Breaking down the Barriers for SME Exporters

Small and Medium Enterprises (SMEs) in the Asia-Pacific contribute significantly to regional exports, job creation and economic growth. However, SMEs also face major impediments to market access and are often under represented in the international economy.

At a national level SMEs contribute around 50% of gross domestic product, but at an international level SMEs only account for around 30% of exports, and attract 10% of foreign direct investment. Efforts to reduce this disparity and encourage greater SME participation in the global economy are expected to contribute to a substantial increase in global trade and investment. The removal of unnecessary impediments to SME participation in international activity has the potential to stimulate an additional US$1 trillion in trade and US$150 billion in FDI per annum for the APEC region.

Overcoming impediments to increased international activity by SMEs is a complex process that extends across a number of trading areas. Border issues such as tariffs, quotas, customs requirements, or non-border issues such as domestic regulations, compliance requirements, discriminatory or predatory practices are among factors affecting SME expansion.

The non-tariff and regulatory barriers have a more significant impact on SMEs than they do on larger businesses. Customs delays, customs paperwork and inconsistency in customs policy and regulations can act as prohibitive barriers to trade. Small businesses, due to their size, cannot compensate for unforseen costs and delays, which increase the costs of transactions, cut into profitability and can cause transactions to be unprofitable.

When SMEs are able to expand their operations into export markets they have a positive effect on society, including raising living standards, increasing investment in employee development and contributing to wage increases for workers. Recognising the importance of SMEs to the future growth of the region, the APEC Small and Medium Enterprises Working Group (SMEWG) is working to identify market access impediments and strategies to improve access to international markets for SMEs.

In 2003 the APEC SMEWG hosted two seminars on "Growing the APEC SME Exporter Community" with the participation of government representatives and SMEs. Held in both Malaysia and Thailand, the seminars were aimed at gaining an informed perspective on the type of impediments and issues that have the greatest adverse impact on SMEs. The seminar was also intended to further define the role that APEC can play in attempting to tackle these impediments.

In Malaysia, the SMEWG endorsed a work plan for taking the issue forward in two ways. Firstly, the SMEWG will raise the profile of SME issues amongst various APEC fora, particularly those dealing with impediments to trade. Secondly, a process will be established within the SMEWG to address impediments to trade that adversely affect SMEs.

In February 2004, the APEC Market Access Group (MAG) held a Trade Policy Dialogue (TPD) on market access issues of concerns to SMEs. At this TPD, the SMEWG presented details of the new SME Impediments Identification and Monitoring System project. Being developed in cooperation with the OECD, the project is in its initial stage and will ultimately be used to identify specific cases of SME impediments to trade in cooperation with export facilitation agencies. This will help to build a profile of cases and characteristic impediments. When the trial project is completed in late 2004, it will provide policy makers with substantial information on trade barriers faced by SMEs. A parallel process is being explored to assist governments and policy makers to develop strategies to reduce or remove SME market access impediments.

The SMEWG also held a TPD in 2003 with the APEC Sub-Committee on Standards and Conformance and is now planning a further joint session in September 2004 in Chile.

APEC is committed to cooperating and working actively with business on understanding barriers to SME trade and how these may be overcome. Working with the APEC 2004 sub-theme of "Opportunities for Entrepreneurial Growth" these efforts are serving to empower and broaden opportunities for small and medium enterprises.