A WTO Open Door Trade Environment Fosters SME Growth

By James R. Meenan

As world trade ministers gather in Seattle at the end of this month to kick-off the next Round of trade negotiations, small and medium size enterprises (SMEs) look to government to further level the playing field for their continued growth. SMEs, more than any other group, rely on public sector officials for leadership and support in international trade, whether it be in the area of trade facilitation, market access or entry into the new emerging realm of Electronic Commerce.

The World Trade Organization, is the only international organization setting global rules for international trade to ensure that commerce flows as smoothly, predictably, and as freely as possible.

The WTO system has served U.S. SMEs well over the last decade. The most recent U.S. Department of Commerce data shows that SMEs (liberally defined as companies with fewer than 500 workers) have grown steadily in international trade. The vast potential SMEs possess for the global marketplace, however, remains largely untapped.

For the ten year period ending in 1997, the number of U.S. firms exporting goods tripled to a total of 209,455. The bulk of that growth are SME merchandise exporters who account for 96.5 percent of the total (202,185 firms) and very small companies (those with less than 20 employees) make up nearly two-thirds of all U.S. exporting firms in 1997.

But in terms of the value of U.S. exports, SMEs account for only 30.6 percent of merchandise exports in 1997, just a slight increase from 26.4 percent in 1987.

Because the management of SMEs is normally concentrated in their founder/president, they can adapt quickly, innovate, and respond rapidly to challenges and opportunities in the global marketplace. In entering foreign markets, it often works best if they enter into business with neighboring countries and with those they have personal ties.

Nearly 40 percent of total 1997 exports by U.S. SMEs are concentrated in three leading markets - Canada, Mexico and Japan. Canada is by far the most popular destination, with almost 99,000 out of the 202,185 SME exporters registering sales to this market.

Emerging global markets have also attracted many U.S. SMEs. These SMEs were responsible for 38 percent of the total U.S. goods exported to the combined China/Hong Kong markets in 1997. SMEs have also found good growth prospects in such countries as Brazil, Thailand, Malaysia and the Philippines.

But given the limited breadth of SME management, nearly two-thirds of recorded sales were to only one foreign market. Of the total SMEs engaged in exports, only 5.6 percent did business in ten or more countries.*

These statistics do not tell the whole story. SMEs are the mainstay enterprises in most economies, yet they have not begun to reach their international market potential for their goods or services. That is why this new WTO Round is a key opportunity to better facilitate expanded SME growth in the numbers of participants, the value of merchandise, and the range of markets they enter.

When the dust has settled in Seattle, hopefully the world body will have stepped forward to truly recognize the potential of SMEs and fully engage them in the deliberations that will follow in Geneva over the coming years.

*Based upon U.S. Department of Commerce figures for 1997.

James R. Meenan is vice president of IMDI, a member of the U.S. Trade Alliance, and chair of the U.S. Industry Sector Advisory Committee (ISAC 14) Representing Small/Minority Business on Trade Policy Matters. He can be reached at JRMIMDI@aol.com.

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