WTO NEWS: SPEECHES — DG ROBERTO AZEVÊDO

Speech by Director-General Roberto Azevêdo


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Thank you Ambassador Conejos.

Executive Director Arancha Gonzalez,
Vice-Minister Terrado,
Distinguished guests,
Excellencies,
Ladies and gentlemen,

Good afternoon.

I want to start by congratulating the Philippines, Lao PDR, Malaysia, Brunei Darussalam, Singapore and Thailand for their initiative in holding this workshop today — and the ITC for supporting the event.

Thank you for inviting me to join you in discussing this important issue.

Trade is sometimes thought of as an economic activity that only favours the big companies. And while we may disagree with that, we cannot deny that trading internationally is often much more costly and difficult for MSMEs.

The smaller the business, the bigger the barriers can seem.

MSMEs are responsible for the largest share of employment opportunities in most economies — up to 90% in some countries. And they are big employers of women and young people.

So, at the domestic level MSMEs have major economic importance. But their participation in trade simply doesn’t match up. This is true in both developing and developed countries.

And so it seems that we may be missing a significant opportunity. A truly inclusive trading system offering MSMEs a chance to develop their potential could help to transform many lives around the world.

This would mean tackling the barriers that MSMEs face when participating in trade. And I think there is a range of issues here.

The fixed costs involved with meeting particular standards or other non-tariff barriers can be particularly difficult for MSMEs.

But tariffs are also a major issue. MSMEs see tariffs as a greater obstacle than larger firms do, possibly because they are more sensitive to changes in tariff levels.

Slow, costly border procedures also place a greater burden on MSMEs than they do on larger firms.

In addition, MSMEs can often struggle to access trade finance. Globally, banks reject over 50% of all requests for trade financing placed by these firms — compared to just 7% for multinational companies.

These are just a few of the issues that MSMEs face.

And I think it’s very welcome that WTO members want to explore what we can do in response.  

Since the Nairobi Ministerial Conference in December last year, members have been discussing a number of issues, with MSMEs as a constant feature. But so far the discussion has been quite broad — we haven’t yet delved into the detail.

I think it would be useful to establish:

  • First, a detailed sense of what the major barriers and priorities are for MSMEs.
  • And, second, what we can potentially do to help. This could be through Aid for Trade support, through the regular work of the WTO, through negotiating new trade agreements, or a whole range of other avenues.

I hope that this meeting will be an important step in answering these questions.

There is an impressive panel of experts to speak today. Although I can’t stay for the whole meeting, I look forward to hearing about how your discussions went. And I would urge you to focus on the practical issues: what are the problems, and what are the concrete steps we could take to solve them?

We have heard some interesting ideas in the conversations that have been taking place already this year — and not just from members.

Due to the success of Bali and Nairobi, the interest in our work here is extending to other constituencies.

In response to requests, we have facilitated meetings with the private sector and the academic community in recent weeks.

Some 60 business leaders attended the private sector discussion. I ensured that the organisers of the event invited representatives from small and large companies, from developed and developing countries, and from a range of sectors. They debated the challenges they face in conducting trade operations and how the WTO can help in dealing with them.

Improving trade conditions for MSMEs was a major theme.

Their suggestions included:

  • improving the regulatory environment for MSMEs through the digitalization of government processes, improvement of access to public procurement markets, and reduction of compliance costs,
  • developing coordinated capacity-building and certification programmes to facilitate the inclusion of MSMEs in global production networks,
  • and conducting research on how MSMEs can fit into these global value chains.

These points chime with those raised in most of the conversations I’ve heard. And in each case they will need to be further developed.

So, to get the ball rolling today, I will say a few words about three elements where the debate is perhaps slightly more advanced.

First, I think the quickest, simplest step we can take to support MSMEs to trade would be to implement the Trade Facilitation Agreement.

MSMEs often cite burdensome customs procedures and regulations as major obstacles to their participation in trade. This is because large firms, especially multinational firms, are better equipped to navigate complex regulatory environments. The more time it takes to export, the more exporting is dominated by large firms.

Indeed, the evidence suggests that when the time spent to clear exports is reduced, MSMEs are more likely to increase their export shares than large firms.

So the Trade Facilitation Agreement has the capacity to boost MSMEs’ trading capacity. I received the latest ratification just yesterday, from Madagascar, taking the number to 83. And I expect to receive more in the coming days. We need to keep up momentum on this front.

Second, I want to say a few words about e-commerce.

It’s clear that being technology-enabled helps small firms to export.

A survey conducted by eBay over 22 countries found that, on average, 97 per cent of tech-enabled firms export.

In contrast, among more traditional MSMEs, the proportion of exporters ranged between 2 and 28 per cent.

So being connected is a major factor.

However, we can’t just assume that MSMEs will continue to benefit from greater opportunities once they are connected. Connectivity is fundamental, but not sufficient.

The reality is that, if we just cross our arms and do nothing, we may see the opposite effect. E-commerce may actually promote the concentration of opportunities for big companies and services suppliers.

Therefore I think it would be useful to look at how new technologies can facilitate the participation of small players in digital trade and in global value chains. We should look at how we can ensure that, through multilateral rules, MSMEs benefit from harmonized procedures, improved connectivity, and reduced operational costs.

In short, we should look to ensure that small suppliers can market their products — goods or services — in a timely fashion, with competitive prices and reliable customer support. Only then will consumers have full confidence in buying from MSMEs in the digital environment.

There are a range of interesting ideas out there. For example, I recently met with the founder of Alibaba, Jack Ma, who is proposing the establishment of e-hubs, or digital free trade zones, for small firms. We agreed to continue and deepen our discussion.

So this is a very dynamic debate — and I think it can provide food for thought for our work here.

Finally, I want to say a word about trade finance provision for MSMEs.

There are huge gaps in provision, as I indicated earlier, and this is a major barrier for MSMEs. Members will be aware that the WTO recently published a report setting out some of these issues in detail.

And we proposed some possible actions.

These included:

  • working with partners to enhance existing trade finance facilitation programmes to reduce the gaps in trade finance,
  • addressing the knowledge gaps in local institutions to help improve the capacity of local financial sectors,
  • increasing dialogue with regulators to help ensure that trade and development considerations are fully reflected in the implementation of regulations,
  • and improving the monitoring of trade finance provision, as better market intelligence would enable us to be more responsive to problems as they emerge.

So these are just some reflections, based on the recent debate.

I think there is a need to deepen our understanding across all of these issues, and to crystalize any potential actions that members may want to explore.

This year’s WTO World Trade Report, which will be launched in September, will provide some much-needed insight. We will hear some of the initial findings today. And I’m sure that all of the presentations on today’s programme will help to improve our understanding of these issues. 

So, to conclude, I hope you have a great workshop, and a robust exchange of ideas.

I hope that members will find the discussion useful, and that the conversation will continue and evolve rapidly in the weeks and months ahead.

As Director-General, I have always sought to make our work here inclusive. But, in the broader trade debate over the years, I think that the interests of MSMEs have sometimes been overlooked.

I want to make sure that that doesn’t happen again — and that their interests are always remembered in the discussion — so that the WTO is as inclusive as possible.

Today’s workshop is an important step towards the goal.

Thank you.

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