INF/MSME/W/40  
26 September  2022 
(22-7216) Page: 1/12 
 Original:  English  
 
  
INFORMAL WORKING GROUP ON MSMES  
LITERATURE REVIEW ON RTA EFFECTS ON MSMES  
Update : 9 September  2022 
 
The following communication, dated 2 6 September  2022, is being circulated at the request of the 
Coordinator of the Informal Working Group on MSMEs.  
 
_______________  
 
 
  INF/MSME/W/40  
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  Table of Contents  
ABSTRACT/SUMMARY  ................................ ................................ ................................ ...... 3 
INTRODUCTION  ................................ ................................ ................................ ...............  4 
SECTION 1: TO WHAT EXTENT DO MSMES USE RTA PROVISIONS?  ................................ ... 5 
SECTION 2: WHAT FACTORS SUPPORT MSME RTA USE?  ................................ ...................  6 
SECTION 3: WHAT CHALLENGES DO MSMES FACE WHEN USING RTA 
PROVISIONS?  ................................ ................................ ................................ ..................  7 
SECTION 4: RESEARCH GAPS FOR RTA EFFECTS ON MSMES  ................................ .............  8 
SECTION 5: CONCLUSION  ................................ ................................ ................................  9 
BIBLIOGRAPHY  ................................ ................................ ................................ ..............  10 
 
  INF/MSME/W/40  
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  ABSTRACT/SUMMARY  
1. This document presents a literature review of the effects of regional trade agreements (RTAs) 
on micro -, small - and medium -sized enterprises (MSMEs) . It focuses on the extent to which MSMEs 
use RTAs to engage in international trade, and addresses other recurrent themes in the literature, 
such as the determinants of RTA use, MSME challenges in utilizing RTAs, and potential benefits RTAs 
can have for MSMEs . Most of the studies available in the literature focus on economies in North 
America, East Asia and the Pacific, with limited coverage of other regions such as Africa, Europe and 
Latin America . These studies do not provide definitive conclusions on the direction of RTA effects on 
MSME trade participation given that their principal focus was RTA utilization rates and not 
effectiveness of MSME -specific RTA provisions . Rather, the literature describes the potential benefits 
MSMEs can experience from RTAs such as access to cheaper intermediate goods due to lower tariffs, 
increased exports, more business opportunities, larger p roduction networks and further participation 
in regional and global supply chains . Studies, however, also document challenges MSMEs can face 
to use RTAs including complex regulatory requirements and high administrative costs or downside 
effects RTAs can ha ve such as increased competition from foreign firms.  
2. Keywords : regional trade agreements, RTAs, small business, MSMEs, preferential market 
access, RTA use, RTA utilization rates . 
  INF/MSME/W/40  
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  INTRODUCTION  
Recent years  have seen an increase in the number of regional t rade agreements (RTAs) with 
provisions on micro -, small - and medium -sized enterprises (MSMEs1). In 1971, the first MSME 
reference in an RTA notified to the WTO was recorded in the EU – Overseas Countries and Territories 
agreement. Since then, the number o f RTAs with at least one MSME provision has grown steadily up 
to 196 RTAs  by the end of 2021 . With these RTAs accounting for more than a half of the 353 RTAs 
notified to the WTO in that time , there has been an interest in academic and policy circles to ass ess 
the extent to which those provisions , and RTAs in general , affect MSME trade  participation . To 
contribute to such growing interest, this document presents a review of studies that have evaluated 
the impact of RTAs on MSMEs. The document also reports on  potential government initiatives to 
evaluate the impact that MSME -related provisions in RTAs have had on MSME trade participation, 
such as a review the European Union is projecting to undertake over the next five years.  
 
Until the 1990s, only a few studie s investigated the potential effects RTAs can have on MSMEs. These 
studies intended to address research motivations to understand how globalization had impacted 
small businesses. Julien et al. (1994) , for example, documented a number of studies that revealed 
MSMEs generally have less resources to counter increased competition from foreign exporter s. 
Through a survey of 879 small manufacturing firms (those with fewer than 250 employees) that 
were impacted by tariff reductions from the 1988 Canada -United States Free Trade Agreement, they 
aimed to explore how small firms were affected. Their findings suggested that only a small number 
of businesses knew about the agreement and had taken actions to benefit from it.  
 
