Policymakers & Researchers
Welcome to our dedicated resources for policymakers and researchers. Here you will learn about the various aspects of trade and MSME-related policymaking.
Why MSMES and Trade?
View GuideWhy MSMEs and Trade?
Why MSMEs and trade? There is no universal definition of an MSME. Some economies categorize them by number of employees, some by annual turnover, others by assets, and still others by a combination of the above. Although there may be no exact agreement on what a MSME is, what is clear is that they are a large part of the global economy. Some estimates indicate that MSMEs account for roughly 60% of global employment, 50% of value-added, and 95% of enterprises worldwide (See the World Trade Organization’s (WTO) World Trade Report 2016 for more information). Additionally, when considering their number of employees, the majority of MSMEs are very small (or micro, less than 10 employees) enterprises. In some parts of the world, they can also be part of the informal sector. MSMEs trade less than large firms International trade, and especially participation in global value chains (GVCs), has been shown to hold a number of advantages for participants, from input and market diversification to technology transfer and increased productivity. However, not all businesses have the same capacity to participate and there is a growing body of evidence showing that MSMEs need support to trade. For more research on this, see the WTO World Trade Report 2016: Levelling the trading field for SMEs, the International Trade Centre’s (ITC) SME Competitiveness Outlook: Connect, compete and change for inclusive growth, and the Organisation for Economic Co-operation and Development (OECD) and World Bank’s publication on Inclusive Global Value Chains). MSMEs and services trade Services are an important sector for MSME economic participation, especially as the digital economy continues to grow. MSMEs that supply services have been found to export earlier than manufacturing MSMEs, having relatively lower fixed costs to enter international trade (see WTO World Trade Report 2019: The future of services trade). Support for services trade through lowering barriers can be an important way to open trade opportunities for MSMEs. MSMEs and digitalization The digital economy has many opportunities for MSME to begin to trade internationally. From “born global” firms to e-commerce, those MSMEs that digitalize have access to tools that can reduce business costs and facilitate trade. However, MSMEs remain much slower to digitalize, be it due to access to infrastructure, costs, or lack of digital know-how. For more information, see the ITC SME Competitiveness Outlook: Business Ecosystems for the Digital Age, OECD Digital Transformation of SMEs, and the United Nations Conference on Trade and Development’s (UNCTAD) Digital Economy Reports. MSMEs, trade, and gender MSMEs are important for trade inclusiveness, especially when it comes to women. There are large gaps in trade participation between women and men-owned firms. Women-owned firms generally are smaller than men-owned firms, according to the WTO Women and Trade Report. Understanding the nexus between MSMEs, trade, and gender is important, especially given findings that women-owned exporting businesses pay more, hire more, and are more productive than their non-exporting counterparts (see the ITC Unlocking Markets for Women to Trade). MSMEs and innovation Innovation is crucial for long term growth and development. MSMEs at the forefront of new business innovations can be more agile than large firms and more willing to experiment. However, on average MSMEs are less innovative than large firms according to work by the OECD. More policy effort is necessary in order to foster MSME innovation (see OECD Promoting innovation in established SMEs).
Policymaker guides on key issues to help MSMEs trade
Cross-cutting issues
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Gender
Trade and Gender There is a growing body of research showing that while international trade can be important for business development, innovation, and resilience, there is a need for trade to become more inclusive. Barriers exist not just for MSMEs to trade, but also more specifically for women traders and entrepreneurs, complicating their efforts at realizing the benefits of trade’s economic opportunities. Trade can foster women’s economic empowerment and advance gender equality. Governments can make this possible through the development and implementation of gender-responsive trade policies, as well as by implementing the WTO Agreements with a gender lens. Trade policy can support women entrepreneurs by lifting the many additional obstacles they face through financial and non-financial incentives, government procurement, or capacity building in trade. Why MSMEs and Gender? Women entrepreneurs constitute a significant share of MSMEs globally. They represent about 30% to 37% (8–10 million) of all MSMEs in emerging markets (see MSME FINANCE GAP from 2017). In Nigeria, women represent 41% of micro-business owners, with 23 million female entrepreneurs operating in the country. Nigeria has one of the highest female entrepreneurship rates globally (the PWC report can be found here). Women entrepreneurs mostly own, and lead, micro enterprises and they are typically smaller than men-owned, or led, firms. For instance, in Canada, 92.7% of women-owned firms employ less than 20 staff members (the Women Entrepreneurship Knowledge Hub and Women’s Enterprise Organizations of Canada report can be found here). Their micro size makes competing in the international market very difficult and it is one of the many reasons why they are not integrated in the global market (See Unlocking Markets for Women to Trade for more information). Women entrepreneurs not only face the same trade challenges as MSMEs, such as relatively higher cost burdens imposed by non-tariff measures and customs procedures, they can also face additional barriers and trade costs such as legal prohibitions to economic participation, additional discrimination for access to finance, and unequal access to the digital economy due to the persisting gender digital divide. Where can policymakers access more resources? For more resources on trade and gender, please see: The World Trade Organization’s (WTO) women and trade website contains information on relevant resources and events, as well as a link to the WTO informal working group on trade and gender webpage. Published in 2020, a World Trade Organization and World Bank report, Women and Trade: The role of trade in promoting gender equality, looks at the role of trade in promoting gender equality and provides new information and data on this important topic. Other papers of interest are: Women’s economic empowerment: an inherent part of Aid for Trade “; Gender Provisions in African Trade Agreements: Assessment of the Commitments for Reconciling Women’s Empowerment and Global Trade ; and Trade Policies Supporting Women’s Economic Empowerment: Trends in WTO Members. The International Trade Centre’s (ITC) women and trade webpage links to resources including the ITC’s SheTrades initiative, which is a platform for women-owned businesses, organizations, and companies to connect, access workshops, and find suppliers. The ITC also issued a publication in 2020 on Mainstreaming Gender in Free Trade Agreements, among other relevant reports. The Organisation for Economic Co-operation and Development (OECD) also has a trade and gender webpage with related research and publications on ways trade can contribute to women’s economic empowerment. The United Nations Conference on Trade and Development (UNCTAD) provides a webpage on gender equality, its importance for sustainable development, and the role for trade. This webpage features all recent publications, projects, and events on the subject. The World Bank’s trade and gender webpage is another resource linking to relevant publications and upcoming events on women and trade. Where can policymakers access good practices or national examples? The WTO Informal Working Group on Trade and Gender has prepared a progress report outlining the technical work that WTO Members and Observers have undertaken on women’s economic empowerment. It can be accessed at the WTO website
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Regional Trade Agreements
What do small businesses matter for RTA negotiations? Small businesses are the backbone of economies by accounting for most businesses and employment worldwide. According to the International Labour Organization (ILO), small businesses represent about 90% of all enterprises and 70% of all jobs in many countries around the world. However, these businesses participate relatively less in international trade than large firms. To bridge this gap, regional trade agreements (RTAs) with small business language have emerged as an avenue for enabling small businesses to integrate more in regional and international markets. The first small business reference in an RTA notified to the WTO was recorded in the EU – Overseas Countries and Territories agreement in 1971. Since then, RTAs including at least one small business-related provision have increased to more than half of all RTAs notified to the World Trade Organization (WTO) as of now. How are small businesses included in RTAs? RTAs contain provisions that affect trade by businesses of all size. Beyond tariff reductions and trade standardization, RTAs now go further to include small businesses directly with dedicated SME chapters or specific provisions related to small businesses in chapters like investment, e-commerce, intellectual property, competition, government procurement and trade facilitation among others. According to the latest information available in the WTO’s MSME-Related Language in Regional Trade Agreements database, cooperation and government procurement chapters are the ones where RTAs contain the most small business-related provisions. A report by the WTO Secretariat found that over a half (53%) of RTAs with small business provisions contain a reference on cooperation mechanisms for developing small business capabilities and competitiveness, with such mechanisms ranging from human resources and technology adoption to public-private partnerships and better access to finance, information, and institutional support. How can RTAs impact small business and trade? RTAs with small business-related provisions offer opportunities for small businesses to engage more in regional and international trade by receiving preferential market access and improved support from public- and private-sector institutions. While most small business provisions have focused on cooperation avenues for developing the trade capacities of small businesses, there is little evidence the latter are aware of how they can benefit from RTAs. For example, the International Institute for Sustainable Development (IISD) has found that lack of information has been a stumbling block preventing Southeast Asian small businesses to fully benefit from the over 90 RTAs led by the Association of Southeast Asian Nations (ASEAN) and its member states. High fixed costs in using tariff benefits are another factor constraining the ability of small businesses to seize market access opportunities through RTAs. A study from the Inter-American Development Bank (IDB) highlighted that smaller firms are less likely to use treaty benefits because they face higher utilization costs than large firms. When larger firms are the ones driving national exports due to their increased use of RTA preferential terms, small businesses can also face higher factor prices for the industry. To level the playing field for small businesses, policymakers need to consider small business needs (see guide on Think Small First Principle) in RTA negotiations and tailor support tools that enable small businesses meet the financial and production requirements to fully reap RTA benefits. Where can I access further resources on policy frameworks, guidelines and tools? ITC’s SME Competitiveness Outlook 2017: The International Trade Centre (ITC) provides a flagship report with research and analysis on mechanisms through which RTAs support small business trade and key areas where policymakers can provide technical assistance. Visit this ITC report. WTO’s MSME Provisions in Regional Trade Agreements: The WTO maintains a database of provisions related to micro, small and medium-sized enterprises (MSMEs) included all RTAs notified to the WTO by Members. Visit this WTO website. WTO’s Provisions on Small and Medium-sized Enterprises in Regional Trade Agreements: The WTO offers a working paper that reviews, analyses and categorises the different types of RTA provisions on small- and medium-sized enterprises (SMEs). Visit the WTO paper. Where can I access good practices and national examples? Benefits of EU Trade Agreements for Small and Medium-Sized Enterprises: The European Parliament provides a framework and assessment on small business awareness of RTA chapters and the latter’s small business benefits. Visit this European Parliament website. Canada’s Approach to Small- and Medium-Sized Enterprises and Free Trade Agreements: The Government of Canada applies a two-pronged approach to integrating small businesses into RTAs by formulated a chapter dedicated to small businesses, and by mainstreaming small business issues through provisions related to small businesses across agreement chapters. Visit this Canada website. ITC’s Business Guide to the African Continental Free Trade Agreement: The International Trade Centre (ITC) offers a guide for small businesses to gain insight in the benefits they can seize from the African Continental Free Trade Agreement. Visit this ITC guide. Malaysia’s Evidence on SME Internationalization through Global Value Chains and Free Trade Agreements: The Asian Development Bank Institute (ADBI) provides an analysis on firm-level factors driving businesses to leverage on RTA provisions to engage in trade, and highlights key areas where policymakers can provide small business support. Visit this ADBI report. OAS’s MSME Provisions in Trade Agreements: The Organization of American States (OAS) maps out provisions on small businesses included in regional trade agreements adopted by countries across the Americas. Visit this OAS website. Philippines’ Doing Business in Free Trade Areas: The Philippines provides a business guide and dedicated portals to guide small businesses through opportunities businesses can explore in free trade areas. Visit this Philippines website. Switzerland’s new Free Trade Agreements (FTA): Opportunities in Asia, Middle East and America for Swiss Exporters: Switzerland provides online tools and for small businesses to explore opportunities through RTAs and assessments of potential economic benefits reaped by RTAs. See this Swiss paper. The Representation of SME Interests in Free Trade Agreements: The United Kingdom Trade Policy Observatory and Federation of Small Businesses offer a study with policy recommendations for enabling small business trade through best practices in incorporating provisions on small businesses in RTAs. Visit the UKTPO-FSB report
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Voluntary sustainability standards
What are voluntary sustainability standards (VSS) Voluntary Sustainability Standards (VSS) are a set of standards which aim to encourage sustainability along global value chains, by ensuring businesses use resources and processes that do not damage the environment or people. This benefits both the business and the consumer, provides good working conditions for employees, and has a positive impact on the environment. Voluntary Sustainability Standards tend to focus mainly on business sectors such as forestry, farming, mining or fishing, but they also target a range of sustainability objectives, such as: respect for basic human rights; worker health and safety; environmental protection; community relations and others. To learn more about the concepts and business perspectives around VSS, you can visit the knowledge base of the International Trade Centre’s (ITC) Standards Map see link below. Types of VSS VSS can come in various forms depending on which the sector, issue, production process or governance mechanisms they focus on. VSS are mostly governed by non-state actors that include: companies, industry associations not-for-profit organizations Some well-known standards include GlobalGap, a farm insurance program, or Starbucks’ CAFÉ practice to ethically source coffee beans. Public agencies such as the United States Department of Agriculture (USDA) also develop standards, for example, a process to certify whether products are organic. Other standards are the result of multi-stakeholder initiatives, including the Forest Stewardship Council (FSC) and the Roundtable on Sustainable Palm Oil (RSPO). The International Trade Centre (ITC) website offers information and resources that can give you further insights on the various types of VSS that may be in demand in the market. Why do VSS matter for my business to trade? VSS have become increasingly relevant for businesses, consumers and regulators because of their role in contributing to societal objectives such as social rights protection, fair prices, environment conservation, and food security. Most VSS relate to environmental, social and economic objectives, which assess business practices to ensure sustainability through product quality, management practices and ethics. With over 500 VSS now in existence, consumers, businesses, governments and other stakeholders are paying closer attention to how companies can consider the needs of consumers, workers and supply chain actors. While the adoption of VSS can represent business costs, it can also lead to benefits in improving management and monitoring systems, productivity, and access to credit, which are relevant for expanding business operations and reaching new markets through participation in international trade. The International Trade Centre (ITC) offers a VSS SME (Small and Medium Enterprises) training programme for coaches to help business to prepare for VSS certification processes. Canada’s government website also includes an SME Sustainability Roadmap/SME Sustainability Map that may also be able to assist you to gain benefits from VSS certifications. Who develops VSS? Industry associations, consumer groups, and other stakeholders collaborate to develop VSS by sharing subject matter expertise and recognizing best business practices. VSS issuers vary according to the standards’ scope. For example, Cocoa Life, the Sustainable Agriculture Network, and the Ethical Trading Initiative are among the organizations granting VSS that apply to single products or a group of products. Other organizations such as Fairtrade Small Producers, and the Rainforest Alliance Sustainable Tourism, focus on the ability of businesses to meet social and environmental objectives. How can I get started with certification for VSS? A number of articles, tools and training courses on voluntary standards are available for business owners wishing to learn more about VSS. Some of these are highlighted as follows: ITC offers an analytical toolkit that enables businesses to review and compare 320+ standards by product, sector, area, or focus. This tool focuses on voluntary sustainability standards (VSS), codes of conduct, audit protocols, reporting frameworks and company programs on sustainability. ITC’s new Sustainability Gateway provides examples of sustainability projects in action. Through ITC’s Sustainability Map, businesses can create an online profile to find partners and customers for gaining access to sustainable markets. The ISEAL Alliance represents a movement of sustainability standards that supports businesses to adopt good practices for mainstreaming sustainability in business operations. Links to Supporting Information Trade4MSME Guide Standards Government of Canada’s SME Sustainability Roadmap SME Sustainability Roadmap (canada.ca) International Trade Centre’s (ITC) Standards Map StandardsMap The International Trade Centre (ITC) Sustainability Map Sustainability Map The International Trade Centre (ITC) Home – SustainabilityMap (sustainabilitygateway.org) International Trade Centre (ITC) VSS SME coaching program Virtual Workshopping – Training of Coaches on T4SD’s VSS Expert Methodology & Tool The ISEAL Alliance ISEAL’s resources on sustainability practices for businesses The Institute of Export and International Trade Export essentials: building and maintaining a green supply chain – The Institute of Export and International Trade
Digitalization
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Blockchain / Distributed Ledger Technology (DLT)
What is blockchain? Blockchain, or distributed ledger technology (DLT), is a decentralized digital network of records that can be simultaneously accessed by all permitted users and that are automatically updated and validated if an authorized change is made. All changes are time-stamped and DLT transactions are based on consensus, replication, and immutability. This provides a high level of security, even in transactions where parties do not know each other or have other verification tools. Why does blockchain matter for MSMEs and trade? Blockchain technology holds the potential to facilitate trade transactions and access to finance, along with reducing costs. By providing an immutable record of transactions, MSME with access to IT infrastructure and the right digital know-how may be able to use this technology in their international trade dealings or provide alternative documentation to verify their credibility when trying to access finance. From identity management to smart contracts, a Finextra article entitled Blockchain: A game-changer for Small and Medium-sized enterprises provides additional information on the benefits of blockchain for MSMEs. What can policymakers do? While blockchain technology could reduce barriers for MSMES to engage more in international trade, there are a number of challenges that need to be overcome. Some challenges relate to blockchain technology adoption, including: scalability; security; interoperability; and the lack of clear legal framework. Other challenges relate to MSMEs themselves, including the lack of technical skills and internet access to adopt, use and seize the benefits of blockchain technology. Where can policymakers access more resources? The International Trade Centre’s (ITC) SME Academy: In partnership with the World Trade Organization, the ITC has a free online course called Introduction to Blockchain. Information Technology and Innovation Foundation (ITIF): The ITIF has A Policymaker’s Guide to Blockchain that is a resource on what blockchain is and its applications. It also outlines considerations for regulating this technology. The International Telecommunications Union (ITU): The ITU provides a focus group on the application of distributed ledger technology. More information is available here. The Organisation for Economic Co-operation and Development (OECD): The OECD has several resources for policymakers on blockchain, including a chapter in their report entitled The Digital Transformation of SMEs. This chapter is called How can blockchain ecosystems serve SMEs. They also have a 2019 report on The Policy Environment for Blockchain Innovation and Adoption. The United Nations Economic Commission for Europe (UNECE): The UNECE continues to look into blockchain technology and its relation to trade, including through events and papers such as the technical applications of blockchain in UN/CEFACT deliverables and blockchain in trade facilitation. UN/CEFACT refers to the United Nations Centre for Trade Facilitation and Electronic Business. The United Nations Conference on Trade and Development (UNCTAD): UNCTAD has published A Policymaker’s Guide to Blockchain Technology Implementation and Innovation with practical information for policymakers on the regulatory requirements. The World Trade Organization: The WTO has published various reports related to DLT, including the 2018 World Trade Report on The future of world trade: How digital technologies are transforming global commerce, as well as Can blockchain revolutionize international trade? These reports provide insights into the ways this technology can impact trade and MSMEs. Other resources, including the above-mentioned joint online course with the ITC, are available here. Where can policymakers access best practices and national examples? The European Blockchain Partnership (EBP): This is an initiative to develop an EU strategy on blockchain and build a blockchain infrastructure for public services. Visit the EU Commission website. The Arab Regional Fintech Working Group: This working group published a report on Strategies for adopting DLT/ Blockchain Technologies in Arab Countries. The report includes recommendations and an overview of other national blockchain initiatives, including in Australia and the Russian Federation. The ITU Distributed Ledger Technology use cases: Visit the ITU website to access a series of cases studying how DLT is put into practice.
