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Small and Medium-Sized Enterprises and Trade

Making it easier for SMEs to trade in the global economy

In all countries and at all stages of development, small and medium-sized enterprises and trade (SMEs) play an important role in job creation and can be an important source of economic activity.

There is also an indication that SMEs support greater economic inclusion, for example, by promoting the participation of women as entrepreneurs and in the labor market.

Despite their contribution to our economy and today’s society, SMEs tend to be underrepresented in international trade. In particular, they generally make up a small proportion of exports with their labor force participation and employment.

This is partly because SMEs have fewer resources to cover the high costs often associated with participating in international markets.

Smaller companies also face greater challenges than larger companies when navigating foreign markets, as they cannot meet complex regulatory requirements.

The growth of global value chains (GVCs) and digital transformation offers SMEs new opportunities to integrate into the global economy.

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Global value chains offer new opportunities for SMEs – Enterprises and Trade

In the last few decades, production has been increasingly fragmented across national borders by GVCs.

Which allow companies to specialize in various “tasks” or processes according to their comparative advantage, resulting in the production of an end product.

Global Value Chains

While larger corporations and multinational corporations are generally the driving force behind GVCs,

There are several ways that smaller companies can participate and benefit from GVCs. For example, by specializing in certain product segments.

Medium-sized companies can use global value chains instead of having to master all processes for manufacturing finished products.

SMEs can also benefit from better flexibility than larger companies and often can customize and differentiate products to react quickly to product life cycles.

SMEs can participate in global value chains by exporting an intermediate product or service directly to a person or company abroad.

But they can also participate indirectly through exports; that is, they supply multinational companies or other national companies with products they export.

However, SMEs can benefit from global value chains by improving access to imports at competitive prices.

And also by obtaining expertise or technology from the larger companies (or “executives”) who supply them.

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The digital transformation can help reduce costs associated with engaging in trade – Enterprises and Trade

The digital transformation has also opened up new avenues for SMEs to enter the global economy and spawned a new generation of “global-born” companies.

Access to digital technologies reduces the barriers to entry into global markets and enables SMEs to internationalize at a fraction of the cost;

Digital technologies can make it easier for small businesses to participate in global value chains, find customers abroad, and make international payments.

Promoting digital connectivity, increasing the quality of digital infrastructure, and lowering access costs will allow smaller businesses to take full advantage of the digital commerce revolution.

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