These results eventually led other early studies to examine how MSMEs benefit from RTAs and which 
factors hinder small businesses from usin g trade agreements. On the one hand, Julien (1995) , by 
following previous work undertaken in Julien et al. (1994) , observed that smal l businesses seeking 
to use RTAs pursued organizational changes and investments in marketing and technology to 
develop foreign market entry strategies. In particular, they identified studies suggesting that MSMEs 
are likely to adopt new production technolo gies, such as computer -controlled machines or CAD 
(computer -aided design) systems, or to develop product differentiation strategies in order to face 
up to challenges and opportunities created by RTAs ( Carriere et al., 1994 ; Acs & Audretsch, 1990 ). 
On the other hand, Litvak (1988)  noted that MSMEs have significant challenges in using RTAs 
because of their resource constraints to, for example, bear the procedural costs in applying for any 
favorable market access conditions granted by a g iven trade agreement. In Canada, for example, 
MSMEs are usually defined as those firms whose annual sales do not exceed USD 2 million (Canada's 
currency) and/or firms employing fewer than 50 employees, meaning focusing attention on new 
procedures comes at a higher relative cost. In this context, Litvak (1988)  stressed that differences 
in firm characteristics such as organizational size, product -service mix and resource endowments, 
mean that the risks, such as being squeezed out of local markets by foreign competition introduced 
by an RTA, vary considerably. MSMEs tend to be at higher risks when RTAs lead to increased foreign 
competition, and when domestic la bor and capital have limited time -horizons to adapt to freer trade.  
 
With the various trade liberalization waves and the establishment of the World Trade Organization 
(WTO) , a growing  set of studies on RTA effects on MSMEs started to emerge in the literatu re by the 
early 2000s . These studies addressed both the positive and negative effects of RTAs in MSMEs by 
looking into factors that may support, or constrain, small business use of preferential market access 
benefits granted by RTAs. A starting place for m any of these studies to investigate the RTA utilization 
rate among MSMEs to measure the extent of small business RTA -use was to measure the degree 
small business es use the reduce tariff rates  granted by applicable trade agreements. Regarding the 
factors th at may help, or hold back,  businesses when using RTA benefits , the literature document s 
firm size, business support programs or institutions, market conditions, managerial business 
practices, and the policy regulatory environment, among other factors. In t erms of geographical 
focus, most of the studies have focused on economies across the East -Asia and the Pacific region. 
But it is worth highlighting that studies on some economies in Africa, the Americas and Europe have 
been documented (Ulloa & Wagner, 2012 ; Chingwaru, n.d.; De Ville & Gheyle, 2021 ; Garcia, 2009 ). 
 
MSMEs have had different definitions across the studies reviewed in this document. Most studies 
converge in defining MSMEs as firms with less than 100, 200 or 300 employees. However, other 
studies can present slightly different definitions. For example, Litvak (1988)  defines MSMEs as firms 
that employ less than 50 employees and/or report annual sales below 2 million (local currency). 
 
1 The terms “MSMEs” and “small businesses” will be used interchangeably throughout the document.  INF/MSME/W/40  
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  Garcia (2009) , on the other hand, documents MSME definitions used in Mexico and Europe, 
suggesting these are firms with less than 250 employees and annual turnover between USD  13.4 
million and USD 67.28 million.2 MSMEs included in these firm -level surveys also participate in a 
variety of economic sectors, including: automobiles; electronics; textile and garments; wholesale; 
retailing; and services; among others.  
 