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Cross-Border Paperless Trade
What is cross-border paperless trade? Paperless trade refers to the digitalization of information flows required to support goods and services crossing borders. By moving away from paper and opting for digital systems, governments and other stakeholders can speed up and facilitate trade (see guide on Trade Facilitation). Paperless trade can also yield significant environmental benefits by cutting out printing, dispatching, processing, exchanging, and the eventual discarding of vast quantities of paper documents. Paperless trade systems can be B2B, B2G or G2G and have various focuses (e.g. electronic customs declarations, electronic port management systems, electronic single windows). Why is cross-border paperless trade important for MSMEs? Paperless trade could significantly reduce trade costs and add up to major savings for traders, especially MSMEs. According to a study conducted by the International Chamber of Commerce (ICC) and Coriolis Technology, digitizing transferable documents could boost MSME trade by 25% and lead to a 35% improvement in business efficiency. Paperless trade can reduce complexity by eliminating the need for copies of the same document, as well as making electronic and immediate transmission of those same documents possible. All of this can reduce the time and effort required, thereby assisting all traders, especially MSMEs, with managing trade-related procedures, such as trade finance requests and logistics operations. What legal and technical aspects need to be considered when putting in place cross-border paperless trade systems? Legal issues that policy makers should consider when putting in place cross-border paperless trade systems include: Legal recognition of electronic transactions and documents: adopting a legal framework that recognizes electronic transactions and documents as equivalent to those based on paper is. The UNCITRAL Model Law on Electronic Transferable Records (MLETR) provides useful international guidance in this respect. Trust services: for paperless trade systems to be interoperable, they need to rely on mechanisms guaranteeing an international alignment on what constitutes a valid trust service across borders. See the UNCITRAL Model Law on Electronic Signatures (MLES) for guidance on this issue. Data governance: When documents and information are exchanged between users using electronic systems or between electronic systems, the system must ensure confidentiality (i.e. information is private to only designated parties of the communications) and data integrity (i.e. the accuracy and consistency of data are maintained and assured over their entire life cycle). Liability and dispute management: trading parties and other concerned entities may suffer losses from the incorrect transmission or improper reuse of information and may seek compensation for those losses. Guaranteeing access to civil remedies for such losses and dispute settlement opportunities can help to enhance trust in paperless trade systems, and thereby support their adoption. In addition to the legal framework, technical issues to consider when putting in place cross-border paperless trade systems include digital identity, electronic payments, data models and semantics, communication protocols, connectivity and data security. A list of standards for cross-border paperless trade that can be called upon when putting in place such systems can be found in the joint ICC-WTO Standards Toolkit for Cross-border Paperless Trade. Detailed guidance on these various legal and technical issues is provided in the Cross-border Paperless Trade Toolkit developed by the WTO in collaboration with the United Nations Economic Commission for East Asia and the Pacific (UNESCAP) and UNCITRAL, as well as in the legal and technical readiness assessment guides and checklists developed by UNESCAP. Where can policymakers access resources on policy frameworks, guidelines and tools? ICC’s Digital Standards Initiative (DSI): The International Chamber of Commerce’s (ICC) has developed a digital standards initiative. The DSI website includes a page for policymakerswith links to information related to adoption, economic analyses on the benefits of digitalization, and legislation related to the adoption of the MLETR. ITC-UNESCAP-UNNExT’s Making the WTO Trade Facilitation Agreement Work for SMEs: The International Trade Centre (ITC), the United Nations Economic Commission for East Asia and the Pacific (UNESCAP) and the United Nations Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT) provide guidance for policymakers to mainstream paperless measures and other trade facilitation components in strategies aimed at developing small- and medium-sized enterprises (SMEs). Visit this ITC-UNESCAP-UNNExT repor WTO-UNESCAP-UNCITRAL Cross-Border Paperless Trade Toolkit: The World Trade Organization (WTO), in collaboration with UNESCAP and UNCITRAL, developed a toolkit with technical and legal tools that can be called upon to adopt cross-border paperless trade systems. UN/CEFACT’s While Paper on Paperless Trade: The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) has a policy document with frameworks, case studies and resources that can guide policymakers to align trade rules with trends in paperless trade. Visit this UN/CEFACT report. UNECE-UN/CEFACT’s Guides on Paperless Trade: The United Nations Economic Commission for Europe (UNECE) and the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) have a number of papers and guides on paperless trade, including a 2018 white paper on paperless trade, a roadmap towards paperless trade, and trade facilitation and paperless trade implementation. UNESCAP’s Legal Readiness Assessment Guide: UNESCAP has developed legal readiness assessment guides that countries can use to identify legal issue areas that are relevant to cross-border paperless trade. Visit this UNESCAP website. UNESCAP’s Technical Readiness Assessment Guide: UNESCAP offers technical readiness assessment guides that countries can use to address technical issues on implementing electronic trade systems, paperless environment and actions needed for facilitating cross-border paperless trade data exchange. Visit this UNESCAP website. WCO’s Guide on Dematerialization & Paperless Processing: The World Customs Organization (WTO) has developed guidelines for customs authorities to support the use of electronic means for managing trade-related documents and reduce the hard copy requirements for such documents. Visit this WCO guide. Where can policymakers access good practices and national examples? Single Window for Foreign Trade in Colombia: A Case Study on Trade Transactions: The International Trade Centre (ITC) has documented Colombia’s experience in establishing a national single window for foreign trade which has enable business to conduct paperless transaction with the support of information and communication technologies. Visit this ITC website. UNECE’s Regional Report on Trade Facilitation and Paperless Trade Implementation: The United Nations Commission for Europe (UNECE) provides an example of regional policy reviews on best practices and opportunities for cooperation in adopting paperless trade measures and other trade facilitation interventions. Visit this UNECE report. UNESCAP’s Readiness Assessments for Cross-Border Paperless Trade: The United Nations Economic Commission for East Asia and the Pacific offers policy toolkits for assessing legal and technical readiness for cross-border paperless trade. Visit this UNESCAP website.
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Cyber readiness and cybersecurity
What is cybersecurity? Cybersecurity embodies a set of systems, processes, and actions that protect businesses from digital attacks. It is also known as information technology security or electronic information security. Using technology and digital platforms for commercial activities exposes companies to cybercrime like phishing, malware, or data and identity theft. To counteract these cyber threats, policymakers play a role in raising cybersecurity standards and developing regulatory frameworks that enhance cyber readiness capabilities in businesses. The International Telecommunications Union (ITU) provides a definition on cybersecurity and action areas for policymakers in its Recommendation ITU-T X.1205. Why does cybersecurity matter for small businesses? An increasingly interconnected world through digital networks has enabled businesses to collect and share more information to reach new customers and innovate. But it has also led to a rise of criminal activities that profit from stealing customer data and spying on business practices. In 2019, a report found that about 7.9 billion records globally were exposed by data breaches, an increase of 112% from 2018. Small businesses are often security breach victims, representing more than 40% of attacks in 2019. Studies have also found that about two-thirds of small companies close within six months of being hacked. Because of these vulnerabilities, MSMEs are often the weak link in global value chains. Since small businesses are so vulnerable to cyber attacks and can link to large anchor firms in global value chains, cyber readiness can be a criteria for the selection of suppliers. Bearing this in mind, policymakers need to develop holistic strategies and action plans to mitigate these threats. For example, the Organisation for Economic Co-operation and Development’s (OECD) Cybersecurity Policy Making at a Turning Point suggests key elements that cybersecurity strategies can incorporate. A McKinsey article has also outlined questions that can help policymakers formulate action plans on cybersecurity. What are some cybersecurity risks facing small businesses? The increased use of digital platforms creates security vulnerabilities that cyber criminals often seek to exploit for illicit gains. During the COVID-19 pandemic, for example, cyber criminals increasingly targeted small businesses due to their lower skills and resources to adopt cyber protection systems. In this context, the International Chamber of Commerce (ICC) has outlined four key cybersecurity threats facing small businesses: (1) phishing and business e-mail compromise attacks; (2) malware distribution using COVID-19 as bait; (3) remote working and supply chain threats; and (4) heightened vulnerability due to a lack of awareness. Why is cyber readiness a trade issue? Cyber readiness and security are important for international trade, especially digital trade. Trade relies on trust, and threats to cybersecurity undermine confidence in digital trade and transactions and make sellers and consumers think twice about using this option. Businesses recognize this fact but have to comply with national regulations. If those regulations do not follow a standardized, risk-based approach, then potential traders are put at a disadvantage. Furthermore, varying requirements add complexity and can significantly increase costs for MSMEs, while at the same time reducing security. What can policymakers do to support cyber readiness? Policymakers should aim for aligned approaches to cybersecurity, including consistent use of standards, to reduce complexity and support MSMEs. They can also play a role in raising awareness of the importance for MSMEs to be cyber ready through education programs, certification schemes, and toolkits for mitigating potential cyber risks. For example, the United Kingdom National Cyber Security Centre (NCSC) offers a training programme to certify businesses and professionals with cyber security skills aimed at enabling participants to gain awareness, first-hand experience and expertise enhancement on cyber readiness. For more information, visit this NCSC website. Where can policymakers access policy guidelines, frameworks and trainings? ITU National Cyber Security Strategy Guide: This resource provides actionable guidance for policymakers so that they can gain a comprehensive understanding of the purpose and content for developing a national cybersecurity strategy. Visit the ITU website. ITU Global Cyberecurity Index: This consists of a measurement tool that tracks country progress on cybersecurity commitments around capacity development, cooperation, and regulatory measures. Visit the ITU website. ITU Cybersecurity training: This training is designed to help policymakers understand lifecycles, principles, and good practices of cybersecurity strategies at the national level. Visit the ITU Academy. Where can policymakers find good practices and national examples? Canada’s National Cyber Security Action Plan (2019 – 2024): This plan was designed after a comprehensive cyber review conducted in 2016. It led to the development of a cybersecurity assessment and certification program for SMEs. Visit the Canadian government website. ITU’s National Cyber Security Strategies Repository: This resource maps out national policies, action plans, and other relevant resources reported by policymakers around the world. Visit the ITU website. United Kingdom’s Active Cyber Defence: This resource was launched in 2017 to counteract cyber attacks. It led to setting up the National Cyber Security Centre and other programs. A recent study found a 20% reduction in UK-hosted phishing attacks in the 18 months after the strategy was adopted . Visit the UK government website. United Kingdom National Cyber Security Center (NCSC): This center offers certified training in cybersecurity for businesses and professionals, along with advice and guidance on the topic. Visit the NCSC website. United States Cybersecurity Maturity Model Certification (CMMC): This framework looks to make accreditation affordable to small businesses to reduce their risks against certain cyber threats. Visit the U.S. CMMC.
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Digital Economy
What is the digital economy? According to the Organisation for Economic Co-operation (OECD), “the Digital Economy incorporates all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including government, that are utilizing these digital inputs in their economic activities.” In essence, this broad definition captures all aspects of our new digitally supported world, from e-commerce to digitally developed and delivered services like web design. The United Nations Conference on Trade and Development (UNCTAD) works to measure e-commerce and the digital economy, with information available here. What is the state of play of e-commerce discussions under the WTO? Issues related to the digital economy are discussed at the WTO in various bodies, including under the Work Programme on E-Commerce, which was established in September 1998, and the Joint Statement Initiative on E-Commerce, which was launched at the 11th Ministerial Conference (MC11) in Buenos Aires in 2017. In addition, since 1998 WTO Members have agreed not to impose customs duties on electronic transmissions. For more information on such discussions, see the dedicated WTO page on e-commerce. Information on other WTO discussions related to the digital economy can be found on the WTO Digital Technologies & Trade page. What trade opportunities does the digital economy hold for MSMEs? The digital economy provides many important business tools and trade opportunities for businesses, especially MSMEs. Some of these include: Digital banking and e-payments: Electronic finance can provide individuals with easier, cheaper, and safer access to financial services. Additionally, e-payments have made it possible to conduct transactions online, making it easier to transfer money across accounts for a good bought or a service rendered. For more information see the guide on electronic cross-border payments and visit the International Chamber of Commerce website. Digital platforms: The new digital economy is based around platforms – search systems, marketplaces, application development software, and some others. These platforms have applications for all businesses, opening the doors to new industries and players, from micro firms to digitally connected businesses in every digitally connected economy of the world. For more information, see the 2021 Global Value Chain Development report. Blockchain: Blockchain, or distributed ledger technology (DLT), is a decentralized digital network of records that can be simultaneously accessed by all permitted users and that are automatically updated and validated if an authorized change is made. Blockchain technology holds the potential to facilitate trade transactions and access to finance as well as to reduce costs. See the Guide on Blockchain for more information. E-commerce: This covers goods and services sold and bought online, including transactions done through marketplaces. It reduces trade barriers and increases opportunities for businesses by expanding their sales. In order for businesses to access these benefits, it is important that national economies be e-commerce ready. For more information, see the Guide on e-commerce readiness. Visit UNCTAD’s Digital Economy Report. E-documents/e-signatures: Electronic documents can speed a transaction. For example, electronic trade documents, such as for customs and trade transactions, reduce submission errors and the costs of paperwork and procedures. For more, visit Trade Finance Global. Risks and inequities of the digital economy The digital economy has many risks, especially for MSMEs, that need consideration and care. A value chain is only as secure as its weakest link and businesses of every size are targets for cybercrime, which is why it is essential for MSMEs to be prepared. Visit the Cyber Readiness Institute and see the guide on cyber readiness. Another important note about the digital economy is its uneven access. Many are excluded from the digital economy either because of access to technology or lack of training and understanding of these new resources. For MSMEs in particular, lack of access to capital can prevent integration of new digital technologies. Where can I access further resources? eTrade for all, initiated by UNCTAD, is a global partnership to make the digital economy and its opportunities more accessible. eTrade for all links to several resources, including publications on digitalization and e-commerce. It also has information on development solutions, including in seven key policy areas, with contact information for interested policymakers to learn more. The OECD published a report on The Digital Transformation of SMEs. This report looks at the need for SMEs to be prepared to adopt digital technology, the gaps that persist in technology adoption, and recent trends. The OECD Digital for SMEs Global Initiative provides links to reports, the programme of work for this initiative, and related events. UNCTAD’s Digital Economy Reports cover themes ranging from software and cloud computing to value creation and cross-border data flows. These reports provide an in-depth look at the various aspects of the digital economy. UNCTAD also hosts many dialogues and conferences related to digitalization and SMEs. More information is available on their website. WTO’s Regional Trade Agreements (RTAs) Database: Is a repository of the legal texts and annexes of all RTAs notified by WTO members, including preferential tariffs and trade data provided by RTA parties, and other related documents. The database also provides information on a number of provisions related to the digital economy, such as e-commerce. For more information on RTA provisions, visit the WTO’s Glossary on RTA provisions and the WTO RTA Database.
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E-commerce Readiness Assessment
How can a country be ready for e-commerce? E-commerce readiness refers to a variety of policies, frameworks, and institutional actions that enable countries to engage effectively in e-commerce. It considers country-level dimensions on trade, technology, education, finance, and law that determine challenges and opportunities for public and private sector actors to enable an e-commerce ecosystem. The United Nations Conference on Trade and Development (UNCTAD) has an initiative known as eTrade for All, which advises countries to engage in e-commerce by addressing seven policy areas: (a) e-commerce readiness assessments; (b) information and communications technology (ICT) infrastructure and services; (c) payment solutions; (d) trade logistics; (e) legal and regulatory frameworks; (f) skills development; and (g) access to financing. What could e-commerce readiness assessments aim for? Developing national e-commerce readiness starts with conducting a nationwide assessment of strengths, weaknesses, opportunities, and challenges in the enabling environment for an e-commerce ecosystem. An e-commerce readiness assessment can inform decision-makers across public and private sector institutions about the priority areas and key stakeholders that can play a role in enabling a national e-commerce ecosystem. Which policy areas are relevant for e-commerce readiness? UNCTAD’s eTrade for all initiative suggests seven policy areas and provides an array of programs to support e-commerce readiness across the world. Some examples per policy area that can be considered are as follows: E-commerce readiness assessments: The World Customs Organization (WCO) has an E-Commerce Web-Corner that provides instruments, topics, and tools for developing e-commerce policies and strategies. ICT infrastructure and services: UNCTAD offers an ICT Policy Review Programme, which examines national policies on information and communication technologies to identify enablers and obstacles for e-commerce readiness. Payment solutions: The Universal Postal Union (UPU) in partnership with other private sector institutions, runs the Financial Inclusion Technical Assistance Facility. This facility is designed to assist countries in adopting the latest technologies for enhancing efficiency and outreach in postal financial services. Trade logistics: The United Nations Economic Commission for Europe (UNECE) provides advice for countries to facilitate trade through measures that range from creating national single windows to promoting paperless trade transactions. Legal and regulatory frameworks: UNCTAD provides assistance to countries in developing legal and regulatory frameworks to build confidence in e-commerce, while promoting secure online business and economic wellbeing. Skills development: UNCTAD has a program known as TradeForTrade, which builds trade knowledge and skills for governments, business, and citizens to seize opportunities in international trade and e-commerce. Access to financing: The SME Finance Forum is a global network where actors engaged in funneling financing for e-commerce projects can connect and cooperate. Where can I access further resources on policy frameworks and guidelines? The Organisation for Economic Co-operation and Development’s (OECD) Measuring electronic commerce: The OECD provides a framework for identifying issues associated with measuring e-commerce. Visit the OECD website. The International Trade Centre’s (ITC) Bringing SMEs onto the E-commerce Highway: This resource addresses e-commerce policies that affect the engagement of small businesses in cross-border e-commerce. Visit the ITC website. The Commonwealth’s Policy Guide for Least Developed Countries, Small States and Sub-Saharan Africa: This publication offers recommendations that can help some developing countries to build capacity for developing e-commerce policies and engaging in global digital trade matters. Visit the Commonwealth website. WTO’s Regional Trade Agreements (RTAs) Database: Is a repository of the legal texts and annexes of all RTAs notified by WTO members, including preferential tariff and trade data provided by RTA parties, and other related documents. The database also provides information on e-commerce provisions contained in RTAs. Visit the RTA Database. For more information on the type of e-commerce provisions that RTAs may include, visit the WTO’s Glossary on RTA provisions. Where can I see best practices and national examples? Regulations, Policies and Initiatives on E-Commerce and Digital Economy for Asia-Pacific Economic Cooperation (APEC) MSMEs’ Participation in the Region: This resource presents applied research and analysis on policies and actors that play a role in enabling small business engagement in e-commerce. Visit the APEC website. UNCTAD Rapid eTrade Readiness Assessments of Least Developed Countries: This resource consists of a tool to inform policy measures that can support the capacity of least developed countries to assess e-commerce readiness. Visit the UNCTAD website.
