SMEs disproportionally hit by international trade standards, regulations: report

GENEVA - An International Trade Centre (ITC) report warned Thursday that small firms across the world are twice as affected as their large enterprises counterparts when complying with standards and regulations required to conduct international business.

"Trade in the 21st century is increasingly consumer-centric," said ITC Executive Director Arancha Gonzalez in a statement.

"Standards are an important means to respond to consumer demands for 'good trade', one that is environmentally sustainable, socially responsible and protective of consumers. But standards can also represent an impossible burden, in particular for SMEs (small and medium-sized enterprises)," she added.

According to the 2016 SME Competitiveness Outlook: meeting the standard for trade, a 10 percent increase in regulatory burden cuts small-firm exports by 3.2 percent, compared to a 1.6 percent drop for large-business exports.

Focusing largely on standards and regulations, both crucial to a firm's generic value chain, the report found however that when authorities take steps to reduce compliance costs, the competitiveness of SMEs is greatly improved.

It also underlined an important shift which is seeing more and more developing countries setting voluntary sustainability standards (known as VSS, these are set by businesses and NGOs) which govern international trade together with public standards and regulations.

Findings show that while 75 percent of VSS originate in countries belonging to the Organisation for Economic Cooperation and Development, over a third of new voluntary standards are thought up in developing countries, up from eight percent in 1990.

The outlook also outlined that many regions across the world can increase their export potential "by directing regulatory efforts to boost SME competitiveness."

In the Middle East and North Africa region for example, researchers found there is large untapped export opportunity in the fresh and processed food sector, while metal and basic manufacturing represent 28.4 percent of Eastern Europe and Central Asia's unexploited export potential.

In China, ITC estimated that telephone sets have an unrealized export potential of more than $100 billion, while other products including automatic data processing machines and parts and accessories for printers also have potential.

"The SME Competitiveness Outlook provides a compass for governments to understand where the challenges for SMEs are, and what areas they should exploit," Gonzalez concluded.