The studies reviewed in this document do not provid e conclusive evidence on the direction of RTAs ' 
impacts on MSME trade. Two main methods of reviewing MSME RTA utilization rates are described 
by Ulloa and Wagner (2012) . The f irst is through surveys of businesses and the second through 
modelling. Both of these types of studies are reviewed in this paper although MSME specific evidence 
is found mainly in the former while broader firm -level findings are generated with modelling. 
Regardless of the data collection methods used across studies, such as firm -level surveys, business 
interviews, or quantitative modelling, none of the studies have defined a research strategy aiming 
at evaluating the direct impacts of RTAs on MSMEs, in par ticular RTA MSME chapters or other specific 
provisions. Rather, they have intended to measure the extent to which MSMEs use RTA preferences, 
which have been mostly approached in terms of tariff reduction benefits, and to assess which are 
the factors either  supporting or constraining MSMEs in using RTAs.  
 
The present document is structured as follows. Section 1 presents a review of findings and 
approaches on RTA utilization rates among MSMEs that have been documented in the literature. 
Section 2 documents a set of studies that have found positive effects of RTAs on MSMEs and presents 
a discussion on factors that support RTA -use by small businesses. Section 3 depicts another group 
of studies that have revealed negative effects of RTAs on MSMEs and the particul ar challenges the 
latter encounter in learning about and benefitting from RTAs. Section 4 discusses research gaps 
identified in the literature to shed light on potential avenues for further analysis on MSME issues in 
using RTAs. Section 5 concludes.  
 
SECTI ON 1: TO WHAT EXTENT DO MSMES USE RTA PROVISIONS?  
The relatively scarce data on the specific users of RTAs, especially for provisions other than tariff 
reductions, has meant that research on the use of tariff provisions has relied heavily on surveys. 
Many of the studies have also looked more generally at RTA effects on economic growth and 
international trade, or more specifically at tariff preference use, and most have surveyed samples 
of firms that are not MSME -specific and with varying definitions for a " small business". Consequently, 
MSME use of RTAs has been documented within a wide range of levels in the literature.  
 
The literature on RTA effects on businesses identifies a first set of studies that have analysed firms 
within groups of Asian economies. F or example, Kawai and Wignaraja (2009)  surveyed 609 exporting 
firms of varying sizes in five economies in East Asia and the Pacific, including: Japan; Singapore; 
Korea, Republic of ; Thailand; and the Philippines. These firms operate in various sectors, including: 
electronics, automotive, textile and garments, pharmaceuticals, metals and machinery, and food 
processing. The results found that 2 2% of all surveyed firms use market acces s preferences granted 
by RTAs adopted by the aforementioned economies .3 Although this study was not only reviewing 
MSMEs and therefore reported aggregate results obtained for the full sample of firms, it is worth 
noting that small businesses (defined as t hose firms with 100 or fewer employees) were included in 
the sample and represented 3 9% of all surveyed firms.  
 
Another multi -economy study on RTA effects on Asian businesses was undertaken by Wignaraja 
(2013)  who surveyed a total of 595 firms from three economies: Indonesia, Malaysia and th e 
Philippines. These economies were selected because of their involvement in negotiating and 
implementing RTAs adopted between member countries of the Association of Southeast Asian 
Nations (ASEAN). Firms that were surveyed in this study included MSMEs (de fined as those firms 
with 100 or fewer employees) and represented different shares of the firms in each economy .4 RTA 
 
2 For more information, see: European Commission (2015). User guide to the SME definition. Available 
in: https://ec.europa.eu/regional_policy/sources/conferences/state -aid/sme/smedefinitionguide_en.pdf . 
3 When disaggregated by economy, this study doc umented varying levels of RTA utilization rates among 
businesses. Firms surveyed in Japan and Thailand reported RTA utilization rates of 29 %and 25 % respectively 
while the rates observed in the Republic of Korea, the Philippines and Singapore were slightly lower at 20.8 %, 
20% and 17.3 %accordingly.  
4 In Indonesia, 23.3 % or respondents were firms with 100 or fewer employees, in Malaysia 88.5 % and 
in the Philippines 41.3 %. INF/MSME/W/40  
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  utilization rates among all surveyed firms ranged from 2 0% to 31% across the three economies. As 
in Kawai and Wignaraja (2009) , RTA use rates were not disaggregated by firm size.  
 