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Electronic Cross-border Payments
What are e-payments? Electronic payments (e-payments) are digital transactions that users make to pay for goods and services on the internet. To execute payments electronically, businesses and individuals use a variety of e-payment methods that range from debit and card payments to bank transfers to mobile pay and automated clearing house (ACH) transactions. E-payments are basically financial operations enabled by electronic devices, such as computers, smartphones, or tablets. For more information on e-payment models and transaction types, see the International Chamber of Commerce’s (ICC) Electronic Payment Services and E-Commerce and the International Monetary Fund’s (IMF) fintech note 19/91 “The Rise of Digital Money.” Why do e-payments matter for MSMEs to trade? Technological developments in recent years have been enabling financial and non-financial institutions to modernize the payment methods they offer to users. Studies by the Bank for International Settlements (BIS) and the International Monetary Fund have documented the rapid growth that digital technologies are seeing relative to traditional instruments. As digital technologies offer more efficient and less expensive payment instruments, small businesses can benefit from using e-payment options to reduce uncertainty and costs, especially for international trade transactions. Other advantages that e-payments have for MSMEs when it comes to engaging in trade range from speeding up cross-border payment activities at customs to reducing fraud risks and burdensome administrative expenses. For more information on e-payments and online transactions, see the following articles and papers: The BIS article on trends in digital payments, “Payments go (even more) digital”; The IMF working paper WP/21/177 “Is Mobile Money Part of Money? Understanding the Trends and Measurement“; The United Nations Economic Commission for Europe’s (UNECE) Trade Facilitation Implementation Guide; and The Organisation for Economic Co-operation and Development’s (OECD) paper on “Trade finance for SMEs in the digital era.” Which challenges do MSMEs encounter in using e-payments? While digital technologies have contributed to the rapid expansion of financial services, e-payment markets face regulatory challenges that hinder the ability of small businesses to have greater access to cross-border payment options for trade. A recent World Trade Organization (WTO) study has shown that only a quarter of WTO Members have fully liberalized cross-border payments under the General Agreement on Trade in Services (GATS) commitments. The World Economic Forum (WEF) and International Chamber of Commerce (ICC) have identified four key areas where policymakers could engage to reduce frictions in e-payment markets: (a) market access and national treatment barriers; (b) technical standards; (c) security and trust; and (d) policy coordination and oversight. For more information, see the WEF’s Connecting Digital Economies page and their white paper on Addressing E-Payment Challenges in Global E-Commerce, as well as the ICC’s Issues Brief on Electronic payment services and e-commerce. Where can I access resources on frameworks and policy recommendations? Policy recommendations for cross-border payments: The WEF outlines key areas where policymakers can engage and cooperate to reduce complexity in e-payments markets. Visit Connecting Digital Economies: Policy Recommendations for Cross-Border Payments. Scope of existing commitments on e-payment services: The WEF describes the current state of multilateral commitments and plurilateral negotiations on trade-related aspects of e-payment services and e-commerce. Read the WEF paper. Consumer policy guidance on mobile and online payments: The Organisation for Economic Cooperation and Development (OECD) offers guidance that policymakers can use to address consumer protection issues when designing policies targeting mobile and online payment markets. Read the OECD guide. Analytical framework on fintech and payments regulations: The International Monetary Fund (IMF) documents recent international experiences in modernizing legal and regulatory frameworks for payments services. Link to IMF framework. Where can I find best practices and national examples? E-payments guide for developing countries: The International Trade Centre (ITC) developed a guide on legal and regulatory reforms and best practices that policymakers can use to address e-payment policy issues in developing countries. Visit the ITC guide. Electronic payments acceptance initiatives: The World Bank has documented a review of literature and country examples to guide policymakers in designing incentives to foster electronic payments acceptance. Access the World Bank review.
Legal considerations and intellectual property
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Business Contracts and Disputes
Why do MSMEs need model contracts? MSME often have relatively lower access to legal advice when negotiating a contract or managing a dispute than large firms. Also, MSMEs may be the weaker contractual parties and could have difficulties in ensuring that the contractual balance is kept. A wide range of international conventions and model laws enable MSMEs to access a fairer and more uniform contractual regime and to reduce their contract administration costs. Having access to standardized and uniform contracts can simplify establishing new international relations between businesses and reduce trade costs for MSMEs. With this in mind, the United Nations Commission on International Trade Law (UNCITRAL) has developed a wide range of conventions, model laws, and contractual terms that can be used by either governments or by parties to international trade contracts. This includes conventions on international commercial arbitration, mediation, and electronic commerce, among others. For a full list of UNCITRAL instruments, visit this website. One notable instrument is the United Nations Convention on Contracts for the International Sale of Goods (CISG), also referred to as the Vienna Convention. This instrument provides substantive and procedural rules governing contracts for the international sales of goods between private businesses, excluding sales to consumers and sales of services, as well as sales of certain specified types of goods. As of September 2020, UNCITRAL reported that 94 States had acceded to the CISG (access the full list of States). How can governments help? Ensuring that MSMEs can enforce their contractual rights, regardless of the place where the contract is executed, can avoid parallel proceedings. In turn, this can reduce MSMEs’ costs of administering their contracts and disputes with foreign counterparts. Beyond the CISG, multiple international organizations have developed conventions to which governments can adhere and model laws that can provide guidance to facilitate the recognition and enforcement of foreign awards. UNIDROIT instruments The International Institute for the Unification of Private Law (UNIDROIT) has developed a wide range of model laws and conventions for specific trade-related transactions. These include, among others, franchising, agency, factoring, leasing, and international sales of goods, as well as common contractual principles that parties to international trade contracts can use. The UNIDROIT Principles 2016 is a valuable resource for more information. The Hague Judgments Convention, formally the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters The Convention establishes common criteria according to which judgments from one Contracting Party will be recognised and/or enforced in another. The Convention facilitates the circulation of judgments among its Contracting Parties, thus ensuring that a successful party will have a meaningful judgment. This approach also provides this party with an opportunity to enforce the judicial award abroad with shorter timeframes, costs, and risks. The Convention applies to the recognition and enforcement of judgments in civil or commercial matters, including consumer and individual employment contracts. The Convention does not apply to the status and legal capacity of natural persons, family law matters, insolvency, privacy, intellectual property, and certain antitrust matters. The full text of the Convention can be accessed online. HCCH Convention of 30 June 2005 on Choice of Court Agreement The Hague Conference on Private International Law (HCCH) Choice of Court Convention ensures that parties’ choice of forum is upheld by courts, thereby creating a climate more favourable to international trade and investment. The Convention contains three key obligations. The first of these is that the court chosen by the parties must hear the dispute. Any non-chosen court must suspend/dismiss proceedings, in favour of the chosen court. Judgments given by the chosen court must be recognized and enforced in other Contracting Parties, ensuring their global circulation. As such, the Choice of Court Convention has a similar effect to the recognition of arbitration agreements under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Judgments given by the chosen court must be recognised and enforced in other Contracting Parties (Article 8), ensuring their global circulation. The Convention can be accessed at the HCCH website. UNCITRAL, HCCH, and UNIDROIT Legal Guide to Uniform Instruments in the Area of International Commercial Contracts, with a Focus on Sales The purpose of the UNCITRAL, HCCH, and UNIDROIT Guide is to provide a description on the complementary nature of the UNDROIT, UNCITRAL, and the Hague Conference’s instruments when more than one instrument applies to a transaction. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) The New York Convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration. It establishes common criteria for recognizing and/or enforcing arbitral awards made in the territory of one Contracting Party in that of another.
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Intellectual Property Protection and Disputes
What is intellectual property (IP) and what are IP rights? IP refers to creations of the mind and includes inventive products or processes, designs, distinctive signs, and creative works. Among other scenarios, IP may be generated by investments in research and development, or by activities aimed at differentiating products by improving product quality, reducing production costs, and/or delivering greater value to customers. IP rights are generally private rights granted by governments to individuals, businesses, or associations to exclude others from using a protected work without the owner’s permission for a limited period of time, subject to exceptions, limitations, and exclusions. IP rights are granted and enforced at the domestic level and valid only in the jurisdiction in which they have been registered or otherwise acquired. See the World Trade Organization’s (WTO) Guide to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) for an introduction to the organization’s intellectual property rules, as well as the World Intellectual Property Organization (WIPO) and the International Trade Centre’s (ITC) guidebook on Secrets of Intellectual Property, A guide for small and medium-sized exporters for more information. What are the different types of IP rights? IP assets can be grouped into two main categories: Copyright and related rights: Copyright refers to the rights of authors in their literary and artistic works, including books, music, films, computer programs, and advertisements. Related rights include the rights of performers over their performances, producers over their “fixations” (recordings) of performances, and broadcasting organizations over their broadcasts. Copyright and related rights seek to encourage and reward creative work. See WIPO’s Understanding Copyright and Related Rights for more information. Industrial property: Industrial property can be sub-divided into two fields: Distinctive signs and geographical indications, which inform consumers, prevent consumer deception, and help to ensure fair competition among producers. Within this field, there are further sub-categories of trademarks and geographical indications. Trademarks: These are any sign or combination of signs, including words, letters, numerals, figurative elements, and colour combinations, capable of distinguishing the goods and services of one undertaking from another. These signs or sign combinations be protected as a trademark. Geographical indications (GIs): A GI is a sign that identifies a good as originating in a place where a given quality, reputation, or other characteristic is essentially attributable to its origin. Some examples are well-known names of food products from specific locations, including coffee, cheese, wine, and spirits. Patents, industrial designs, and trade secrets, among other types of IP, which aim to stimulate innovation and enable the transfer and dissemination of technology and associated know-how. See WIPO’s Understanding Industrial Property for more information. Within this field, there are several sub-categories. Patents: Patents protect inventions or new solutions to a technical problem in the form of a product or process. Various technologies found in smartphones, medical devices, pharmaceuticals, and self-driving cars are patented in certain jurisdictions. Industrial designs: New and independently created ornamental or non-functional aspects of an article, such as its shape, patterns, lines, or colours, may be protected as an industrial design. Businesses create industrial designs to customize products, develop new market segments, and strengthen brands. Household products, textiles, toys, and cars often incorporate industrial designs. Trade secrets: Information that is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it secret may be legally protected as a trade secret. Also known as “undisclosed information,” manufacturing processes, algorithms, customer lists, and formulas for producing products may constitute trade secrets. Why does IP matter for MSMEs to trade? Domestic IP laws and regulations have implications for product development, design, and delivery; marketing; exporting; licensing and franchising; and pricing. They can also influence businesses’ ability to raise financial resources and attract foreign investors and partners. Identifying the various types of IP that businesses develop, which IP rights to protect and enforce, and in which jurisdictions, are important steps for international traders. Researching which IP rights are already protected for other businesses in the fields where a company conducts its activities in a target market is also critical to avoid infringement. As IP rights are protected and enforced at the domestic level, exporting goods and services often entails navigating through IP laws and procedures applicable in each target market to assess whether export licenses are needed and which trademarks are appropriate for the markets considered. For more information on why IP rights matter for exporters, see this WIPO training of trainers presentation. What issues can emerge for MSMEs in dealing with IP frameworks? MSMEs are not always aware of the benefits of IP and may also lack the resources to effectively protect what IP they have registered. Additionally, MSMEs may unknowingly infringe on another company’s or individual’s IP rights and be taken to task, especially when they enter unfamiliar jurisdictions. The variations in IP frameworks between markets contribute to the IP challenges faced by smaller firms. There are a number of initiatives that pursue harmonization and integration of these frameworks, especially at the regional level. Where can policymakers access resources on policy frameworks and guidelines? The World Intellectual Property Organization offers a number of useful tools, including: WIPO Methodology and Tools for the Development of National IP Strategies: WIPO helps countries in formulating IP strategies with linkages to national development goals through research, audits, and national consultation processes. Visit the WIPO website. WIPO Policy and Legislative Assistance: WIPO provides policy and legislative advice in the areas of copyright, patents, trademarks, industrial designs, geographical indications, genetic resources, traditional knowledge and traditional cultural expressions, and building respect for IP. Visit the WIPO website. WIPO IP Office Business Solutions: WIPO offers business solutions to IP offices in national and regional institutions that play a role in enabling countries to participate effectively in the global IP system. Visit the WIPO website. Where can policymakers access best practices and national examples? Guidebook for SMEs’ IP-Business Cycle: The Asia-Pacific Economic Cooperation (APEC) forum compiled a list of policies and models that public institutions in Asia and the Pacific can use to formulate IP policies and programs with a small business focus. Visit the APEC website. OECD SME Policy Index (Latin America and the Caribbean): The Organisation for Economic Co-operation and Development (OECD) has developed a SME Policy Index that assesses measures related to small business policy design, including IP-related matters. The SME Policy Index has been applied to Chile, Colombia, Mexico, and Peru and throughout the Latin America and the Caribbean region. Visit the OECD website.
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Trade remedies
What are trade remedies? Trade remedies are border measures applied by governments on imports of a product where the total imports have surged (safeguards) or the imports are dumped or subsidized (anti-dumping and countervailing measures, respectively); and where the imports in question have been found to have injured the competing domestic industries. Anti-dumping, countervailing, and safeguard measures are regulated by three separate agreements of the World Trade Organization (WTO): the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (known as the Anti-Dumping Agreement); the Agreement on Subsidies and Countervailing Measures (SCM Agreement); and the Agreement on Safeguards (SG Agreement). For small businesses, trade remedies should be looked at from two perspectives: where the products of small businesses are subject to trade remedies investigations and measures in export markets; and where small businesses request the application of trade remedies in respect of imports competing with their products in their own markets. For more information on trade remedies, please see WTO’s Trade Topics on Anti-Dumping, Subsidies and Countervailing Measures, and Safeguard Measures. How can trade remedies affect small businesses that export? Where small businesses are exporting a product to a market in which a trade remedy on that product is in effect, the product will be subject to additional import duties, or in the case of safeguards possibly quantitative restrictions. These remedies will increase the costs of and regulations for entering the goods into the export market, beyond the normally applicable customs duties and other taxes applicable to imports. If a small business participated in the investigation leading up to the application of a trade remedy measure, this would imply work and associated costs in providing the information required in the investigation, and in representing the business’s interests before the investigating authority in the importing country that is conducting the investigation. Small businesses that export thus should be familiar with the nature and operation of trade remedies, and of the investigations that must be conducted for trade remedies to be applied. For more information, see WTO’s Handbook of Anti-Dumping Investigations. What can policymakers do? When governments conduct trade remedies investigations, they are expected to bear in mind the challenges faced by small businesses that are exporters of the investigated goods, as provided for in Article 16.3 of the Antidumping Agreement: “The authorities shall take due account of any difficulties experienced by interested parties, in particular small companies, in supplying information requested, and shall provide any assistance practicable.” Governments of exporting economies also can provide assistance to small business exporters that find themselves involved in trade remedy investigations or affected by trade remedy measures. How can small businesses seek the application of trade remedies on imports of products they produce? Depending on the circumstances, trade remedies may be one possible source of relief for small businesses facing competition from imports that may be dumped or subsidized, or may be surging. Representativity requirements on domestic producers seeking application of anti-dumping and countervailing measures on behalf of a domestic industry mean that small businesses would need to work with others in their industry to apply for trade remedy relief. See experiences documented by government offices, such as the United States Government Accountability Office (GAO). Governments can provide assistance to applicants, including small businesses, in preparing applications to open trade remedy investigations. What can policymakers do? Policymakers can, for instance, develop knowledge portals with clear guidelines on procedures that small businesses could follow to file a trade remedy application. Examples of such initiatives include the European Commission’s SME Trade Defence Helpdesk and the United States International Trade Commission’s Trade Remedy Assistance Program. Where can policymakers access resources on policy frameworks, guidelines and tools? World Trade Organization’s (WTO) Briefs on trade remedies: The WTO provides dedicated webpages with information on official meeting documents, reports and member actions on trade remedies. Visit the separate WTO webpages dedicated to anti-dumping, countervailing and safeguards measures. Where can policymakers access information on good practices or national examples? A Business Guide to the African Continental Free Trade Area Agreement: The International Trade Centre (ITC) has prepared a guide for policymakers to understand provisions on trade remedies and other areas that expected from the African Continental Free Trade Agreement. Link to this ITC report. Australia’s International Trade Remedies Advisory Service (ITRA Services): Australia has a government office dedicated to support importers deal with trade remedies by preparing applications for trade remedy investigations, continuation inquiries, duty assessments, and exemptions. Visit this IRTA Services website. European Commission’s Guide on Trade Defence Instruments for Exporters: The European Union offers a guide for exporters to better understand concepts around trade remedies and receive advisory sources on how to manage trade defence investigations. Visit this European Commission guide. European Commission’s Guide on Trade Defence Instruments for Small- and Medium-Sized Enterprises: The European Commission provides a guide for small businesses on principles, procedures and business support mechanisms related to trade defence instruments used by European Union member states. Visit this European Commission guide. International Trade Centre’s Business Guides to Trade Remedies in Brazil: The International Trade Centre (ITC) offers a guide for businesses to gather relevant information on trade remedy procedures required by Brazil. Visit this ITC guide. International Trade Administration Commission (ITAC) of South Africa: ITAC has a Trade Remedies Unit that administers trade remedies instruments by investigating cases of dumping, subsidised imports and surge of imports, in accordance with domestic legislation and consistency with WTO rules. Please visit this ITAC website. Philippines’s Bureau of Import Services: The Philippines government has a dedicated unit where entities that are concerned with unfair market practices can file a trade remedy petition and submit the relevant forms to specified contact points. Visit this Philippines website.
