The essential role of SMEs in the global economy
Trade builds bridges that strengthen us as a global community. But the public and private sectors must work together to make cross-border trade sustainable and inclusive. Here’s how we can do that.
Recommendations for experts and practitioners in trade facilitation
As consumers, the global trade network we take for granted today was once a far-fetched dream. Go back as little as three or four generations and your ancestors would marvel in disbelief as you order a product online from a small company halfway around the world.
In business, however, there is still a huge opportunity gap for small and medium enterprises (SMEs). To move forward and leverage the full potential of the global economy, the consensus among trade experts worldwide is that we must support and enable SMEs to access the international marketplace and draw effectively on global trade infrastructure.
Cross-border trade routes open endless possibilities to companies and consumers alike. From vital medicines and vaccines to handmade jewelry, nothing is too far out of reach for anyone with an internet connection and a postal address. The pandemic showed us just how essential global production systems, markets, and supply chains are – and how critical access to them can be.
In the big business of global trade, smaller companies are at a disadvantage. They often don’t have the resources and expertise on hand to access the international marketplace and navigate cross-border complexities.
But SMEs play an essential role in the global economy. That’s why we have to mobilize our resources to facilitate the growth and success of SMEs around the world – to expand their access to global trade networks and enhance their capabilities, such as in e-commerce. In broad terms, this means improving transparency about the often complex processes involved in setting up an international or intercontinental supply chain and investing in programs that teach SME business owners how to operate at this scale without exhausting their existing resources.
Source: World Bank
In early 2022, we hosted the inaugural Deutsche Post DHL GoTrade Summit with the theme “Connecting People, Improving Lives.” The event attracted 600 attendees from more than 40 countries, with keynote speakers and panelists from a range of internationally renowned and influential institutions, including the World Trade Organization (WTO), the Organization for Economic Co-operation and Development, the International Trade Center, and more.
The summit, which was introduced by our GoTrade initiative, revealed a strong case for public-private partnerships to help develop a modern trade policy that is sustainable and inclusive. Participants agreed that trade, logistics, and connecting people were the structural forces that drive well-being – and that there is still much to do to enable everyone to embrace the advantages of cross-border trade. The summary report lays out a blueprint for shaping ongoing and future trade initiatives – and we hope it inspires trade champions in the public and private sectors worldwide. Here’s a look at four key findings to unlock more growth potential in global trade.
Businesses and regions with better access to global trade networks benefit from higher economic performance. But as explained above, SMEs are missing out, which means the economy is missing out too. We have to level the playing field. Future trade policymaking mechanisms must offer transparency to all stakeholders and act on the needs of smaller businesses more than they have done in the past.
Inclusivity must be the driving force behind new digital compliance requirements and new economic investments in the sector. Although still in review, the WTO's Trade Facilitation Agreement (TFA) is a clear statement from one of the world’s most influential NGOs, recognizing the importance of fostering an inclusive trading marketplace.
The two base ingredients for boosting inclusivity in global markets are offering trade insights and instructional programs directly to SMEs without an established international trade network while reducing complexity in cross-border trading. However, to be worthwhile, all large-scale changes must translate into real change for small business owners.
Last year, vaccines showed us that international trade between private and public institutions can work seamlessly – and even save lives. Logistics providers, governments, and international organizations came together to ship COVID-19 vaccines under significant pressure from stakeholders around the world. The success of this operation is now considered a model for how efficient cross-border transport can be in the future, with bureaucratic red tape kept to a minimum.
This would not have been possible without a significant amount of trust from all parties involved. Poor communication and historically opposing targets have long put a strain on public and private sector relations. But in global trade, the overarching goal is becoming clear to all: boosting the success of SMEs. All public-private partnerships must be based on trust – and that trust is nurtured and actively supported by maintaining real-time communication.
GoTrade is a social impact program of Deutsche Post DHL Group that seeks to make the world a better place through public private partnerships that foster international trade and sustainable economic growth. Particular focus is placed on: increasing the number and volume of small and medium-sized businesses (SME) in developing and least developed countries that trade across borders; reducing barriers to trade through trade facilitation; and leveraging Group resources and capabilities to help countries implement best-in-class trade and custom procedures.
If inclusive trade networks are the ultimate goal, and trust is the foundation of those networks, then widespread adoption of interconnected digital technologies is the tool we use to reach our goal. Through data collection and analysis, digital technologies can optimize border management performance, e-commerce services, and even the development of new trade policies.
Digitalization can solve the problem of supply chain transparency and demystify processes for SMEs more efficiently and on a more global scale than ever before. However, going forward, the logistics industry and trade stakeholders must remember and act on lessons learned during the COVID-19 pandemic regarding resilient supply chain management and operations.
SMEs add undeniable value to economies. But when it comes to international trade networks, the odds are still stacked against them. Today, most businesses still operate within national borders, and those that venture abroad predominantly trade in neighboring countries. But trends are changing – and the future for globally networked SMEs is looking brighter than ever. There is now a broad consensus among industry leaders and public sector organizations worldwide that the old playbook needs to be rewritten – or at least updated. Today’s stakeholders agree that inclusivity and sustainability for smaller businesses are the top priorities.
Prevailing trends still point to a future with enormous business opportunities to gain from stronger links to the wider world. SMEs need empowerment, training, and financial support to tackle the advantages of cross-border trade, especially in developed and least developed countries. If we recognize the significance of SME activity for the global economy, we will prioritize them in initiatives so that they are able to build up their international trade capabilities more easily. Furthermore, we must not underestimate the role played by larger enterprises, and we should encourage activities that support SMEs. This is one area in which public-private partnerships are critical – a bottom-up collaborative effort rather than a top-down, government-led approach.
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Equality is not a zero-sum game. We all gain from the success of globally networked SMEs. More access means more opportunities, which means more wealth generated, both for individual companies and in the local economies where they operate, many of which are underrepresented on the current global trade stage. Digitalization, trust-based relationships, and more large-scale economic support level the playing field and achieve sustainable and inclusive growth. But we still have work to do.
Thankfully, there is a lot of room for improvement – and a large scope for learning, be it from the policy lessons gleaned from the COVID-19 pandemic or within the context of regional integration. Our 2022 GoTrade Summit and the action items derived from it demonstrate this. We invite you to review the summary report or relive the panel discussions on demand.
Ultimately, the success of SMEs in the global economy will depend on whether we choose to recognize their economic value and use our resources to support them with inclusive and sustainable trade initiatives.
Published: June 2022