A second set of studies has focused on the RTA effects on businesses in single Asian economies. For 
example, Cheong and Cho (2009)  found that in their survey of firms from the Republic of Korea, 
only one out of five of the 120 exporting firms used preferential tariffs under RTAs. This study defined 
MSMEs as those firms with less tha n 300 employees, with surveyed firms representing a range of 
sectors, including: automotive parts, electrical goods, machinery, petrochemicals, textiles, steel and 
metal products, and sundries. In particular, the results indicated that only 2 2% of surveyed  MSMEs 
used RTA preferences compared to 6 0% of large firms. In China, Yunling (2010)  surveyed 232 firms 
in electronics, automobiles, textile and garments, machinery, and other s ectors. MSMEs made up 
18% of surveyed firms and they were defined as those with less than 100 employees. The results 
found that 4 5% of surveyed businesses were using RTA preferences, significantly higher than the 
previously mentioned studies from elsewhere  in Asia.  
 
The studies that were discussed previously documented varying proportions of businesses using RTA 
preferences. In general, RTA utilization rates among firms of all sizes were observed to range from 
20% to 45% of those surveyed depending on the business surveys conducted by study ( Kawai & 
Wignaraja, 2009 ; Wignar aja, 2013 ; Yunling, 2010) . According to the studies that disaggregated 
results by firm size, small businesses using RTA preferences accounted for about one fifth of firms 
survey ed (Cheong & Cho, 2009) . 
 
In other world regions like Africa, Europe and the Americas, studies on RTA effects on small 
businesses are scare and do not focus on obtaining concrete measures for RTA u tilization by firms. 
However, they address relevant research dimensions that are identified in the literature, such as the 
factors that either support or constrain MSMEs from taking advantage of RTA benefits.  
 
SECTION 2: WHAT FACTORS SUPPORT MSME RTA USE?  
As the previous section emphasized, MSMEs have reported varying levels of RTA use. Understanding 
the differences of such RTA utilization rates has been a core research motivation in the literature by 
analysing the factors that support or constrain MSMEs to  pursue preferential market access. This 
section focuses on the factors that make small businesses more likely to use RTA preferences.  
 
Studies covering multiple economies have looked into the macro - and firm -level factors driving 
MSMEs to use RTA preferen ces. Kawai and Wignaraja (2009)  examined some of these factors in 
their survey of southeast Asian firms.5 With regard to macro -level factors, they found that high RTA 
use among bu sinesses were observed in economies with higher levels of industrial structures linked 
to regional production networks, and a dense network of business associations and public trade 
support institutions that assist businesses to adjust to RTA conditions. F irm characteristics that were 
found to be positively associated with RTA utilization rates among firms were number of employees, 
foreign ownership percentage, awareness of RTA provisions, and likelihood for changing business 
plans. These results have also been somewhat similar to findings Kawai and Wignaraja (2011)  
obtained in a study covering a sample of 841 firms across China, Japan, Thailand, Republic of Korea, 
the Philippines, and Singapore. In another multi -economy study covering 595 firms in Indonesia, 
Malaysia and the Philippines, Wignaraja (2013)  found that business perception s of higher benefits 
over costs in using RTA provisions were another factor associated with increased RTA use by 
businesses.  
 
Economy -level studies have also contributed to the literature by identifying determinants of RTA -use 
among businesses. In Malaysia, Arudchelvan and Wignaraja (2015)  pointed out that MSMEs with 
higher technological capabilities, such as experience in holding technology licences from overseas, 
R&D spending and certification processes, are more likely to use RTA preferences. The authors also 
noted that small businesses belonging to production networks were observed to use RTA preferences 
to a larger extent than those who are not.  
 