Regulation
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Competition Policy
What is competition policy? Competition policy comprises the full range of measures that may be used to promote competitive market structures and behaviour by enterprises, including but not limited to a comprehensive competition law dealing with anti-competitive practices of enterprises. Why does competition policy matter for MSMEs? Well-designed and implemented competition policy supports efficient and well-functioning markets, benefits end, and industrial, consumers, and supports innovation. Anti-competitive practices, if left unaddressed, can result in slower economic development, misallocation of resources, higher prices, lower product quality or limited consumer choice. For micro, small and medium enterprises (MSMEs) to thrive, they need a competitive environment in which they can compete on the merits and without being treated unfairly by their suppliers, consumers or competitors. Such an environment creates incentives for MSMEs to innovate and bring to market new goods or services. Competition policy concerns MSMEs both as possible perpetrators of anti-competitive practices and as victims of such practices. To avoid becoming perpetrators, MSMEs need to take pains to comply with any binding rules implementing a chosen competition policy (competition law). Competition law violations such as bid rigging or other anti-competitive coordination involving competitors or distributors may expose MSMEs to substantial financial penalties. As victims of anti-competitive practices, MSMEs may be forced out of a market, lose market share or be unable to enter a new market, if such practices are left unchallenged. What issues can emerge for MSME perpetrators of competition law violations and what are possible policy options? Lack of awareness on the part of MSMEs of the risks associated with competition law violations. Policy option: Undertaking targeted governmental campaigns to educate MSMEs about their exposure to legal risks under competition law. Competition law is complex and can be difficult for MSMEs to navigate competently and confidently. Policy option: Enhancing clarity of aspects of competition law of concern to MSMEs by issuing competition authority guidelines to enhance legal certainty about what SMEs are or are not permitted to do. Insufficient diligence by MSMEs to prevent competition law violations. Policy option: Promoting and encouraging the adoption and use by MSMEs of compliance programmes to protect themselves against inadvertent competition law violations. What issues can emerge for MSME victims of competition law violations and what are possible policy options? Dominant companies may abuse their market position to disadvantage MSMEs (e.g., by refusing to supply them, charging excessive prices, boycotting them, hindering access to essential facilities, etc.). Policy option: Prohibiting companies from abusing a dominant position. Anti-competitive agreements imposed by a supplier on its dealers (e.g., vertical cartels providing for resale price maintenance) or concluded among suppliers (e.g., horizontal price-fixing cartels) may prevent MSME dealers from competing effectively with other dealers or MSME purchasers from being profitable. Policy option: Prohibiting anti-competitive agreements (cartels) among companies (Caveat: It may be appropriate to permit cooperation among MSMEs that is not anti-competitive and clarify the permitted scope for cooperation through appropriate guidelines. MSMEs may need to be able to enter into cooperative agreements with other MSMEs, e.g., on research and development or distribution, to be efficient and competitive). Mergers and acquisitions can create a dominant position of a newly created company or reinforce a dominant position of an existing company to the detriment of MSMEs operating in the same market. Policy option: Controlling mergers and acquisitions, including by prohibiting them, where appropriate, or permitting them under conditions. MSMEs may hesitate to contribute to the enforcement of competition law (e.g., because of fears about reprisals from companies engaging in anti-competitive conduct, the lack of prompt and effective remedies, or insufficient expertise on competition law). Policy options: Encouraging enforcement of competition law by or on behalf of MSMEs by allowing anonymous reports to competition authorities about suspected violations; providing for the possibility of requesting urgent interim measures to avoid serious irreparable harm; and supporting MSMEs in getting access to affordable competition law expertise (e.g., from competition authorities or other entities). Where can policymakers access more resources? The United Nations set of principles on competitionis a set of non-binding multilateral instrument setting out principles aimed at, inter alia, attaining greater efficiency in international trade and development through the creation, encouragement and protection of competition; control of the concentration of capital and/or economic power; and encouragement of innovation. UNCTAD’s Training course on the Interface between SME Development and Competition Policy highlights how competition policy and law can be leveraged to further market entry, growth, and sustainable development of MSMEs, with a particular focus on times of emergency (COVID-19 pandemic). The ICC SME Toolkitdeveloped by the International Chamber of Commerce suggests practical tools for small businesses to enhance compliance with competition law. The UNESCAP report on the Role of Competition Policy in Strengthening the Business Environment for MSMEs in the ASEAN Region discusses issues of competition policy and law relevant to MSMEs in Southeast Asia and includes recommendations on how competition policy and MSME policy can work together to benefit those enterprises. APEC’s issues paper on SMEs, Competition Law and Economic Growth examines the theoretical and empirical underpinnings of the synergies between SMEs, competition law and economic growth with a particular focus on the APEC region. Competition Policy For Development: A Report On UNCTAD’s Capacity Building And Technical Assistance Programme sheds light on UNCTAD’s mandate as a focal point of competition-related discussions within the UN system and highlights the capacity building work carried out by the organization.
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Government Procurement
What is government procurement? Government procurement (GP) refers generally to the purchase, lease or rental of goods, services, and construction services by governmental bodies in fulfilment of their public service responsibilities. Why does GP matter for MSMEs? GP typically represents a large volume of domestic public expenditure, amounting to 10-15 percent of a country’s GDP on average. It thus constitutes a highly significant economic opportunity for MSMEs seeking to do business with governments. In most countries, MSMEs are by far the most common enterprises, and hence account for a significant proportion of overall employment. However, MSMEs are generally underrepresented in most countries’ GP markets. What issues can emerge for MSMEs in their home markets and what are possible policy options to enhance SME participation in government procurement? Difficulties in accessing information about GP opportunities Enhancing transparency Providing for electronic access to tender opportunities and information Inexperience in tendering for government contracts Building MSME capacity to participate in tenders at home Offering post-award debriefing sessions by procuring entities with unsuccessful MSME candidates Organizing training, coaching and technical assistance activities, including web-based ones, for MSMEs focusing on effective participation in tenders (such as preparing offers and submitting electronic tenders) Burdensome requirements and other barriers to MSME participation in tenders Designing MSME-friendly participation-related requirements Reducing the burden of tender preparation, including by relaxing documentation requirements (self-certification, documentary evidence only on request), setting workable time limits for MSMEs and providing for electronic submission of tenders. Minimizing registration-related fees and limiting financial tender guarantees in the case of MSMEs Providing for proportionate and appropriate technical, commercial and financial conditions for participation (e.g. lower annual turnover allowing MSMEs bids, reasonable prior experience requirements, etc.) Overly large procurement contracts that MSMEs could not fulfil Designing MSME-friendly public contracts Splitting large public contracts into smaller ones that MSMEs could fulfil (lots) and allowing MSME to bid jointly or to subcontract Late payment by procuring entities Promoting good payment behaviour by procuring entities Ensuring timely payment to support MSME cashflow or providing for interim or advance payment What issues can emerge for MSMEs in markets abroad and what are possible policy options to enhance SME participation in government procurement? Obstacles to accessing government procurement markets abroad Implementing a trade policy oriented towards the progressive opening of the domestic government procurement market on the basis of mutual reciprocity Negotiating accession to the plurilateral WTO Government Procurement Agreement 2012 (GPA 2012) and concluding bilateral free trade agreements containing government procurement chapters with market access commitments, which options provide legal guarantees for MSMEs from signatory countries to access covered government procurement markets abroad Inexperience in tendering for government contracts Building MSME capacity to participate in tenders abroad Organizing training, coaching and other technical assistance activities for MSMEs seeking to participate in tenders abroad, organized by their Ministries or official export promotion agencies at home and embassies or helpdesks in their export markets Where can I access resources on policy frameworks and guidelines? The Asian Development Bank’s Guide on SME Development gives an overview on barriers faced by MSMEs in participating in government procurement and options for policy makers. The UNDP’s Playbook on Inclusive Public Procurement explores how supplier diversity can be promoted in keeping with important government procurement principles. The Open Contracting Partnership’s Guide on Access to Government Procurement by Minority-Owned Small Businesses explores how local governments can expand access to government procurement opportunities for minority-owned small businesses. For case studies, see also the Open Contracting Partnership’s Guide on Inclusive and Effective Public Procurement: Findings and Lessons from Research in 12 Countries. The OECD Public Governance Reviews. Report on SMEs in public procurement practices and strategies for shared benefits takes stock of the policy options used in OECD and non-OECD economies to integrate SME considerations in government procurement. The World Bank Group/Business Environment Working Group (BEWG) of the Donor Committee for Enterprise Development (DCED)’s Technical Report: Policies that Promote SME Participation in Public Procurement analyses and assesses the impact of various preferential treatment policies benefitting SMEs in government procurement based on a series of country level case studies. The International Trade Centre UNCTAD/WTO’s Guide on SME and export-led growth in public procurement programmes identifies how programmes in government procurement can support SMEs in becoming more competitive as far as exportation is concerned. Public’s Guide on “Global SME Procurement Benchmark” focuses on good practices for promoting SME participation in government procurement and points to key opportunity areas. The WTO GPA Knowledge Series event on “Bidding for government procurement opportunities abroad: the lowdown for SMEs” gives practical advice on how SMEs can take advantage of opportunities to win government contracts abroad and overcome related challenges. The OECD SME Policy Index: Eastern Partner Countries 2020 – Assessing the implementation of the Small Business Act for Europe is addressed to European policymakers and their external partners and examines how better SME-support policies can be designed and delivered.
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Non-tariff Measures
What are non-tariff measures? Non-tariff measures are policy measures that can potentially affect traded goods by changing their quantities, prices, or both. The purposes of non-tariff measures include the protection of public health, or the environment, and may imply information, compliance, and procedural costs. These measures can apply to both imports and exports and are divided into 16 categories. The United Nations Conference on Trade and Development (UNCTAD) provides a full list of non-tariff measures and their definitions. What are the different types of non-tariff measures? Below is a table with broad categories of non-tariff measures that you may encounter. The first two, A and B, apply to importers, or buyers, and item P at the bottom of the table applies only to exporters, or sellers. It is important to note that some of these, such as quotas and trade-related investment measures, are prohibited under World Trade Organization (WTO) rules except for specific circumstances. For more details, please see the WTO’s General Agreement on Tariffs and Trade (GATT). Technical measures on imports A Sanitary and phytosanitary (SPS) measures: These include measures to restrict substances, ensure food safety, and prevent the dissemination of diseases or pests. (See guide on SPS measures) B Technical barriers to trade: These relate to product, technical, or quality requirements. They also include measures on labelling and packaging. (See guide on TBT) C Pre-shipment inspection and other Customs formalities: These involve other technical measures. Non-technical measures on imports D Contingent measures: These include antidumping, countervailing, and safeguard measures. E Licensing and quotas: These also cover quantity controls and other related restrictions. F Price control measures: These affect the prices of imported goods. G Finance measures: These restrict payment of imports and terms of payment. H Competition measures: These grant privileges to one or more economic operators. I Trade-related investment measures: These impose local content or export conditions on investment. J Distribution restrictions: These regulate the internal distribution of imported products. K Restrictions on post-sales services: These restrict, for example, the provision of accessory services. L Subsidies and other forms of support: These include financial transfers to enterprises, individuals, or households. M Government procurement restrictions: These restrict bidders from selling products to a foreign government. N Intellectual property: These involve restrictions or rules related to intellectual property rights. O Rules of origin: These are criteria involving the origin of products or their inputs, which can affect whether these are subject to restrictions, duties, or other measures. P Export-related measures: include export quotas and other export prohibitions. How can I start identifying non-tariff measures? Chambers of commerce, industry associations, and trade agencies may provide online portals with lists of non-tariff measures applicable for your products. Businesses can also identify trade restrictions in their targeted markets by using four available online tools, described below: Market Access Map: This database features specific non-tariff regulations that apply to exports or imports of products, as well as a tracker of temporary trade measures put in place in response to COVID-19. Trade Analysis Information System (TRAINS): The TRAINS database provides an exhaustive list of non-tariff measures available for more than 160 countries, covering more than four fifths of world trade. Global Trade Helpdesk: The Global Trade Helpdesk provides an overview non-tariff measures coming from the Market Access Map and TRAINS, as well other information on rules of origin, trade statistics, and related procedures for importers or exporters targeting foreign markets. World Integrated Trade Solution (WITS): The WITS presents country profiles on non-tariff measures by type. Links to Supporting Information The United Nations Conference on Trade and Development (UNCTAD) provides a full list of non-tariff measures and their definitions International Classification of Non-tariff Measures – 2019 edition (unctad.org) World Trade Organization (WTO)’s General Agreement on Tariffs and Trade (GATT) WTO | legal texts – Marrakesh Agreement Trade4MSMEs guide Sanitary and Phytosanitary Measures Trade4MSMEs guide Technical Barriers to Trade International Trade Centre ITC Market Access Map UNCTAD TRAINS International Trade Centre ITC Global Trade Helpdesk World Integrated Trade System WITS
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Sanitary and Phytosanitary Measures and Technical Barriers to Trade
What are sanitary and phytosanitary (SPS) measures? SPS measures consist of laws, decrees, regulations, requirements, and procedures that countries adopt to protect human, animal, or plant life and health against certain risks. These measures generally aim to promote food safety and protect against risks stemming from cross-border spread of contaminants, diseases, and pests affecting animals and plants. Examples of SPS measures include: requirements for products to come from disease-free areas; specific treatment or processing of products; thresholds for pesticide residues; and permitted use of certain additives in food. However, these measures can also sometimes act as trade restrictions, especially for smaller firms with fewer compliance resources, and it is important that policymakers ensure that all firms can easily comply. For more information, see Understanding the World Trade Organization’s (WTO) Agreement on Sanitary and Phytosanitary Measures. What are the types of SPS measures that can apply to imports? SPS measures can be said to include six broad categories: prohibitions or restrictions of imports for sanitary and phytosanitary reasons; tolerance limits for residues and restricted use of substances; labelling, marking, and packaging requirements directly related to food safety; hygienic requirements related to sanitary and phytosanitary conditions; treatment for elimination of plant and animal pests and disease-causing organisms in the final product or prohibition of treatment; and other requirements relating to production or post-production processes. In addition, SPS measures cover procedures to verify that products meet SPS requirements. For a more comprehensive list of SPS measures, see the United Nations Conference on Trade and Development’s (UNCTAD) International Classification of Non-Tariff Measures. What are technical barriers to trade (TBT)? TBT measures include product-related technical regulations and standards, as well as procedures to assess compliance with the requirements set out in these regulations and standards. While conformity with standards is voluntary, technical regulations are mandatory. TBT measures are used by a country for safety reasons, to protect the environment, to enhance national security, or to provide information to consumers, among other considerations. For more information, see the WTO Agreement Series on Technical Barriers to Trade. What are examples of TBT measures? TBT measures can take the form of: testing and certification requirements to ensure product quality, safety, or performance; labelling, marking, and packaging requirements; production or post-production requirements; product identity requirements; and product quality, safety, or performance requirements. Some examples of TBT measures include packaging or labelling requirements, such as health warnings on tobacco products; regulations on product characteristics, such as energy performance requirements for electrical appliances; or conformity assessment procedures, such as testing procedures for motor vehicle safety requirements. For more information on what constitutes a TBT, see the WTO’s information on Technical regulations and standards. For a complete list of different types of TBT measures, see UNCTAD’s International Classification of Non-Tariff Measures (chapter B). Why do SPS/TBT measures matter for MSMEs? While SPS and TBT measures are important to protect human, animal, or plant life or health and ensure the quality of products, keeping abreast of new measures and complying with them may be challenging for small businesses. For example, the International Trade Centre (ITC) SME Competitiveness Outlook 2016 found that increases in the frequency of regulatory or procedural trade measures have been associated with larger decreases in the export value of MSMEs compared to larger firms. What can policymakers do? Policymakers can play a role in reducing the costs and complexity associated with SPS and TBT measures by involving MSMEs in regulatory- and standard-setting processes. Applying a Think Small First Principle (see guide on the Think-Small-First Principle) can make the voice and concerns of MSMEs heard and help tailor TBT and SPS measures to MSME needs. In addition, policymakers can enhance their transparency efforts by notifying the adopted final text of technical regulations, conformity assessment procedures, and other developments in TBT and SPS measures. The World Trade Organization (WTO)’s SPS Measures and Transparency Toolkits for TBT contains guidelines and resources for policymakers to communicate their updates on TBT and SPS. Policymakers can also raise MSME awareness of the e-ping platform which facilitates tracking of SPS and TBT measures, in particular by receiving email alerts on notifications on products and/or markets of interest as well as contact information of enquiry points. Where can policymakers access more resources? The ePing SPS&TBT Platform: This Platform allows search of SPS/TBT information on notifications, specific trade concerns, as well as the contact information of enquiry points (and notification authorities). Of particular interest to exporters is ePing’s customized email alerts service to receive early notice of changes to regulations. Standards and Trade Development Facility (STDF) Good Regulatory Practices: This guide is designed for developing economy government officials tasked with developing SPS measures. Visit the report. STDF also offers funding opportunities for public sector entities, business support organizations, and non-profit NGOs for SPS-capacity building projects. Visit the STDF funding opportunities webpage. WTO’s Agreement Series on Sanitary and Phytosanitary Measures: This resource is designed to improve public understanding of the WTO’s Agreement on the Application of Sanitary and Phytosanitary Measures by describing key features of the SPS Agreement and addressing frequently asked questions on SPS matters. Visit the WTO website. WTO’s Practical Manual for SPS National Notification Authorities and SPS National Enquiry Points: This resource provides advice and guidance for governments to facilitate the implementation of transparency provisions of the SPS Agreement and understand the framework of SPS measures in trade. Visit the WTO website. Where can policymakers access further resources on TBT policy guidelines and frameworks? WTO’s Technical Information on Technical Barriers to Trade: This resource Underlines the principles of the WTO’s Agreement on Technical Barriers to Trade and their relevance for international trade. Visit the WTO website. WTO TBT Enquiry Point Guide: This guide documents best practices on the performance of enquiry points for TBT measures and offers insights for training and capacity-building purposes. Visit the WTO website.
