./.WORLD TRADE
ORGANIZATIONS/CSS/W/49
14 March 2001
(01-1405)
Council for Trade in Services
Special SessionOriginal:  English/
French
COMMUNICATION FROM CANADA
Initial Negotiating Proposal on Small- and Medium-Sized Enterprises
The attached communication has been received from the delegation of Canada with the
request that it be circulated to Members of the Council for Trade in Services.
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1. Canada reserves the right to modify this proposal at any time. This proposal does not prejudge
Canada’s position on other service sectors, nor any future offer on this or other sectors. This proposal
should be read in conjunction with the principles and objectives as outlined in Canada’s initial
negotiating proposal.
A. INTRODUCTION
2. The purpose of this proposal is to encourage consideration in these negotiations of barriers
limiting the participation of small- and medium-s ized enterprises (SMEs) in the global trade of
services.
B. IMPORTANCE OF SERVICE SME S
3. SMEs are key contributors to the economic growth and employment in the global economy.
They make up more than 95 percent of developed countries’ enterprises and account for 60 to 70percent of their workforce. We believe the situation is quite similar in developing countries. For
example, in Latin America and the Caribbean, SMEs also make up more than 95 percent of the total
number of business establishments and absorb more than 85 percent of total private sector
employment in most countries in the Region. In Canada, SMEs account for almost 60 percent of
Canada’s private sector employment and 43 percent of private sector GDP.
4. SMEs predominate in service sectors. In Canada for example, 86 percent of services firms
employ less than 50 employees. They are active in exporting services in key sectors such as
professional services, computer and related services and environmental services.
5. The vast majority of service SMEs are realising new opportunities through applications of
information technologies. Being on-line makes them automatically global. They are  increasingly
present in technology-intensive industries, such as information and communications technology, as
well as in strategic business services, such as computer software and information processing or human
resource development.
6. The limited number of organizations to effectively voice SME concerns and the wide range of
SME interests limits their capacity to defend their collective interests.S/CSS/W/49
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C. INTERNATIONALIZATION OF SERVICE SME S
7. In an increasing integrated world, service SMEs will be more active in the global marketplace
in order to maintain their job and wealth-creation capability.
8. Advances in communication and information technology have given them potentially more
efficient tools to operate internationally. They are making use of the Internet’s competitive advantagesof speed, convenience and reduced costs to enter new markets.
9. To increase their participation in the intern ational trade, service SMEs have to overcome
barriers related to a discriminatory, burdensome and non-transparent regulatory environment. For
example, onerous licensing, registration requirements and excessive user fees can create barriers that
are particularly burdensome for SMEs.
10. We also note that smaller firms may have less capacity to devote to activities related to
entering and sustaining their activities in foreign markets as they often have less available capital andtime than larger firms.
11. Due to limited resources, SMEs cannot necessarily respond as quickly and effectively to
market access barriers as larger firms. The development of Mutual Recognition Agreements (MRAs)
that will reduce these resources demands is very important for SME service providers. Members
should consider ways to facilitate the development of MRAs.
D. T
RANSPARENCY
12. Market access for service SMEs can be strongly hampered by a lack of information on
regulatory regimes and requirements.
E. MODES OF SUPPLY
13. Due to their size and resource constraints, we believe that SMEs export services primarily by
using mode 1 (cross-border) and mode 4 (movement of natural persons) because these are the least
expensive and most effective ways for them to conduct business. However, many countries require
businesses to establish a commercial presence before they will allow services to be imported into their
market. This makes it very difficult for service SMEs to export to these markets because they cannot
afford to establish a commercial presence in th e foreign market. In order to help service SME
exporters, in the negotiations, Members should explore ways to remove unwarranted mandatory
commercial presence requirements on the cross-border supply of a service.
14. Electronic commerce may be a preferred vehicle of delivery for many service SMEs. To the
extent that they establish a commercial presence in foreign markets, entry and exit barriers in foreign
markets may be barriers to their effective participation.
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