Other sets of studies have identified factors such as international networks and business ownership 
types as playing a role in supporting MSME s to adopt international business strategies that can 
potentially drive them to use RTA preferences. For example, Zimmerman et al.  (2009) found using 
 
5 This initial survey covered 609 firms from Japan, Thailand, the Republic of Korea, the Philippines and 
Singapore.  INF/MSME/W/40  
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  questionna ire data that small businesses having strong international network ties may influence 
them to pursue new foreign market entry strategies. Size of international network ties was not found 
to have an association with MSME growth, but rather the strength of i t as measured by the frequency, 
length and intimacy through which small business owners interact with their international business 
contacts. Regarding business ownership type, Fernandez and Nieto (2006)  found from a firm -level 
government dataset including 10,579 MSMEs in Spain that the participation of corporate 
shareholders in firm equity was associated with a higher likelihood of small businesses in adopting 
internationaliz ation strategies. The authors observed that MSMEs with all or part of their capital 
owned by external corporations are more prone to internationalize and seek new foreign market 
entry opportunities because of strategic resources and governance mechanisms i ntroduced by the 
shareholders. In Africa, Chingwaru (2015)  issued a questionnaire to look at the impacts trade and 
economic liberalisation policy reforms —which are broader in scope than RTA ef fects—have had on 
manufacturing MSMEs in Africa and South Africa, and found the latter have been negatively affected 
because of their low capabilities to compete with resource -rich multinationals. In Europe, De Ville 
and Gheyle (2021)  have analysed the political discourse in Europe around the benefits of RTAs on 
MSMEs, and have underscored the latter face barriers, such as relatively higher fixed costs when 
using RTA referenc es due to their inability to spread costs out over a larger volume of exports.  
 
Separately, using modelling of export data, Ulloa and Wagner (2012)  analysed Chilean firms 
exporting to the United Sates and found that until a relatively high export value threshold was 
attained, the costs for RTA preference -use outweighed the benefits, meaning smaller traders were 
less likely to benefit. Further, their study suggested that smaller  exporting firms not using the RTA 
may be negatively impacted by larger firms using the RTA that are then exporting more, and 
demanding more inputs thereby increasing factor prices.  Other studies using modelling to estimate 
firm-level impact of RTAs includ e Kohpaiboon (2010)  and Hayakawa et al. (2008) . Using Thai 
administrative records of approved certificates of origin, Kohpaiboon (2010)  finds that complying 
with rules of origin (ROO) adds an equivalent cost of a 2 to 8% tariff, a cost which is harder for 
smaller firms to bear, partially explaining why large local  conglomerates are most likely to use RTA 
provisions. Hayakawa et al. (2008 ) use AEAN affiliate data and find that the larger the affiliate, the 
more likely they are to use RTA provisions, or, in oth er words, smaller affiliates use RTAs less. Noted 
reasons are high fixed costs, investment incentive schemes that reduce the relative benefits, and 
already low, or zero, tariffs in key sectors like electrical machinery.  
 
SECTION 3: WHAT CHALLENGES DO MSMES  FACE WHEN USING RTA PROVISIONS?  
With the majority of studies obtaining RTA utilization rates among selected surveyed MSMEs of 
significantly less than 5 0%, the literature has also drawn attention to challenges small businesses 
encounter when using RTAs. A fact that has been observed in the literature is that not all MSMEs 
benefit equally from RTAs because of associated costs in meeting complex procedures and lack of 
business support. Ulloa and Wagner (2012) , for example, studied RTA -use among firms in Chile and 
found that small businesses export smaller quantities and therefore will have lower, overall, tariff 
costs, meaning the cost of compliance can outweigh the benefit of favorable tariffs. In a somewhat 
similar finding, Takahshi and Urata (2008)  observed high costs of using RTAs in a sample of firms 
studied in Japan. The authors noted that only at quan tities beyond those a small business could 
trade would the RTA benefits outweigh the costs.  
 
