Helping Smaller Firms Thrive and Grow with Trade Policies

Policymakers should not assume that MSME firms will always stay MSMEs. Yet frameworks in many economies seem designed to trap smaller firms into a set category and entrench them into a “small” mindset. There will always be MSME firms. They form the backbone of most economies, as much as 97 percent of companies across Asia, employing the overwhelming share of workers. The goal of MSME policies should be enabling the current crop of smaller firms to grow, allowing firms in the “medium” category to reach large scale in relatively short order, while encouraging new entrants to the MSME ranks. Trade policy is one tool to help MSMEs grow. In most economies, the domestic market alone can be too small or even too competitive for success. E-commerce and digital technology, however, have allowed MSMEs to reach regional or global audiences.

Larger regional agreements, like RCEP, provide the size and scale in an agreement that can unleash new growth prospects. To get there, however, requires officials, ministers and leaders to seize the chance and create something special. RCEP has to address barriers to trade in services, for example. Services are critically important to the economy of the future. Even trade in goods requires that services be considered, since blockages on the movement of services across borders can fundamentally impede the growth of trade in physical products like manufactured goods and agricultural items. Increasingly, services will be provided digitally. One such example is the rise of online travel agencies (OTAs.) These service providers represent a new dimension to travel and tourism, as they match up customers seeking things like accommodation, rental cars, or local experiences like cooking classes or photography tours with local providers and vendors of such services.