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“Think Small First” or “Small Business Lens” Principle
What is the “Think Small First” or “Small Business Lens” principle? The “Think Small First” or “Small Business Lens” principle is a policy approach to consider small business needs, points of views and impacts when designing legislation, policies, and regulations. The “Think Small First” or “Small Business Lens” principle relies on the fact that “one size does not fit all”, meaning that policymaking needs to account for the disproportionate effects regulations have in businesses of all sizes, and thus, deliver streamlined requirements that are easy to comply with by all final users. The European Commission’s Think Small First document, Canada’s Small Business Lens, and the SME Policy Institute Association’s SME Test all provide useful resources on this principle that will be further discussed in this guide. Why does considering small businesses in policymaking matter? Small businesses account for most employment and economic activity in countries across the globe. And yet, they are often hard to reach by policy consultation processes and face higher burdens and costs in complying with policy requirements. The “Think Small First” or “Small Business Lens” principle stands as a core guideline policymakers can take to mainstream small business considerations into all stages involved in designing, implementing and evaluating regulations. Adopting small business lenses in policymaking can help reduce the regulatory complexity and compliance costs that new policies can have for small businesses. Policies that deliver simplified administrative rules and procedures for small businesses ultimately make it easier for them to comply with the law. How can the “Think Small” or “Small Business Lens” Principle support small businesses to trade? With the same importance small business considerations have for general policy making processes, thinking small first matters for designing, negotiating, and implementing trade policy. Although small businesses are the main engines of employment and economic activity, they do not participate in international trade on equal terms with larger firms. Applying the “Think Small Principle” can enable trade policies and agreements at national, bilateral, regional and multilateral levels to be inclusive of small businesses. In turn, this plays a role in developing trade requirements and provisions for enabling small business to engage in cross-border trade by facing less compliance costs and having better access to business support, finance and information needed for doing international business. The Federation of Small Business Trading Forward provides further information on how policymakers can start approaching the “Think Small First” principle to support small businesses to trade. Where can policymakers access further resources on policy frameworks, guidelines and tools? OECD’s SME Policy Index: The Organization for Economic Co-operation and Development (OECD) uses a small and medium-sized enterprises (SME) policy index for guiding countries to setting targets for developing policies affecting small businesses. Visit the OECD website. Where can policymakers access good practices and national examples? Australia’s Guidance Note on Best Practice Consultation: The Government of Australia developed guidelines for regulators to undertake inclusive policy consultation processes and consider practical matters when involving small businesses. Visit this website of the Government of Australia. Canada’s Small Business Lens Checklist: The Government of Canada formulated nine checklist items for regulators to include small businesses in policymaking processes and consider their needs and potential impacts in meeting regulatory requirements. Visit this website of the Government of Canada. European Commission’s Consultation with Stakeholders in Shaping Policies Affecting Small Businesses: The European Commission assessed methods and procedures on policy consultation processes to identify how small businesses can be better involved in policymaking at national and regional levels. Visit this European Commission website
Services trade and investment facilitation
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Services Trade – Overview
Modes of services supply The World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) distinguishes between four modes of services supply. This is a way of characterizing and sorting services transactions by the territorial presence of suppliers and consumers and it is a helpful framework for thinking about how a service, which is usually intangible, can be traded across borders. Learn more at the WTO website. Cross-border supply (Mode 1): This occurs when businesses from one territory sell services to customers located in another territory. For example, an architect in country A sends building plans to a developer in country B. Consumption abroad (Mode 2): This refers to domestic businesses selling services to foreign customers present in their market. Examples are tourism or medical services provided to foreign visitors. Commercial presence (Mode 3): This consists of services sold by foreign companies to domestic customers through local affiliates, subsidiaries, or representative offices established in the customers’ market. An example is a foreign hotel group selling vacation packages to domestic residents. Movement of natural persons (Mode 4): This characterizes services provided by a services professional or an employee of a services firm who is temporarily present in the territory of the customers. For example, an IT specialist that travels abroad to develop a new piece of software for a local client. Why does services trade matter for small businesses trying to reach new markets? Since 2011, trade in services has been expanding at a faster pace than trade in goods. The WTO’s World Trade Report 2019 found that commercial services trade grew 5.4% each year on average between 2005 and 2017, totalling USD 13.3 trillion in 2017. Technological progress and greater access to the internet have enabled services businesses to reach customers without needing to be in physical proximity with them, thus reducing the cost of trading services. Trade in services has also led to opportunities for small businesses to become early exporters. WTO findings have shown that services-based small businesses are on average two years younger than small firms in manufacturing sectors when they start exporting. However, the small firms in services sectors are overall less internationalized than their peers in manufacturing activities, suggesting areas for policy improvement. Policy considerations on services trade Trade in services remains subject to higher barriers than trade in goods, although most economies have opened up their services sector over the past few decades. Indeed, trade costs in services are almost double those in goods. These costs have remained higher despite the lowering of policy barriers, the spread of digital technologies and investment in infrastructure. There have been some improvements, however, with these costs decreasing by 9 percent between 2000 and 2017. This situation has implications for countries worldwide, as barriers in services trade prevent a more efficient allocation of resources, the achievement of greater economies of scale, and an increase in the variety of services on offer, ultimately affecting the productivity of firms economy wide. Enhanced international cooperation may help reduce frictions in services trade and untap the potential for small businesses to trade services. For more on this topic, see the WTO’s World Trade Report 2019. Where can policymakers access other resources on policy frameworks, guidelines, and tools? ITC Business Survey on Obstacle to Services Trade: The International Trade Centre (ITC) conducts surveys that can help countries identify services trade barriers. Visit the ITC survey. OECD Services Trade Restrictiveness Index Regulatory Database: This resource from the Organisation for Economic Co-operation and Development (OECD) contains information on trade restrictions and behind-the-border regulations in multiple services sectors, including computer services, construction services, and telecommunications services, among others. Visit the OECD database. UNCTAD Trade Policy Frameworks for Developing Countries: The United Nations Conference on Trade and Development (UNCTAD) offers a manual of best practices that can provide guidance to key actors involved in developing national trade policy frameworks. Visit the UNCTAD website. World Bank Report, At Your Service? The Promise of Services-Led Development: This resource presents the findings of World Bank experts on the prospects for services-led development strategies that can help low- and middle-income countries catch up with high-income countries while expanding job opportunities through services-led trade and economic activity. Visit the World Bank website. WTO Guide to reading the GATS schedules of specific commitments and the list of Article II (MFN) exemptions: This resource includes a full list of WTO Members’ schedules and MFN exemption lists on services trade under the General Agreement on Trade in Services (GATS). Visit the WTO website. WTO Trade Monitoring Database (TMDB): This database monitors services trade measures that WTO Members have been introducing since October 2015. Visit the TMDB. WTO-World Bank I-TIP Services Database: This database provides information on WTO Members’ commitments under the GATS, services commitments in regional trade agreements (RTAs), applied measures in services, and services trade statistics. Visit the I-TIP. WTO World Trade Report 2019: This edition of the WTO’s flagship report examines market and regulatory factors shaping the current and future landscape of services trade. Visit the World Trade Report.
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Investment facilitation
The relationship between trade and investment in the global economy is rapidly evolving as a result of technological developments, economic liberalization, and new ways of organizing production and distribution. Although trade and investment have always been interlinked, three related developments in the global economy — the spread of global value chains (GVCs), the growth of services, and the rise of digital trade or ‘e-commerce’ — are amplifying these dynamic links and making it more important for policymakers to respond in complementary and coherent ways. The Joint Statement Initiative (JSI) on Investment Facilitation for Development (IFD) at the WTO Launched in December 2017 by a group of developing and least-developed WTO Members as ‘structured discussions’ under a ‘joint initiative’, negotiations are currently ongoing at the WTO among more than 110 participating Members (over 2/3 of the WTO Membership), with the objective to develop a multilateral Agreement on Investment Facilitation for Development. Since April 2021, the discussions advance on the basis of a single negotiating text (the so-called ‘Easter Text’). As stated in the latest Joint Statement on IFD endorsed by over 110 WTO Members in December 2021, the signatories aim at concluding the text-based negotiations on an IFD Agreement by the end of 2022. What is investment facilitation at the WTO? The negotiations on investment facilitation at the WTO are inspired by the success of the WTO’s Trade Facilitation Agreement – and the recognition that in today’s integrated global economy, expanding investment flows, like trade flows, depends on simplifying, speeding up and coordinating processes, not just liberalizing policies. Indeed, in many cases the bottlenecks, inefficiencies, and uncertainties that investment facilitation seeks to address arise from unnecessary red tape, bureaucratic overlap, or out-of-date processes which serve no clear policy purpose but can be costly for everyone concerned. Although there is no internationally agreed definition of ‘Investment facilitation’, it typically involves whole-of-government efforts to develop enabling regulatory and administrative frameworks for supporting both new and existing investors to comply with investment-related policy requirements. Some examples of investment facilitation mechanisms include public-private dialogue, investment aftercare services, and good governance laws. In the framework of the WTO negotiations on IFD, facilitating investment is understood as creating a more transparent, efficient, investment-friendly business climate – by making it easier for domestic and foreign investors to invest, to conduct their day-to-day business, and to expand their existing investments, and for host and home governments to work cooperatively and in mutually beneficial ways to facilitate not only more, but also more sustainable investment. The focus is not on changing national investment policies, but on implementing and administering those policies more clearly, efficiently, predictably, and fairly, notably through increasing transparency of governments’ investment measures, streamlining administrative procedures, and enhancing cooperation among relevant agencies. However, it is clearly distinct from investment ‘liberalization’ (market access), investment ‘protection’ and Investor-State Dispute Settlement, all of which are explicitly excluded from the scope of the future WTO IFD Agreement. It is to be noted that, as there is no internationally agreed definition of this concept, other International Organizations (IOs) working in the field of investment facilitation, such as OECD or UNCTAD may approach this concept in a slightly different way. However, all approaches have in common their focus on making it easier for investors to establish or expand their investments, as well as to conduct their day-to-day business in host countries. Why does investment facilitation matter – and why does it matter particularly for MSMEs? MSMEs often face many ground-level obstacles and impediments when attempting to invest abroad. Notably, the lack of easily accessible information on investment measures and the practical steps to invest in a given country/territory; language barriers; the lack of predictability of the regulatory environment; as well as the opacity and complexity of administrative procedures may often be overly burdensome and act as a deterrent in particular for MSMEs. Indeed, unlike big firms, MSMEs often lack the capacity and/or the financial means to hire expert consultancy services to find out the information on the requirements and procedures in order to invest in a particular country/territory. In this context, investment facilitation measures can benefit in particular MSMEs when investing abroad, through promoting greater transparency of regulations (including notably through online publication), streamlining and speeding up administrative procedures, building constructive relationships between investors and relevant authorities, and establishing amicable consultation/mediation mechanisms to prevent investment disputes from escalating. As well, investment facilitation measures can also enable MSMEs to link up with foreign investors, notably in developing countries, through different channels. Indeed, enhancing the visibility of domestic firms, including MSMEs, is part of investment facilitation, notably through measures encouraging the establishment domestic supplier databases. Global policy dialogues framed within the Group of Twenty’s (G20) Guiding Principles for Global Investment Policymaking stress that investment facilitation provides avenues for small business to participate and move up in supply chains by leveraging on linkages to multinational companies. WTO Members’ awareness of the importance of investment facilitation for MSMEs is well reflected in the draft negotiating document for an IFD Agreement, through provisions encouraging Members to review their investment measures with the view to make their regime more effective in addressing the specific needs of MSMEs, or to take into account, when preparing major investment measures, the potential impact of those measures on MSMEs. Actually, enhancing investment in as well as by MSMEs is one of the objectives of the future Agreement. How can policymakers facilitate investment in, and by, MSMEs? Several measures can be adopted to facilitate investment, particularly for MSMEs, at the national and international level. For instance, countries negotiate trade and investment agreements that may include provisions aiming at facilitating conditions for small businesses to access to or benefit from investment opportunities (see chapter 5 of WTO’s MSME-Related Language in Regional Trade Agreements). At the national level, countries seeking to facilitate investment may develop policies, institutions and financial facilities that support small businesses to engage in international trade and investment by increasing their access to capital, technology, and business networks. More specifically, the United Nations Conference on Trade and Development (UNCTAD) developed a Global Action Menu for Investment Facilitation, which provides 10 ‘action lines’ with a series of options for investment policymakers and government agencies for national and international policy measures on investment facilitation. As well, to support the ongoing negotiations on an IFD Agreement in the WTO and enable negotiators and policymakers notably from developing and least-developed countries to better engage in them, the International Trade Centre (ITC), jointly with the German Institute of Development and Sustainability (IDOS), has launched an ‘Investment Facilitation for Development (IF4D) project’. In this context, the ITC/IDOS have developed a toolkit for policymakers provides guidelines for developing investment facilitation regulations aimed at attaining development objectives, such as small business growth and competitiveness. This toolkit provides principles, action lines and examples for designing investment facilitation measures, and includes considerations for such measures to account in particular for small business needs. Some examples of investment facilitation policy measures in support of small business growth and development include: digital investment portals with lists of investor-ready small businesses; periodic impact assessments of the investment facilitation framework on small businesses; certification programs for developing small business linkages to customers, larger businesses and multinationals (see guide on voluntary sustainability standards); online platforms that streamline regulatory compliance for small businesses. For more information, see ITC/IDOS’s Policymaker Toolkit on Investment Facilitation for Development. A general guidance is that investment policies, regulations and procedures should be transparent, pragmatic, and friendly for small businesses to meet all necessary policy requirements for seizing investment opportunities and for developing business linkages to broader investment processes. By doing so, small businesses grow and are more able to contribute to the economy, increasing their productive and financial capacities to engage more in international trade and investment Where can policymakers access resources on policy frameworks, guidelines and tools? WTO’s Investment Facilitation for Development Portal: The World Trade Organization (WTO) has a webpage dedicated to the IFD negotiations which provides information regarding the negotiations, including a factsheet and joint statements on IFD. Visit the WTO’s IFD webpage. ITC/IDOS Investment Facilitation for Development Policy Toolkit for Policymakers: ITC and DIE developed a policy toolkit for policymakers to support the WTO negotiations on IFD, as well as unilateral, bilateral and regional efforts to facilitate sustainable investment flows. The toolkit notably contains an inventory of measures to facilitate the flow of sustainable FDI. Visit the ITC/DIE’s Policy Toolkit for Policymakers. UNCTAD’s Investment Facilitation and Promotion: The United Nations Conference on Trade and Development (UNCTAD) supports countries to design investment facilitation regulations and institutions through a range of resources, including investment guides, advisory guidelines and policy frameworks. Visit this UNCTAD website. UNCTAD’s Investment Policy Hub: UNCTAD integrates policy frameworks, reviews and monitoring system on investment measures that can help to identify resources, trends and developments in investment facilitation. Visit the Hub. World Bank’s Investment Policy and Promotion: The World Bank offers a knowledge bank with strategies, examples and policy evidence on measures related to investment facilitation. Visit this World Bank website. Where can policymakers access good practices and national examples? IDB-ITC-DIE’s What Foreign Investors Want: The Inter-American Development Bank (IDB), International Trade Centre (ITC), and the German Development Institute (DIE) surveyed a number of active foreign investors in Latin America and the Caribbean and identified a key set of valuable investment facilitation measures for advancing development objectives under multilateral cooperation and national coordination. Visit this IDB-ITC-DIE report. OECD’s Investment Promotion and Facilitation Strategies: The Organization for Economic Co-operation and Development (OECD) provides an inventory of investment promotion and facilitation activities in the Middle East and North Africa region, which policymakers can use for benchmarking purposes. Visit this OECD website. OECD-UNIDO’s Integrating Southeast Asian SMEs in Global Value Chains: The OECD and the United Nations Industrial Organization (UNIDO) provide evidence on investment facilitation measures that can enable small businesses to develop business linkages to global supply chains. Visit this OECD-UNIDO report. UNCTAD’s World Investment Reports: UNCTAD publishes each year a World Investment Report which provides, among other, information on latest investment facilitation measures adopted. Visit UNCTAD’s 2022 World Investment Report. UNCTAD’s Investment Policy Monitor: UNCTAD provides the international investment community with country-specific, up-to-date information about the latest developments in foreign investment policies, notably on investment facilitation. Visit UNCTAD’s Investment Policy Monitor. UNCTAD’s Global Enterprise Registration (GER.co): UNCTAD lists and rates governments’ digital information portals and Single Windows, providing the weblinks to each of them. Visit the GER.co.