Multi-economy studies have also underscored impediments businesses face in using RTA benefits. 
Kawai and Wignaraja (2011)  found that lack of information, small preference margins, delays and 
administrative costs associated with rules of origin, and other administrative procedures embedded 
in using RTA preferences were among the obstacles that businesses report in utilizing RTAs. 
Wignaraja (2013)  and Arudchelva n and Wignaraja (2015)  both find that lack of information is a key 
difficulty for MSMEs when it comes to understanding the detailed tariff preferences and other 
provisions of RTAs under consideration. Other challenges identified are "irrelevance" or unappl icable 
measures for MSMEs  using RTAs; absence of RTAs with major export markets where a MSME would 
be more likely to focus its exports; small margins of preference that make them cost ineffective for 
smaller traders; complex rules of origin; time delays an d administrative costs in preparing RTA -
related documentation; preferences in using other duty free treatment schemes; and non -tariff 
measures in RTA partners. Another recurring MSME challenge in using RTAs is complying with 
different rules of origin.  Hiratsuka et.al (2009)  found that businesses viewed the existence of 
multiple rules of origin as a procedural complexity that can lead eventually to increased costs in 
proving the applicable rules of origin.  
 INF/MSME/W/40  
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  Other studies with a focus on drivers of international business strategies provide insights in broader 
challenges MSMEs face in seeking access to foreign markets and using RTAs.  For example, Ottaviano 
and Volpe Martincus (2009)  found that lower levels of employment, sourcing from abroad, 
investment in product improvement and productivity may all be ass ociated with the probability for 
a firm to engage in exporting activities. These results were found under the context of the 
MERCOSUR trade area in which Argentina participates. In other geographical locations, Winch and 
Bianchi (2006)  conducted a case study of compan ies across the European Union and found that 
small businesses face internationalization challenges if they have stretched capabilities in new and 
unfamiliar markets, low levels of word -of-mouth marketing, and increased competition for resources.  
 
In additi on to firm -level factors driving MSME challenges in seeking foreign market access, studies 
have also identified macro -level factors that may pose difficulties for MSMEs. For example, Govori 
(2013)  researched socio -economic country -level conditions and found that limited access to finance, 
competition, corruption and complex government policies can be detrimental for small business 
growth and development.  
 
The macro -level facto rs pointed out by Govori (2013)  are important to place in perspective, 
especially when comparing the differing RTA impacts between MSMEs and large firms. With this 
regard, Chingwaru (2015)  researched factors explaining the differences between MSMEs and large 
firms in terms of being affected by trade and liberalizing economic policy reforms – which can come 
in the form of increased adoption of RTAs. In Zimbabwe, this study found that manufacturing MSMEs 
have been negatively a ffected by trade and economic liberalisation policies in Zimbabwe and South 
Africa. Some of the factors explaining the adverse effects faced by MSMEs are cash constraints and 
high competition posed by resource -rich multi -national corporations. Lack of know ledge and 
resources along with low innovation levels were other factors hindering the ability of MSMEs to 
benefit from sweeping market conditions created by trade and economic liberalization policy reforms 
in the economies studied.  
 
SECTION 4: RESEARCH GAP S FOR RTA EFFECTS ON MSMES  
The literature on RTA effects on MSMEs is scarce and does not provide conclusive assessments on 
how trade agreements impact MSMEs in their business performance and engagement in international 
trade. This is a fact that De Ville and Gheyle (2021)  also concluded after reviewing recent academic 
analyses that have analysed the impact RTAs have had on MSMEs. Most of the studies discussed in 
this literature review have researched RTA utilization rates and the benefits and costs that RTAs can 
pose for businesses via surveys, with even fewer studies on MSMEs. Attempts to model RTA impacts 
typically use data that include firms of all size ( Hayakawa et al. (2008) ; Kohpaiboon (2010) ; Ulloa 
and Wagner (2012) ) with limited MSME -specific findings.  
 
