WTO Report Examines Impact of COVID-19
Pandemic on Small Businesses
The WTO Secretariat has published an information note
looking at how micro, small and medium-sized enterprises (MSMEs) are being
affected by the COVID-19 pandemic. It notes the impact of supply chain
disruptions on MSMEs and the extent to which smaller businesses are represented
in the economic sectors hardest hit by the crisis.
The
report notes that supply chain disruptions can have a particularly severe
impact on MSMEs because sourcing from new suppliers or absorbing price
increases is more challenging for a smaller firm with limited supply options
and capital.
The
report looks into a wide range of measures taken by governments to support
MSMEs. These include measures to address cash flow issues, to expand trade
opportunities for MSMEs and to make them more resilient. According to the
report, 44 WTO members had introduced such measures by the end of April 2020.
The
note describes how international trade provides MSMEs with opportunities to
diversify revenue streams and better navigate the COVID-19 crisis.
It
outlines that work at the WTO can support small business by promoting the
importance of transparency, facilitating the exchange of best practice,
highlighting the need for increased access to trade finance and encouraging
full implementation of the WTO's Trade Facilitation Agreement.
·
Micro, small and medium-sized enterprises
(MSMEs) are the backbone of many economies, representing 95 per cent of all
companies worldwide and accounting for 60 per cent of employment. Many MSMEs
depend on international trade for their activities, either because they export
their products through direct or indirect channels, or because they import
inputs to manufacture the products that they sell domestically. They are major
employers of women and young people, and a key driver of innovation.
·
MSMEs are particularly exposed to the
COVID-19 pandemic’s economic impact because of limited financial resources and
borrowing capacity, and because of their disproportionate presence in economic
sectors affected by social distancing measures and transport disruptions. MSMEs
are also particularly exposed to trade restrictions on agricultural products.
·
Where MSMEs are highly integrated into global
value chains (GVCs), supply chain disruptions can create an existential risk
for MSME importers and exporters, either because of shortages of necessary
parts, or through shocks to demand.
·
The pandemic-related challenges add on to the
existing, well-known trade obstacles encountered by MSMEs, and therefore
undermine progress towards more inclusive trade.
·
Governments have primarily introduced urgent
stimulus and backstop measures for MSMEs, such as liquidity support to address
cash flow issues, with the aim of preserving jobs and ensuring business
continuity, as well as measures to expand trade opportunities for MSMEs. A few
governments have also introduced measures aimed at developing the resilience of
MSMEs and building their capacity to overcome future shocks to demand and
supply chains.
·
To limit the impact of the current crisis on
MSMEs and to build their resilience, it is critical that MSMEs have better access
to regulatory and market information and affordable trade finance, as well as
to streamlined customs procedures and requirements. Greater use of digital
tools and e-commerce would also benefit MSMEs.
·
The WTO can contribute to supporting MSMEs in
several ways, such as: through transparency mechanisms in WTO committees and
bodies, as well as in the Informal Working Group on MSMEs; through the exchange
of good practices in terms of MSME support measures; through full
implementation of the Trade Facilitation Agreement; through continued efforts
in enhancing access for MSMEs to trade finance; by harnessing transparent, fair
and open procurement markets; and by supporting trade digitalization efforts,
including through the development of e-commerce rules.