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Electronic Cross-border Payments
What are e-payments? Electronic payments (e-payments) are digital transactions that users make to pay for goods and services on the internet. To execute payments electronically, businesses and individuals use a variety of e-payment methods that range from debit and card payments to bank transfers to mobile pay and automated clearing house (ACH) transactions. E-payments are basically financial operations enabled by electronic devices, such as computers, smartphones, or tablets. For more information on e-payment models and transaction types, see the International Chamber of Commerce’s (ICC) Electronic Payment Services and E-Commerce and the International Monetary Fund’s (IMF) fintech note 19/91 “The Rise of Digital Money.” Why do e-payments matter for MSMEs to trade? Technological developments in recent years have been enabling financial and non-financial institutions to modernize the payment methods they offer to users. Studies by the Bank for International Settlements (BIS) and the International Monetary Fund have documented the rapid growth that digital technologies are seeing relative to traditional instruments. As digital technologies offer more efficient and less expensive payment instruments, small businesses can benefit from using e-payment options to reduce uncertainty and costs, especially for international trade transactions. Other advantages that e-payments have for MSMEs when it comes to engaging in trade range from speeding up cross-border payment activities at customs to reducing fraud risks and burdensome administrative expenses. For more information on e-payments and online transactions, see the following articles and papers: The BIS article on trends in digital payments, “Payments go (even more) digital”; The IMF working paper WP/21/177 “Is Mobile Money Part of Money? Understanding the Trends and Measurement“; The United Nations Economic Commission for Europe’s (UNECE) Trade Facilitation Implementation Guide; and The Organisation for Economic Co-operation and Development’s (OECD) paper on “Trade finance for SMEs in the digital era.” Which challenges do MSMEs encounter in using e-payments? While digital technologies have contributed to the rapid expansion of financial services, e-payment markets face regulatory challenges that hinder the ability of small businesses to have greater access to cross-border payment options for trade. A recent World Trade Organization (WTO) study has shown that only a quarter of WTO Members have fully liberalized cross-border payments under the General Agreement on Trade in Services (GATS) commitments. The World Economic Forum (WEF) and International Chamber of Commerce (ICC) have identified four key areas where policymakers could engage to reduce frictions in e-payment markets: (a) market access and national treatment barriers; (b) technical standards; (c) security and trust; and (d) policy coordination and oversight. For more information, see the WEF’s Connecting Digital Economies page and their white paper on Addressing E-Payment Challenges in Global E-Commerce, as well as the ICC’s Issues Brief on Electronic payment services and e-commerce. Where can I access resources on frameworks and policy recommendations? Policy recommendations for cross-border payments: The WEF outlines key areas where policymakers can engage and cooperate to reduce complexity in e-payments markets. Visit Connecting Digital Economies: Policy Recommendations for Cross-Border Payments. Scope of existing commitments on e-payment services: The WEF describes the current state of multilateral commitments and plurilateral negotiations on trade-related aspects of e-payment services and e-commerce. Read the WEF paper. Consumer policy guidance on mobile and online payments: The Organisation for Economic Cooperation and Development (OECD) offers guidance that policymakers can use to address consumer protection issues when designing policies targeting mobile and online payment markets. Read the OECD guide. Analytical framework on fintech and payments regulations: The International Monetary Fund (IMF) documents recent international experiences in modernizing legal and regulatory frameworks for payments services. Link to IMF framework. Where can I find best practices and national examples? E-payments guide for developing countries: The International Trade Centre (ITC) developed a guide on legal and regulatory reforms and best practices that policymakers can use to address e-payment policy issues in developing countries. Visit the ITC guide. Electronic payments acceptance initiatives: The World Bank has documented a review of literature and country examples to guide policymakers in designing incentives to foster electronic payments acceptance. Access the World Bank review.
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Cross-Border Paperless Trade
What is cross-border paperless trade? Paperless trade refers to the digitalization of information flows required to support goods and services crossing borders. By moving away from paper and opting for digital systems, governments and other stakeholders can speed up and facilitate trade (see guide on Trade Facilitation). Paperless trade can also yield significant environmental benefits by cutting out printing, dispatching, processing, exchanging, and the eventual discarding of vast quantities of paper documents. Paperless trade systems can be B2B, B2G or G2G and have various focuses (e.g. electronic customs declarations, electronic port management systems, electronic single windows). Why is cross-border paperless trade important for MSMEs? Paperless trade could significantly reduce trade costs and add up to major savings for traders, especially MSMEs. According to a study conducted by the International Chamber of Commerce (ICC) and Coriolis Technology, digitizing transferable documents could boost MSME trade by 25% and lead to a 35% improvement in business efficiency. Paperless trade can reduce complexity by eliminating the need for copies of the same document, as well as making electronic and immediate transmission of those same documents possible. All of this can reduce the time and effort required, thereby assisting all traders, especially MSMEs, with managing trade-related procedures, such as trade finance requests and logistics operations. What legal and technical aspects need to be considered when putting in place cross-border paperless trade systems? Legal issues that policy makers should consider when putting in place cross-border paperless trade systems include: Legal recognition of electronic transactions and documents: adopting a legal framework that recognizes electronic transactions and documents as equivalent to those based on paper is. The UNCITRAL Model Law on Electronic Transferable Records (MLETR) provides useful international guidance in this respect. Trust services: for paperless trade systems to be interoperable, they need to rely on mechanisms guaranteeing an international alignment on what constitutes a valid trust service across borders. See the UNCITRAL Model Law on Electronic Signatures (MLES) for guidance on this issue. Data governance: When documents and information are exchanged between users using electronic systems or between electronic systems, the system must ensure confidentiality (i.e. information is private to only designated parties of the communications) and data integrity (i.e. the accuracy and consistency of data are maintained and assured over their entire life cycle). Liability and dispute management: trading parties and other concerned entities may suffer losses from the incorrect transmission or improper reuse of information and may seek compensation for those losses. Guaranteeing access to civil remedies for such losses and dispute settlement opportunities can help to enhance trust in paperless trade systems, and thereby support their adoption. In addition to the legal framework, technical issues to consider when putting in place cross-border paperless trade systems include digital identity, electronic payments, data models and semantics, communication protocols, connectivity and data security. A list of standards for cross-border paperless trade that can be called upon when putting in place such systems can be found in the joint ICC-WTO Standards Toolkit for Cross-border Paperless Trade. Detailed guidance on these various legal and technical issues is provided in the Cross-border Paperless Trade Toolkit developed by the WTO in collaboration with the United Nations Economic Commission for East Asia and the Pacific (UNESCAP) and UNCITRAL, as well as in the legal and technical readiness assessment guides and checklists developed by UNESCAP. Where can policymakers access resources on policy frameworks, guidelines and tools? ICC’s Digital Standards Initiative (DSI): The International Chamber of Commerce’s (ICC) has developed a digital standards initiative. The DSI website includes a page for policymakerswith links to information related to adoption, economic analyses on the benefits of digitalization, and legislation related to the adoption of the MLETR. ITC-UNESCAP-UNNExT’s Making the WTO Trade Facilitation Agreement Work for SMEs: The International Trade Centre (ITC), the United Nations Economic Commission for East Asia and the Pacific (UNESCAP) and the United Nations Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT) provide guidance for policymakers to mainstream paperless measures and other trade facilitation components in strategies aimed at developing small- and medium-sized enterprises (SMEs). Visit this ITC-UNESCAP-UNNExT repor WTO-UNESCAP-UNCITRAL Cross-Border Paperless Trade Toolkit: The World Trade Organization (WTO), in collaboration with UNESCAP and UNCITRAL, developed a toolkit with technical and legal tools that can be called upon to adopt cross-border paperless trade systems. UN/CEFACT’s While Paper on Paperless Trade: The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) has a policy document with frameworks, case studies and resources that can guide policymakers to align trade rules with trends in paperless trade. Visit this UN/CEFACT report. UNECE-UN/CEFACT’s Guides on Paperless Trade: The United Nations Economic Commission for Europe (UNECE) and the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) have a number of papers and guides on paperless trade, including a 2018 white paper on paperless trade, a roadmap towards paperless trade, and trade facilitation and paperless trade implementation. UNESCAP’s Legal Readiness Assessment Guide: UNESCAP has developed legal readiness assessment guides that countries can use to identify legal issue areas that are relevant to cross-border paperless trade. Visit this UNESCAP website. UNESCAP’s Technical Readiness Assessment Guide: UNESCAP offers technical readiness assessment guides that countries can use to address technical issues on implementing electronic trade systems, paperless environment and actions needed for facilitating cross-border paperless trade data exchange. Visit this UNESCAP website. WCO’s Guide on Dematerialization & Paperless Processing: The World Customs Organization (WTO) has developed guidelines for customs authorities to support the use of electronic means for managing trade-related documents and reduce the hard copy requirements for such documents. Visit this WCO guide. Where can policymakers access good practices and national examples? Single Window for Foreign Trade in Colombia: A Case Study on Trade Transactions: The International Trade Centre (ITC) has documented Colombia’s experience in establishing a national single window for foreign trade which has enable business to conduct paperless transaction with the support of information and communication technologies. Visit this ITC website. UNECE’s Regional Report on Trade Facilitation and Paperless Trade Implementation: The United Nations Commission for Europe (UNECE) provides an example of regional policy reviews on best practices and opportunities for cooperation in adopting paperless trade measures and other trade facilitation interventions. Visit this UNECE report. UNESCAP’s Readiness Assessments for Cross-Border Paperless Trade: The United Nations Economic Commission for East Asia and the Pacific offers policy toolkits for assessing legal and technical readiness for cross-border paperless trade. Visit this UNESCAP website.
Trade facilitation
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Trade Facilitation
What is the Trade Facilitation Agreement? From the 2013 Bali Ministerial Conference and after almost ten years of subsequent negotiation, the WTO Trade Facilitation Agreement (TFA) emerged, recognizing the need for improvement in trade processes. Ratified at the beginning of 2017, the TFA is an important step to facilitate border procedures. Recent evidence from an ex-post analysis undertaken by the United Nations Economic and Social Commission for East Asia and the Pacific (UNESCAP) suggests that implementation of the WTO TFA to date (as it is a gradual process in most developing economies) has contributed to reduce trade costs by 1-4% on average. Why does the TFA matter for MSMEs? Although the changes proposed by the TFA benefit all traders, smaller traders, with fewer resources, were identified as benefitting more. Section I of the agreement lists all the various areas and processes that should be aligned and modernized (see the guide on cross-border paperless trade), with changes focused principally on two areas, communication and border procedures. The ITC has highlighted certain articles of the TFA as especially relevant for MSME trade. They include articles on trade procedure information dissemination to SMEs; authorized operators and criteria that will not restrict SME participation (see Getting Down to Business or the guide on authorized economic operators); SME support for single windows (see guide on single windows and national portals); reduced fees and charges for SMEs and expedited shipments; and national committees on trade facilitation and SMEs (see guide on national committees on trade facilitation). For more details, see Making the WTO Trade Facilitation Agreement Work for SMEs. Where can policymakers access more resources? There are many resources for policymakers related to implementation of the TFA. Below are just a few, more can be found in the policymaker resource library. ITC not only provides research and capacity building information on their dedicated webpage to the trade facilitation programme, they also offer a policymaker e-learning course on the WTO trade facilitation agreement and training manual on SMEs and the WTO Trade Facilitation Agreement. OECD trade facilitation page contains useful links to research, video explanations and tools with information on implementation of the agreement and related challenges. World Customs Organization (WCO) resources on trade facilitation include a guide on national committees on trade facilitation and information sheets on specific topics such as advance rulings, appeals in customs matters, single window, risk management/post clearance control and simplified procedure/authorized persons, all of which are accessible here. The WCO also has produced many guides and handbooks related to trade facilitation available through the WCO Tools. World Trade Organization (WTO) resources include the trade facilitation webpage, which contains information on the agreement itself as well as links to videos and publications. Additional resources linked on the page include: The dedicated website of the Trade facilitation Agreement Facility which includes information on the agreement itself, resources and case studies for each TFA provision, numerous general resources such from the WTO’s TFA Facility webpage, as well as links to e-learning courses for policymakers provided by the WTO, IDB, ITC, UNESCAP and others. The trade facilitation agreement database with charts on the state of play of the TFA and the status of the implementation of commitments by WTO Members. Where can policymakers access good practices or national examples? ITC, UNCECE and UNCTAD guide titled Getting Down to Business, Making the Most of the WTO Trade Facilitation Agreement includes information on best practices and other useful information on implementation. OECD trade facilitation indicators simulator and compare your country tool provide governments with a basis to prioritize trade facilitation actions and to identify strengths and weaknesses in trade facilitation. UNCTAD similarly offers a Reform Tracker for monitoring of trade facilitation reforms.
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Authorized Economic Operators
What are authorized economic operators (AEOs)? AEOs are businesses and other entities certified by customs authorities to trade goods across borders under international supply chain security standards. An AEO status can provide increased confidence for customs authorities, trade partners, and customers. This status also certifies goods to obtain priority clearance with customs and be subject to fewer physical and documentation checks. Products shipped by companies with AEO status are also given priority as AEO consignments if they are selected for controls at the border. For additional information on AEOs, national examples and implementation guidance, see the United Nations Economic Commission for Europe’s (UNECE) page on Authorized Economic Operator (AEO). Why does an AEO status matter for trade? With international trade increasing over the years, cross-border movement of goods has become a complex process for customs authorities to manage. There are increased security standards in many economies, along with an increase of small, low-value shipments. In response, international guidelines on AEO programs were adopted to streamline clearance processes conducted by customs and border authorities and reduce delivery times in cross-border trade transactions. The World Customs Organization (WCO) published an AEO Compendium in 2020 to provide policymakers with an overview of existing AEO programs around the world and a list of the frameworks that underpin AEO-related standards. How can AEO status benefit MSMEs and what are the potential challenges? MSMEs can apply for AEO status at the customs authorities in their countries (if available). According to the World Customs Organization, there are currently 97 operational AEO programs worldwide, with 20 more under development (See the WCO AEO Compendium 2020 Edition for more information on national AEO programmes). Although different governments have different requirements for becoming an AEO, broadly a company must comply with national domestic registration laws, abide by customs and taxation requirements, maintain appropriate records, and practice required safety and security measures. Sometimes these compliance requirements can be burdensome and the process to attain AEO status difficult. According to the International Trade Centre’s (ITC) trade facilitation guide, “it is crucial to design a mechanism which encourages SMEs’ participation in authorized operator schemes.” Further, cooperation on AEO agreements and a mutual recognition of AEOs themselves could facilitate MSME participation in these programs. For additional guidance on the implications of AEO programs for MSMEs, see WCO’s The Authorized Economic Operator and the Small and Medium Enterprise. Where can policymakers access more resources? WCO SAFE Package: The above-mentioned SAFE package compiles a set of standards, frameworks and tools developed by the WCO over time to secure and facilitate global trade. These are designed for building capacity in trade facilitation matters and guiding countries in the implementation of AEO programs. Visit the WCO site. WCO Authorized Economic Operators (AEO) Implementation Guidance: Presents a 9-phase approach to implement an AEO program under the SAFE package, which aims to provide customs administrations with guidance on AEO-related matters. Visit the WCO website. International Trade Centre: The ITC provides an implementation guide for the World Trade Organization’s (WTO) Trade Facilitation Agreement, including information on facilitation measures for authorized operators. Visit the ITC website. Where can policymakers access good practices or national examples? WCO’s Compendium of Authorized Economic Operator Programmes: This compendium features a list of operational AEO programmes and AEO programmes under development across world regions. Visit the WCO site. APEC’s Integrating SMEs in Authorized Economic Operator Certification: The Asia-Pacific Economic Cooperation (APEC) secretariat documents best practices and recommendations for policymakers and businesses to seize trade facilitation opportunities from implementing AEO programs. Visit the APEC website. COMCEC’s Authorized Economic Operator Programs in the Islamic Countries: The Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) offers an analysis on AEO program awareness, design, and implementation in three best practices in the world, and among member states of the Organization of the Islamic Cooperation (OIC). Visit the COMCEC site. International Trade Centre: The ITC has documented best practices in AEO programs that have led to benefits for businesses and customs authorities in streamlining trade-related procedures. These are described in their study Faster Customs, Faster Trade. Mexico’s AEO Programme: The Inter-American Development Bank has documented evidence on the impact that AEO certification has provided to exporting firms. Visit the IDB site. WTO Informal Working Group on MSMEs: Following recommendations submitted by business associations, the Informal Working Group on MSMEs prepared a consolidated document that includes the topic “AEO programmes.”
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Express Consignments and Low-value Shipments
What are express consignments and low-value shipments? With the advent of e-commerce in the digital economy, the Universal Postal Union (UPU) has recognized the increasing “parcelization” of trade. In fact, over 80% of cross-border goods bought online are small packets weighing up to 2 kilograms, and the majority of those packages (roughly 70%) are delivered through the postal system. This has changed the needs of customs processing as more and more shipments are sent by individual or small sellers with different capacities. Why does it matter for MSMEs? MSMEs may not have the expertise to comply with customs requirements, or may be deterred from entering trade altogether given the paperwork and requirements to ship commercial packages abroad. Making tax/duty information readily available and easy to understand in order to calculate expected costs is a first step in the process. What can policymakers do? Some governments have introduced new approaches to deal with low value shipments. For example, Australia applies a goods and services tax – known as GST – which takes the form of a broad-based tax of 10% applied to sales of most goods, services and other items consumed domestically. Canada has developed a generic harmonized system for household imports, which has been proposed as a model for developing a standard application programming interface with standard classification headings for harmonizing identification codes for low value shipments. Other group of countries have decided to apply a flat import rate at a reasonable level that replaces all duties and taxes. On the basis of these approaches, the Global Express Association (GEA) has conceptualized three broad options that policymakers can consider for collecting taxes and duties on low-value shipments. For more information, see the GEA’s Proposal on Tax/Duty Collection on Imported Low Value Shipments. Where can policymakers access more resources? The Universal Postal Union has a number of resources, including a mobile phone application for submitting electronic advance data (EAD) for customs declarations, along with guidelines and guides, recommendations, and standards. Where can policymakers access good practices or national examples? Australia’s GST system applies to goods imported into the economy as well as domestic production. An explanation of how Australia’s GST system works can be found here and an explanation of importing goods with GST is available here, along with a presentation on Australia’s e-commerce experience. Canada’s generic harmonized system for household imports is described in the GEA’s a proposal on tax/duty collection on imported low value shipments. There is also a presentation on Canada’s low-value shipments policy. The Enhanced Integrated Framework (EIF) and UPU, in conjunction with the United Nations Conference on Trade and Development (UNCTAD) have launched a project in Vanuatu to facilitate the efficient post–customs clearance of postal packages through the exchange of pre-arrival/pre-departure information. An additional 23 least developed countries (LDCs) in which the national interfaces between UPU’s Customs Declaration System (CDS) and UNCTAD’s ASYCUDA (a computerized customs management system) can be established quickly have also been identified. For more information, visit the EIF’s Trade for Development News. New Zealand, similar to Australia, also has a GST system in place. More information on GST for overseas business in New Zealand is available here. UPU publishes both case studies and best practices, such as Easy Export to develop a simplified and easy export system for MSMEs. Originally created for Brazil, Easy Export is now being applied in other economies as well, including Tunisia and Morocco.
