for which however a clear definition is needed.
- Increasing transparency and information access to the markets by means of online platforms and nation-wide information databases.
Taking these aspects into account and establishing international rules however, is not as easy as it may seem. One of the reasons, is that many of the existing trade barriers exist no to actively restrict trade, but because of national interests like health (through health standards), security (through data sharing limitations) and development (through other technical barriers to trade).
In the Model WTO 2017 edition, participants will have to discuss and negotiate the creation and development of new or existing regulations, to adapt current international trade rules to SME needs where necessary. This shall be done within one of the 6 committees which have been set up on the basis of the most relevant issues for SMEs discussed by current scholars and WTO experts.
Find out more about the structure of the negotiations and the different committees and countries.