The WTO Secretariat has published an information note looking at how micro, small and medium-sized enterprises (MSMEs) are being affected by the COVID-19 pandemic. It notes the impact of supply chain disruptions on MSMEs and the extent to which smaller businesses are represented in the economic sectors hardest hit by the crisis.
The report notes that supply chain disruptions can have a particularly severe impact on MSMEs because sourcing from new suppliers or absorbing price increases is more challenging for a smaller firm with limited supply options and capital.
The report looks into a wide range of measures taken by governments to support MSMEs. These include measures to address cash flow issues, to expand trade opportunities for MSMEs and to make them more resilient. According to the report, 44 WTO members had introduced such measures by the end of April 2020.
The note describes how international trade provides MSMEs with opportunities to diversify revenue streams and better navigate the COVID-19 crisis.
It outlines that work at the WTO can support small business by promoting the importance of transparency, facilitating the exchange of best practice, highlighting the need for increased access to trade finance and encouraging full implementation of the WTO’s Trade Facilitation Agreement.
- Micro, small and medium-sized enterprises (MSMEs) are the backbone of many economies, representing 95 per cent of all companies worldwide and accounting for 60 per cent of employment. Many MSMEs depend on international trade for their activities, either because they export their products through direct or indirect channels, or because they import inputs to manufacture the products that they sell domestically. They are major employers of women and young people, and a key driver of innovation.
- MSMEs are particularly exposed to the COVID-19 pandemic’s economic impact because of limited financial resources and borrowing capacity, and because of their disproportionate presence in economic sectors affected by social distancing measures and transport disruptions. MSMEs are also particularly exposed to trade restrictions on agricultural products.
- Where MSMEs are highly integrated into global value chains (GVCs), supply chain disruptions can create an existential risk for MSME importers and exporters, either because of shortages of necessary parts, or through shocks to demand.
- The pandemic-related challenges add on to the existing, well-known trade obstacles encountered by MSMEs, and therefore undermine progress towards more inclusive trade.
- Governments have primarily introduced urgent stimulus and backstop measures for MSMEs, such as liquidity support to address cash flow issues, with the aim of preserving jobs and ensuring business continuity, as well as measures to expand trade opportunities for MSMEs. A few governments have also introduced measures aimed at developing the resilience of MSMEs and building their capacity to overcome future shocks to demand and supply chains.
- To limit the impact of the current crisis on MSMEs and to build their resilience, it is critical that MSMEs have better access to regulatory and market information and affordable trade finance, as well as to streamlined customs procedures and requirements. Greater use of digital tools and e-commerce would also benefit MSMEs.
- The WTO can contribute to supporting MSMEs in several ways, such as: through transparency mechanisms in WTO committees and bodies, as well as in the Informal Working Group on MSMEs; through the exchange of good practices in terms of MSME support measures; through full implementation of the Trade Facilitation Agreement; through continued efforts in enhancing access for MSMEs to trade finance; by harnessing transparent, fair and open procurement markets; and by supporting trade digitalization efforts, including through the development of e-commerce rules.
June 3, 2020