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Single Windows and National Portals
What is a national single window? A national single window refers to a facility where actors involved in trade and transport share standardized information and documents to fulfill regulatory requirements related to trade. Single windows allow traders and government agencies to exchange information regarding trade procedures such as permits and licenses, certificates and necessary approvals, customs clearance, and port exit. The World Customs Organization (WCO) provides more information in its document entitled “Building a Single Window Environment“. In the absence of a single window, businesses typically must submit the same documents to each relevant authority, which represents significant costs. National single windows simplify procedures and provide businesses with a single point for submitting all required information to all authorities involved in export, import, and transit requirements. This approach can significantly reduce costs, thereby benefitting MSMEs. For more information, see the United Nations Economic Commission for Europe’s (UNECE) Recommendation No. 33 on Establishing a Single Window and the International Trade Centre’s (ITC) SMEs and the WTO Trade Facilitation Agreement. Which services do national single windows provide? Single windows can provide a range of services depending on their design and coverage. Mostly, they comprise electronic platforms where business users register to submit customs declarations and applications for import and export licenses and licenses for strategic products. The ITC has developed a training manual for policymakers to understand the scope of national single window services in relation to measures aiming to facilitate trade. Types of single windows The United Nations Economic Commission for Europe has described three general models for single windows on its Recommendation No. 33 on Establishing a Single Window: Single authority: This authority receives paper or electronic information that it later disseminates to the relevant government authorities. The single authority also coordinates actions to facilitate the logistical chain. Single automated system: This system integrates the electronic collection, use, dissemination, and storage of trade-related data disseminating the required information to all relevant authorities. Automated information transaction system: This system enables traders to submit electronic trade declarations to the relevant authorities for processing files and obtaining approvals in a single application. How can policymakers support small businesses to use national single windows? The ITC provides a toolkit that policymakers can consider to support SMEs through trade facilitation reforms, including actions on streamlining national single windows. The toolkit offers two policy recommendations in mainstreaming small business needs to the design of national single windows. The World Customs Organization (WCO) also provides a framework on modern customs administration that suggests principles for regulatory authorities in coordinating border management procedures to cut time and costs involved in implementing single window requirements. Going beyond single windows: Integrated Services for MSMEs in International Trade (ISMIT) The UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT) advocates for the establishment of national ISMIT platforms. An ISMIT platform is a single submission portal (SSP), which provides access to various services to trade internationally and is complementary to a single window. It goes beyond regulatory procedures covered by single windows and provides services such as financing, logistics, insurance etc. ISMIT platforms offer benefits both to government agencies, which can receive high quality and reliable information submitted according to the standards and formats required by the relevant government agency, and to MSMEs by reducing the time, risk and cost of customs clearance, logistics, and other related activities. For more detailed information, see the UNECE ISMIT white paper. Where can policymakers access more resources? Building a Single Window Environment: The WCO provides a compendium of frameworks, guidelines, and tools that policymakers can use to design a national single window. Visit the WCO website. A WCO Guidance on National Committees on Trade Facilitation: This guidance presents resources and action plan examples on single window environments and data harmonization for national committees on trade facilitation. Visit the WCO website. Single Window Planning and Implementation Guide: The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) offers a guide to assist policymakers in planning, developing, and managing single window systems. Visit the UNESCAP website. Where can policymakers access good practices or national examples? Morocco’s PortNet is an example of a national single window platform. For information on the design and implementation process, see this 2017 brief on PortNet in Morocco. Singapore’s Single Window TradeNet System: Singapore has a single integrated permit processing system that counts with document services centres specialized in preparing and submitting trade documents on behalf of small businesses. Access TradeNet. Single Window for Trade Facilitation: UNESCAP has compiled best practices of single window systems developed in Asia and the Pacific. Visit the UNESCAP website. Senegal’s Experience in Single Windows: Senegal created a national single window (known as ORBUS) in 2004. It designed a single window environment with the broader objective of enabling paperless trade through complementary measures on digital signature and electronic interconnectivity. Learn more about ORBUS. WCO case studies and other information: The WCO maintains information on single window initiatives that are currently at various stages of implementation. Visit the WCO website. Informal Working Group on MSMEs: After reviewing recommendations submitted by business associations, the Informal Working Group on MSMEs prepared a consolidation of recommendations in 2019 that includes the topic “single windows.”
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Rules of Origin
What are rules of origin? Rules of origin (ROOs) are a set of laws, regulations, and administrative procedures that countries impose to determine where an imported product comes from. At first glance, where a product comes from should be a simple question to answer – wherever it was made. But digging deeper it becomes more challenging: is a product from the place where the materials originated? Is it from where the product was first put together? What if it has many parts all from different locations? And which processing step determines where the product was made? ROOs provide governments with the criteria to identify whether imports are subject to trade measures such as: most-favoured-nation treatment or preferential treatment from a regional trade agreement; trade remedies; origin marking requirements; quantitative restrictions or tariff quotas; government procurement; and trade statistics. For more information, see the World Trade Organization’s (WTO) Technical Information on Rules of Origin. What are the different types of origin criteria? When making their declarations to customs, businesses have to present a proof of origin which determines whether their imported products are subject to preferential or non-preferential market access terms. If imported goods are manufactured in multiple countries, the country of origin would be ascertained in accordance with the criteria defined in the rules of origin. The WTO Agreement on Rules of Origin distinguishes two types of rules of origin: Preferential origin: This determines whether products are eligible for preferential (lower or zero) tariffs and other benefits provided under preferential regimes, either in the context of trade agreements or unilateral preferential schemes. Qualifying under preferential origin may require imports to be completely or partially produced in a country that is a beneficiary from the preferential regime under consideration, according to its specific conditions identified. In some cases, however, materials from certain third parties may also qualify as originating. Information on rules of origin and origin provisions in trade agreements can be retrieved in the Rules of Origin Facilitator, an initiative developed jointly by the WTO and the International Trade Centre (ITC). For identifying rules of origin provisions in non-reciprocal preferential schemes, see the WTO’s Preferential Trade Agreements (PTA) database. Non-preferential origin: This is not linked to trade agreements and may determine whether businesses have to comply with non-tariff requirements such as trade remedies and quotas (see guide on non-tariff measures). Not all countries apply specific legislation related to non-preferential rules of origin, and negotiations on adopting harmonized non-preferential rules of origin are still ongoing. The WTO’s Rules of Origin Section provides a list of WTO Members that have notified their non-preferential rules of origin. What role do rules of origin play in trade policy? Rules of origin are used to determine the country of origin of goods and shall not, as specified in the WTO Agreement on ROOs, create restrictive, distorting or disruptive effects on international trade. For example, determining rules of origin may be required to verify whether certain products are subject to measures aimed to correct unfair trade practices, protect local industries, or grant preferential access to imports from developing countries or beneficiary countries in regional cooperation agreements. Other reasons that may justify the use of rules of origin range from administering discriminatory government procurement procedures to controlling foreign market access to implementing environmental or sanitary measures. The World Customs Organization (WCO) offers two resources that review technical aspects of rules of origin in a comprehensive manner. These resources are the Rules of Origin – Handbook and the WCO Origin Compendium. What can policymakers do? Complying with rules of origin can require a significant amount of resources, especially when these rules vary depending on the countries involved. With the growing number of preferential trade agreements between different groups, it is important to consider streamlining rules of origin and origin procedures whenever practicable to help businesses of any size comply. For more information, see the International Chamber of Commerce’s (ICC) Business Recommendations on Rules of Origin in Preferential Trade Agreements. Where can policymakers access more resources? The WCO’s Rules of Origin Handbook and Compendium: This handbook and compendium provides a comprehensive review of frameworks that underpin the correct application of rules of origin. Access this WCO resource. The WCO’s Training Packages: The WCO offers e-learning courses on rules of origin for international trade professionals, companies, and universities, as well as training opportunities for customs administrations and private sector entities. Visit the WCO website. The WTO Agreement on Rules of Origin: This provides links to official documents and related resources concerning the WTO rules that apply to this area. Visit the WTO website. Where can policymakers access good practices or national examples? European Commission’s Guidance on Rules of Origin: The European Union provides a number of resources with guidance materials on how economic operators and customs authorities can understand, apply and communicate rules on the determination of preferential and non-preferential origin of goods. Visit the European Commission Quick Guide to Working with Rules of Origin and the European Commission Rules of Origin Webpage. The United Nations Conference on Trade and Development’s (UNCTAD) Rules of Origin and Origin Procedures Applicable to Exports from Least Developed Countries: This resource examines the rules of origin landscape and what it means for least developed countries. Visit the UNCTAD website. Informal Working Group on MSMEs: Drawing from recommendations submitted by business associations, the Informal Working Group on MSMEs prepared a consolidated document that includes the topic of rules of origin.
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National Committees on Trade Facilitation
What are National Committees on Trade Facilitation (NCTFs)? National Committees on Trade Facilitation (NCTFs), also sometimes referred to as National Trade Facilitation Committees (NTFCs), are government bodies or mechanisms tasked with the responsibility to facilitate both domestic coordination and implementation of the provisions included in the World Trade Organization (WTO)’s Trade Facilitation Agreement (TFA). The TFA entered into force on February 2017. Since then, the agreement has been representing a framework for WTO members to facilitate the movement, release and clearance of goods, including goods in transit. TFA’s article 23.2 frames the overall mandate of NCTFs. What are the key objectives of NCTFs? While the overall mandate of NCTFs has been framed under TFA’s article 23.2, these committees have been existent across countries to oversee the implementation of trade facilitation reforms enacted since the 1960s. NCTFs across TFA parties share the function of coordinating stakeholders playing a role in implementing the TFA provisions. However, their scope and frequency of work may differ according to political, management and leadership conditions in which they operate. Some of the activities reported by NCTFs include: advising government and making recommendations; collecting and disseminating information on trade facilitation and awareness raising; monitoring technical assistance projects and programmes; negotiating, promoting and monitoring new trade facilitation agreements; and organizing training sessions and capacity building among others. Why do NTFCs matter for MSMEs? The World Customs Organization (WCO)’s Guidance for National Committees on Trade Facilitation stresses that including micro-, small- and medium-sized enterprises (MSMEs) among the committee stakeholders is part of the preconditions for implementing a successful and effective NCTF. As many of the TFA provisions affect the ability of MSMEs to benefit from simplified trade, transit and customs procedures, enabling MSMEs to have representation in NCTFs is vital for ensuring a full compliance with TFA’s article 23.2 and other related articles, such as article 2. The latter emphasizes that all stakeholders affected by customs concerns should be consulted for trade regulatory developments. What can policymakers do? MSMEs lag behind larger firms in skills, knowledge and access to information, resources and contact to have their voice heard and participate in trade-related policymaking processes. Policymakers can play a role in making the case and creating space for MSMEs to channel their trade-related concerns through NCTFs. The International Trade Centre (ITC)’s Toolkit for Policymakers for Supporting SMEs through Trade Facilitation Reforms outlines key actions policymakers can take to support MSME inclusion in NCTFs including: Developing a communications plan for NCTFs to consult with MSMEs well before trade-related policies and procedures are developed or changed; assessing SME needs and concerns through various information channels; ensuring MSME participation in consultations and feedback; and reviewing MSME impacts of trade policies and procedures. Where can policymakers access more resources? ITC-UNESCAP-UNNExT’s Making the WTO Trade Facilitation Agreement Work for SMEs: The International Trade Centre (ITC), the United Nations Economic and Social Commission for East Asia and the Pacific (UNESCAP), and the United Nations Network of Experts on Paperless Trade in Asia and the Pacific (UNNExT) have compiled programmes, measures and interventions that can support the involvement of MSMEs in NCTFs. Visit this ITC-UNESCAP-UNEExT report. UNCTAD’s Resources for National Trade Facilitation Committees (NTFCs): The United Nations Conference on Trade and Development (UNCTAD) offers resources for policymakers to connect NTFCs with networks, learning platforms and informational tools. Visit this UNCTAD’s website. UNCTAD’s Database of NTFCs: Collects information metrics to assess the performance of NTFCs individually and globally. Visit this UNCTAD database. UNCTAD’s e-Learning for NTFCs: Assists policymakers in understanding key concepts, frameworks and analytical tools on trade facilitation matters. Visit this UNCTAD website. UNCTAD’s Sustainability Score for NTFCs: Assesses the probability of NTFCs to be sustainable over time by analysing several factors, such as scope of work, official set up and membership. Visit this UNCTAD webpage. UNTAD’s Empowerment Programme for NTFCs: Provides capacity building for NTFCs to undertake their mandate and implement trade facilitation reforms that are aligned to the WTO TFA provisions. Visit this UNCTAD webpage. UNCTAD’s Reform Tracker for NTFCs: Is a project management tool for supporting NTFC stakeholders to monitor progress of trade facilitation reforms and to facilitate coordination matters. Visit this UNCTAD Tracker. WTO’s Trade Facilitation Agreement Database: The World Trade Organization (WTO) manages a database that monitors the progress made by WTO members in implementing the WTO Trade Facilitation Agreement. Visit this WTO database. Where can policymakers access good practices or national examples? UNCTAD’s Map on Trade Facilitation Bodies: The United Nations Conference on Trade and Development (UNCTAD) provides a map with country-level information on NTFCs that have been established up to date and provides key features that characterizes them. Visit this UNCTAD Map. Presentations delivered at the First UNCTAD International Forum for NTFCs: UNCTAD organizes an international forum where country representatives can present on experiences on establishing NTFCs. Visit this UNCTAD website. WTO’s Current Practices and Challenges on NCTFs: The World Trade Organization (WTO) has compiled national experiences, best practices and recommendations with respect to the establishment and functioning of NCTFs. Visit this WTO report.
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Cross-Border Paperless Trade
What is cross-border paperless trade? Paperless trade refers to the digitalization of information flows required to support goods and services crossing borders. By moving away from paper and opting for digital systems, governments and other stakeholders can speed up and facilitate trade (see guide on Trade Facilitation). Paperless trade can also yield significant environmental benefits by cutting out printing, dispatching, processing, exchanging, and the eventual discarding of vast quantities of paper documents. Paperless trade systems can be B2B, B2G or G2G and have various focuses (e.g. electronic customs declarations, electronic port management systems, electronic single windows). Why is cross-border paperless trade important for MSMEs? Paperless trade could significantly reduce trade costs and add up to major savings for traders, especially MSMEs. According to a study conducted by the International Chamber of Commerce (ICC) and Coriolis Technology, digitizing transferable documents could boost MSME trade by 25% and lead to a 35% improvement in business efficiency. Paperless trade can reduce complexity by eliminating the need for copies of the same document, as well as making electronic and immediate transmission of those same documents possible. All of this can reduce the time and effort required, thereby assisting all traders, especially MSMEs, with managing trade-related procedures, such as trade finance requests and logistics operations. What legal and technical aspects need to be considered when putting in place cross-border paperless trade systems? Legal issues that policy makers should consider when putting in place cross-border paperless trade systems include: Legal recognition of electronic transactions and documents: adopting a legal framework that recognizes electronic transactions and documents as equivalent to those based on paper is. The UNCITRAL Model Law on Electronic Transferable Records (MLETR) provides useful international guidance in this respect. Trust services: for paperless trade systems to be interoperable, they need to rely on mechanisms guaranteeing an international alignment on what constitutes a valid trust service across borders. See the UNCITRAL Model Law on Electronic Signatures (MLES) for guidance on this issue. Data governance: When documents and information are exchanged between users using electronic systems or between electronic systems, the system must ensure confidentiality (i.e. information is private to only designated parties of the communications) and data integrity (i.e. the accuracy and consistency of data are maintained and assured over their entire life cycle). Liability and dispute management: trading parties and other concerned entities may suffer losses from the incorrect transmission or improper reuse of information and may seek compensation for those losses. Guaranteeing access to civil remedies for such losses and dispute settlement opportunities can help to enhance trust in paperless trade systems, and thereby support their adoption. In addition to the legal framework, technical issues to consider when putting in place cross-border paperless trade systems include digital identity, electronic payments, data models and semantics, communication protocols, connectivity and data security. A list of standards for cross-border paperless trade that can be called upon when putting in place such systems can be found in the joint ICC-WTO Standards Toolkit for Cross-border Paperless Trade. Detailed guidance on these various legal and technical issues is provided in the Cross-border Paperless Trade Toolkit developed by the WTO in collaboration with the United Nations Economic Commission for East Asia and the Pacific (UNESCAP) and UNCITRAL, as well as in the legal and technical readiness assessment guides and checklists developed by UNESCAP. Where can policymakers access resources on policy frameworks, guidelines and tools? ICC’s Digital Standards Initiative (DSI): The International Chamber of Commerce’s (ICC) has developed a digital standards initiative. The DSI website includes a page for policymakerswith links to information related to adoption, economic analyses on the benefits of digitalization, and legislation related to the adoption of the MLETR. ITC-UNESCAP-UNNExT’s Making the WTO Trade Facilitation Agreement Work for SMEs: The International Trade Centre (ITC), the United Nations Economic Commission for East Asia and the Pacific (UNESCAP) and the United Nations Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT) provide guidance for policymakers to mainstream paperless measures and other trade facilitation components in strategies aimed at developing small- and medium-sized enterprises (SMEs). Visit this ITC-UNESCAP-UNNExT repor WTO-UNESCAP-UNCITRAL Cross-Border Paperless Trade Toolkit: The World Trade Organization (WTO), in collaboration with UNESCAP and UNCITRAL, developed a toolkit with technical and legal tools that can be called upon to adopt cross-border paperless trade systems. UN/CEFACT’s While Paper on Paperless Trade: The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) has a policy document with frameworks, case studies and resources that can guide policymakers to align trade rules with trends in paperless trade. Visit this UN/CEFACT report. UNECE-UN/CEFACT’s Guides on Paperless Trade: The United Nations Economic Commission for Europe (UNECE) and the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) have a number of papers and guides on paperless trade, including a 2018 white paper on paperless trade, a roadmap towards paperless trade, and trade facilitation and paperless trade implementation. UNESCAP’s Legal Readiness Assessment Guide: UNESCAP has developed legal readiness assessment guides that countries can use to identify legal issue areas that are relevant to cross-border paperless trade. Visit this UNESCAP website. UNESCAP’s Technical Readiness Assessment Guide: UNESCAP offers technical readiness assessment guides that countries can use to address technical issues on implementing electronic trade systems, paperless environment and actions needed for facilitating cross-border paperless trade data exchange. Visit this UNESCAP website. WCO’s Guide on Dematerialization & Paperless Processing: The World Customs Organization (WTO) has developed guidelines for customs authorities to support the use of electronic means for managing trade-related documents and reduce the hard copy requirements for such documents. Visit this WCO guide. Where can policymakers access good practices and national examples? Single Window for Foreign Trade in Colombia: A Case Study on Trade Transactions: The International Trade Centre (ITC) has documented Colombia’s experience in establishing a national single window for foreign trade which has enable business to conduct paperless transaction with the support of information and communication technologies. Visit this ITC website. UNECE’s Regional Report on Trade Facilitation and Paperless Trade Implementation: The United Nations Commission for Europe (UNECE) provides an example of regional policy reviews on best practices and opportunities for cooperation in adopting paperless trade measures and other trade facilitation interventions. Visit this UNECE report. UNESCAP’s Readiness Assessments for Cross-Border Paperless Trade: The United Nations Economic Commission for East Asia and the Pacific offers policy toolkits for assessing legal and technical readiness for cross-border paperless trade. Visit this UNESCAP website.
