GTPA response to Inquiry into access to free trade agreements by small and medium sized enterprises
The challenges to support MSME engagement in international trade and the utilisation of Free Trade Agreements
A recurring challenge in deliberations related to MSME engagement in international markets, including in the context of global supply chain ecosystems and in deliberations related to policy solutions aimed at enabling such engagement is, in the first instance, to understand what qualifies as an MSME.
The definition of an MSME varies significantly across jurisdictions, to the extent that a medium-sized enterprise in one market could include companies generating multiple hundreds of millions in annual turnover, whilst in another market, is likely to be a fraction of that in size and economic value.
To the extent that a common reference point can be achieved – even an agreed range for each category, based on annual revenue or number of employees, could assist in focusing efforts and solution-development in local, national and regional economies, where the greatest positive (and most needed) impact can be generated.
This observation aside, we can nonetheless offer some common and widely-acknowledged observations about the MSME segment, with a certain focus on micro and small businesses. Medium-sized firms in many markets will also exhibit similar characteristics.
It is axiomatic that MSMEs account for significant portions of GDP and employment in most economies around the world, and collectively, on a global level as well. Whilst businesses in some parts of the world are driven to look outward, MSMEs in other regions are run as “lifestyle companies” with little desire for growth beyond funding a comfortable life for founders and their families. Some leverage extensive international diaspora to develop networks around the globe, whilst others wrestle to generate the commitment necessary to venture internationally.
Initiatives by international organisations, by policymakers and political leadership can enable and support international aspirations but cannot (in most cases) successfully impose or mandate them, thus a targeted approach may warrant consideration in attempts to generate the greatest value and impact.
Programmes that foster the growth of MSMEs to engage successfully in international trade not only drive job growth but provide broad economic benefit and value.
MSMEs engaged in global trade either through customer or supply channels, are often more innovative due to their exposure to global competition and new concepts.