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Business Identification and the Legal Entity Identifier
What is a legal entity identifier (LEI)? An LEI is a 20-character, alphanumeric code that provides a clear and unique identification to businesses and other entities participating in financial transactions (for a detailed description of the code itself, please see the Global Legal Entity Identifier Foundation website). It contains information on business ownership structures that regulators require to assess financial risks and promote market integrity. LEIs are part of global standards that rely on high data quality for enhancing transparency in marketplaces. More information on what an LEI is can be found at the Global Legal Entity Identifier Foundation’s website and at LEI Worldwide. Following the 2008 financial crisis, there was an acknowledgement by regulators of the difficulty in identifying the parties to a transaction across markets, products, and regions (see the Financial Stability Board’s article on the LEI). The LEI became a regulatory response to this issue, allowing for the incorporation of key information for legal entities in a financial transaction (including digital) on “who is who” and “who owns whom.” Although the LEI was initially adopted for use in trade of financial derivatives, it has a host of other applications, including for loan issuance and business identification. For more information on the history of the LEI, see the Financial Stability Board’s website, along with SWIFT and this McKinsey report. Why does an LEI matter for MSMEs and trade? Although an LEI is not a legal requirement, there are several benefits for small businesses. For one, the LEI reduces the cost of onboarding clients, which are sometimes prohibitively high for bringing in new MSME clients. For trade finance, LEIs can speed up access to finance through better identification and can enable faster processing of letters of credit. LEIs also help with KYC (Know Your Customer) requirements, which are financial services guidelines requiring that identity is verified. Working with others that have an LEI number can also provide MSMEs with security in knowing about suppliers and partners and doing business overseas. Finally, LEIs can help MSMEs to comply with international regulations, secure their brand identity, and enhance their compliance reporting requirements. More information can be found in LEI Worldwide. How can policymakers help? Governments and policymakers have a role to play in encouraging the adoption of the LEI, namely by raising awareness that this tool exists and has particular uses. Not only is it important to understand that an identity solution such as the LEI has been developed, it is also important to raise awareness of the ways it can benefit MSMEs by reducing their transaction costs and increasing their access to financial markets. Where can policymakers learn more about policy frameworks and guidelines? Why a Trusted Identity is the First Step to Financial Inclusion for SMEs: This publication underscores the role that trusted digital identities can play for increasing financial inclusion for small businesses. Access this page at the GLEIF website. The LEI in Digital Certificates: The Global Legal Entity Identifier Foundation provides a variety of resources that policymakers and regulatory authorities could use to embed LEIs into certificates and seals, when they are issued in a business context. Visit the GLEIF website. Thematic Review on Implementation of the Legal Entity Identifier: This publication presents a peer review on cross-country and cross-sector LEI implementation progress conducted by the Financial Stability Board (FSB). Visit the FSB website. Where can policymakers access best practices and national examples? Recommendation on the Use of Legal Entity Identifier (LEI) in EU countries: This recommendation outlines information items required under EU regulations to obtain a pre-LEI code for reporting purposes. Visit the European Banking Authority (EBA) for more. The LEI: The Key to Unlocking Financial Inclusion in Developing Countries: This resource identifies ways in which financial institutions in developing countries can increase financial inclusion by providing capacity to small businesses to adopt LEIs. It provides Africa-specific examples. Access this resource at the GLEIF website. How Legal Entity Identifiers Will Transform Small Business in Asia: This resource provides insights on the role that LEIs could have to help small businesses to increase their access to finance and participation in supply chains. Visit the Asian Development Bank (ADB) website.
What is happening at the international and regional level for MSME trade policy?
Overview of MSME trade-related policy at International Organizations
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The International Trade Centre
The International Trade Centre (ITC) is a joint agency of the United Nations and the World Trade Organization (WTO), with its mission focusing specifically on small and medium-sized enterprises. It is headquartered in Geneva, Switzerland, and maintains a variety of tools and resources for policymakers and SMEs. These include the following from their Market Info & Tools web page. E-learning Training on a variety of trade topics for policymakers and MSMEs is available through the SME Trade Academy, including on topics like the WTO Trade Facilitation Agreement or how to develop e-commerce content. Market Analysis Tools These are the ITC’s tools for MSMEs and policymakers. They provide information on export and import statistics from more than 220 countries and territories on about 5,300 internationally traded products. These tools include: Trade Map Market Access Map Investment Map Trade Competitiveness Map Procurement Map Export Potential Map Sustainability Map Market Information Market information is provided by the ITC for MSMEs and policymakers through resources including the Market Insider blog and the Global Trade Helpdesk. The Global Trade Helpdesk is an initiative in coordination with the United Nations Conference on Trade and Development and the WTO, linking to many ITC market analysis tools and other important trade resources. Library An online library of trade-information sources is publicly available. The library’s online catalogue is available to all users, as is a full list of ITC publications. Relevant reports for policymakers include the ITC’s flagship SME Competitiveness Outlook (SMECO) and policymaker guides such as Getting Down to Business: Making the Most of the WTO Trade Facilitation Agreement.
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The Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development (OECD) is a Paris-based body with 38 member countries. Among other areas of responsibility, its secretariat provides a broad range of policy research and data to support the economic development and inclusion of entrepreneurs and SMEs. Their SME, entrepreneurship, and tourism webpage can be accessed here. Other resources include: Entrepreneurship Entrepreneurship is an important focus of the OECD. The OECD provides analyses and information on entrepreneurship policies, including case studies and reviews. In this context, the OECD examines primarily the obstacles and enablers of entrepreneurship for industrial transition and growth. Financing SMEs The OECD has included financing SMEs as one part of its research and policy recommendations. Through the documentation of SME finance trends and the sharing of knowledge and learning in this subject, the OECD seeks to strengthen SMEs’ access to credit. The G20 & SME Agenda The G20 & SME agenda, in particular as regards SME finance, has been pushed by the OECD as an important piece of international SME policy. Ways that the OECD has contributed to this work include through the G20/OECD High-Level Principles on SME Financing and the report on G20/OECD Effective Approaches for Implementing the G20/OECD High-Level Principles on SME Financing. Other examples include its contribution to platforms like the Global Partnership for Financial Inclusion (GPFI). The OECD iLibrary The OECD iLibrary is an important resource that provides searchable access to OECD research, including on SMEs. SME Digitalisation SME Digitalisation, or the OECD “Digital for SMEs Global Initiative,” is a platform for OECD governments, large business, industry experts, and the SMEs themselves to work together on the digital transformation of SMEs. The initiative’s focus is on providing research, SME experience sharing, and a space for policy dialogue on SMEs and digitalization. SME Performance Analysis An SME Performance analysis by the OECD in conjunction with national and local governments can be undertaken to analyze the potential of SMEs in a specific economy and examine how to unlock this capacity. SME Ministerial Meeting The 2018 SME Ministerial Meeting was a ministerial-level conference of 55 OECD Member and Non-Member countries, as well as international organizations and associations. Held in Mexico, the conference was held to discuss ways to enhance SME productivity and inclusive growth. At the end of the session, the 55 countries adopted the Declaration on Strengthening SMEs and Entrepreneurship for Productivity and Inclusive Growth (also available in French).
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The United Nations Conference on Trade and Development
The United Nations Conference on Trade and Development is a UN body headquartered in Geneva, Switzerland, with a specific focus on developing countries. It supports enterprise development through training and projects, among other duties. A full list of their enterprise development resources, including UNCTAD’s entrepreneurship policy framework and a Global Initiative towards post-Covid-19 resurgence of the MSME sector, are available here. UNCTAD also offers the following MSME-relevant resources, including the following: Information on e-commerce and an e-commerce readiness assessment for national economies. Trade training and capacity building focused on non-tariff measures and other trade measures that can impact MSMEs. Information on transport, logistics and trade facilitation, including ASYCUDA. ASYCUDA (Automated System for Customs Data) is a computerized customs management system from UNCTAD that covers most foreign trade procedures, including manifests, customs declarations, accounting procedures, and transit and suspense procedures. ASYCUDA can speed up and facilitate the customs clearance process, benefiting all businesses, especially MSMEs.
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World Intellectual Property Organization
WIPO is the UN agency devoted to intellectual property (IP), with headquarters in Geneva. It is home to several IP treaties and also hosts several resources for policymakers, businesses, and other interested parties. A summary of these resources is provided below. WIPO IP Diagnostic WIPO provides an online IP self-assessment tool, which was launched in November 2021. The tool includes a questionnaire on several IP-related issues that may affect your business and generates a report upon the questionnaire’s completion. The tool is accessible online on the WIPO website. WIPO’s IP for Business Series of Guides WIPO also has several guides that outline how intellectual property issues can be dealt with by companies. The full series of guides can be accessed on the WIPO website, and a brief list of the key ones for MSMEs can be found below. Enterprising Ideas, A Guide to Intellectual Property for Startups (2021) Looking Good – An Introduction to Industrial Designs for Small and Medium-sized Enterprises (updated and revised 2019). In Good Company: Managing Intellectual Property Issues in Franchising (revised 2019) Inventing the Future: An Introduction to Patents for Small and Medium sized Enterprises (updated and revised 2018) Making a Mark: An Introduction to Trademarks for Small and Medium-sized Enterprises (updated and revised 2017) Creative Expression: An Introduction to Copyright and Related Rights for Small and Medium-sized Enterprises (2006 – currently being revised) There are also several other guides in development, which should be available on the WIPO website in due course. Mapping of SME intermediary institutions and their services WIPO has launched a short survey to identify intermediary institutions that provide IP services. The results of this survey will be included in a publicly available database. The survey can be accessed on the WIPO website. IP Office Business Solutions WIPO also provides support for national IP offices as they develop their own services for domestic users. Further information on the support available is on the WIPO website.
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World Trade Organization
Recognizing the importance of MSME trade inclusion, the WTO provides a number of different resources to support trade policymakers and traders. Aid for Trade Aid for Trade – The WTO-led Aid for Trade (A4T) initiative has referred to MSME needs and issues on various occasions. The 2018-19 Work Programme for Aid for Trade looked into how trade could contribute to economic diversification, empowerment, and poverty reduction through the effective participation of MSMEs, women, and youth. The programme also reviewed how A4T addresses trade-related infrastructure constraints, including for MSMEs. The work programme for 2020-22 stressed the importance of MSME-dominated sectors in boosting economic development. The Enhanced Integrated Framework The Enhanced Integrated Framework (EIF) helps least developed country governments address constraints related to competitiveness, growth potential, and supply chain weaknesses, including specific constraints faced by MSMEs. The EIF is a partnership bringing together various countries, donors, and partner agencies. ePing ePing, a joint project by the United Nations Department for Economic and Social Affairs (UNDESA), the WTO, and the International Trade Centre (ITC), shares information on product requirements. Through the site, users are able to search sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT), receive alerts, and collaborate. Government Procurement The WTO’s Government Procurement Committee launched a work programme on MSMEs in 2012 to facilitate MSME participation in government procurement projects and to maximize their potential for growth. Increasing MSMEs’ participation in government procurement also ensures a more competitive bidding process, thus achieving better value for money in government purchases. Informal Working Group on MSMEs The Informal Working Group on MSMEs was launched at the WTO’s Eleventh Ministerial Conference in December 2017. The Group aims to identify and address obstacles to MSME participation in international trade. It currently consists of 91 WTO members and is open to all members. Documents issued by the Group are available on WTO Docs Online and are searchable as “INF/MSME/*”. Intellectual Property The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) is devoted to the implementation of the WTO’s intellectual property rules. In this context, WTO Members also exchange information about their policies aimed at supporting MSMEs’ creativity, inventiveness, and investments in research and technology. Members have recognized the particular significance of intellectual property rights for small businesses, whose intellectual capital is often their main asset. The MSME-related policies presented in that context include financial assistance schemes, efforts at streamlining application procedures, and enhanced transparency of intellectual property rules. The Standards and Trade Development Facility The Standards and Trade Development Facility (STDF) is a partnership that helps governments improve the implementation of sanitary and phytosanitary measures, among other responsibilities. These efforts help increase trading opportunities for MSMEs. Trade and Gender To improve the inclusiveness of trade, some WTO Members have also been exploring how to support women’s economic empowerment through trade. This work is closely linked to the work on trade and MSMEs, with more information available at the following link. The Global Trade Helpdesk Finally, together with the ITC and United Nations Conference on Trade and Development (UNCTAD), the WTO is one of the agencies behind the Global Trade Helpdesk.
What MSME trade data sources are available for analysis?
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What MSME Data Sources are Available for Analytical Purposes?
What MSME Data Sources are Available for Analytical Purposes? The Asian Development Bank (ADB) The ADB launched the Asia Small and Medium-Sized Enterprise Monitor (ASM) in 2014 and the second edition in 2015. The monitor covers 20 developing member countries from five ADB subregions. The 2020 edition upgrades the ASM by extending analytical coverage to both financial and non-financial topics critical to MSME development. Data from the most recent report, including a time-series of exports for selected countries, are available here. The International Monetary Fund (IMF) The IMF financial access survey is the key source of global supply-side data on financial inclusion, encompassing data on access to and usage of financial services by firms and households that can be compared across countries over time. Data are available from 2004 and relevant series are marked “…o/w SME.” The International Trade Centre (ITC) The ITC’s trade map provides information on imports and exports at the firm level that can be disaggregated by a range of features, including: Company name; city and country; list of traded products; number of employees; annual turnover; contact persons; website address; and phone numbers. Accessibility on company data features can vary according to the subscriptions options. For more information, users can visit https://www.trademap.org/ and/or contact by email at [email protected]. In addition, ITC’s SME Competitiveness Survey (SMECS) collects business data in partnership with countries to assist policymakers in developing strategic approaches, policies and interventions on small business competitiveness. National Trade Data National trade data with firm-size characteristics includes the following examples: Eurostat The main objective of the trade in goods statistics by enterprise characteristics (TEC) is to bridge two major statistical domains which have traditionally been compiled and used separately. These are business statistics and international trade in goods statistics (ITGS). With annual data from 2012 for European countries, the section on trade by partner country and enterprise size class has information on European goods exports and imports by firm size. Experimental dataset on services trade with enterprise characteristics (STEC). Data are for 2014. UK Office for National Statistics UK trade in goods by business characteristics. These data detail international trade in goods by industry, age, and size of business with figures from 2013. UK trade in services by business characteristics (size and ownership), industry, and region, on a balance of payments basis using a new experimental dataset. Data are for 2016-18. Statistics Canada Trade in goods by exporter characteristics, by enterprise employment size, and region type (statcan.gc.ca), annual data from 2005. Limited to exports involving the United States and non-United States with information on value and number of exporters. Additional tables are also available for industry, export concentration, country of destination, and export size. Trade in goods by importer characteristics, by enterprise employment size and number of partner countries (statcan.gc.ca), annual data from 2010. Limited to a number of partner countries. Additional tables are also available for concentration of imports, country of origin, country of export, and import size. International transactions in services, commercial services by enterprise characteristics, enterprise employment size and industry, annual (statcan.gc.ca), annual data from 2010. The Organisation for Economic Co-operation and Development (OECD) The Trade by Enterprise Characteristics (TEC) database contains international annual trade in goods data, broken down by different categories of enterprises. The data provide a solid basis for policy analyses that explore which types of firms are responsible for international trade in goods. It answers questions such as who are the firms that are engaged in foreign markets and what are their characteristics. Both the export and import values and the number of exporting and importing enterprises are available for 26 OECD and 6 non-OECD countries. This includes the 27 EU member states plus Canada, Norway, Israel, Turkey, and the United States. Structural Business Statistics (SDBS) provides a wealth of information at a very detailed sectoral level including turnover, value-added, production, operating surplus, employment, labour costs, and investment, to name a few. The breakdown by industrial sector, including services, is supplemented by a further breakdown into size classes. The SME Finance Forum The SME Finance Forum links to a number of useful SME finance data sources, primarily from the International Finance Corporation, which is part of the World Bank Group. These are summarized below. IFC Enterprise Finance Gap Database – This resource primarily uses data from World Bank Enterprise Surveys to estimate the number of MSMEs in the world and the degree of access to credit and use of deposit accounts for formal and informal MSMEs. The database currently covers 177 countries. IFC Financing to Micro, Small, and Medium Enterprises – The IFC Reach Data is based on portfolio reporting from 2004 to the present, drawing from the IFC’s 268 client financial institutions from 84 countries, and detailing the number and quality of loans made to MSMEs. MSME Economic Indicators – The MSME Economic Indicators Database 2019 records the number of formally registered MSMEs across 176 economies. The 2019 update includes the latest economy MSME definitions, number of enterprises, employment figures, and historical data. In addition, the 2019 update kick-starts the collection of information regarding MSME contribution to the economies and includes information on multiple MSME definitions and data sources within an economy. Data are also disaggregated by firm size. Women – SME Finance Categorized Indicators (WSCI) – The WSCI identifies and categorizes “Women Business and the Law 2018” indicators of relevance to SME finance. It is a first step to aggregate and collate gender data systematically to understand the situation, monitor trends, and assess progress. The Women Business and the Law dataset is the most comprehensive Gender Data set covering 189 economies. Systematic trend analysis can facilitate measurement of progress and gaps over time. World Bank Enterprise Surveys (WBES) Enterprise Surveys Data offers an expansive array of economic data on 171,000 firms in 149 countries, including direct exports and imports of goods and services in certain sectors. The data is presented in a variety of ways useful to researchers, policymakers, journalists, and others. Note that data users should exercise caution when comparing raw data and point estimates between surveys that did and did not adhere to the Enterprise Surveys Global Methodology. More information on WBES trade data is available here. Researchers can also access the raw survey data by following the instructions here.