While studies are few and the evidence is inconclusive about RTA impacts on MSMEs, those studies 
that exist frequently suggest that RTAs can affect MSMEs negatively by squeezing them out of 
markets bec ause of their limited capacities to compete with larger firms in using RTA preferences 
and adapting their productivity levels to adjust to changing economic conditions created by RTAs 
and broader trade and economic liberalization policies ( Ulloa & Wagner, 2012 ; Chingwaru, 2015 ; 
Baccini et al., 2017 ; Rodrik, 2018 ). Further, the studies that ha ve been identified in this literature 
do not look at MSME -specific provisions within RTAs but rather at RTAs as a whole. Therefore, the 
necessity for more studies on RTA effects on MSME economic dimensions, as well as the specific 
language concerning small  businesses in the agreements such as for competitiveness, information 
sharing or contact points, is clear.  
 
Another important gap observed in the literature is the geographic concentration of available studies. 
Most of the studies identified focus on East  Asia and the Pacific, but evidence is more limited outside 
of these areas.  
 
Government impact assessments are also limited, and many are initiated before an RTA is 
implemented ( USITC, 2019 ; U.K. Department for International Trade, 2021 ) meaning they remain 
somewhat speculative. On the other hand, the European Union provides regular ex -post evaluations 
of its RTAs6, which may provide future insights into the impacts MSME Chapters have had on smaller 
 
6 Past reports and additional information on European Union ex -post agreement evaluations are 
available at from the European Commission: https://policy.trade.ec.europa.eu/analysis -and-assessment/ex -
post-evaluations_en . INF/MSME/W/40  
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  traders in agreements such as the recent EU -Japan European Partnership Agreement (2019) or the 
EU-UK Trade and Cooperation Agreement (2020) once these reviews are conduc ted. 
 
Lastly, the literature studies the extent to which businesses use tariff reduction benefits granted by 
RTA preferential market access terms. However, no studies that analyse the impact of other 
RTA provisions on MSMEs have been identified so far. Thi s is particularly important given that recent 
studies have suggested the broader disproportionate impacts that RTA provisions beyond tariff 
preferences can have for firms of varying sizes. With this regard, Rodrik (2018)  noted that RTAS are 
becoming more about domestic rules and regulations than tariff and nontariff barriers, which creates 
the necessity to assess the holistic impact of RTAs on business, particularly on MSMEs as discussed  
in this study. Furthermore, addressing research efforts in understanding which RTA provisions 
MSMEs use the most and their related business and economic impact can further contribute to the 
literature on micro -level effects of RTAs, as most of the literat ure has focused so far on the 
macroeconomic impacts led by RTAs.  
 
SECTION 5: CONCLUSION  
This document presents a literature review of RTA effects on MSMEs and the recurrent themes that 
have been investigated. Most of the studies that were identified did no t convey definite conclusions 
on the directions of RTA impacts on small businesses because their research strategy focused on 
analysing RTA utilization rates among MSMEs and the factors constraining or supporting the latter 
to use RTA preferences. Further,  the few studies that exist do not look at MSME provisions specifically 
within RTAs, but rather at the impact of the entire agreement on small businesses. Data constraints 
are one reason for this limitation, but government impact assessments may provide on e way of 
looking deeper into RTA effects on MSME trade.  
 
Nevertheless, the literature suggests that RTAs have the potential to benefit MSMEs to source 
cheaper intermediate goods and increase their exports if they receive adequate business support 
and build  their productive capacities to compete with larger firms in using RTA preferences. Studies 
also signalled potential gains in terms of business opportunities, production networks and 
participation in regional and global supply chains. As per the negative e ffects associated with RTAs, 
small businesses often report increased competition from foreign firms, complex regulatory 
compliance requirements and high administrative costs and time delays.  
 
Some of the recurrent themes in the literature on RTA effects on  MSMEs discussed in this document 
were the varying levels of RTA utilization rates among MSMEs, and the factors that either support 
or constrain small businesses to use RTA preferences. According to the literature reviewed, less than 
half of MSMEs surveyed  across studies report using RTA preferences. Observed rates vary from 2 0% 
to 45% among firms of all sizes, and MSME users of RTAs account for about a fifth of small businesses 
surveyed in the studies that were reviewed. However, there is limited evidence of their impact on 
MSMEs specifically. A combination of macro - and firm -level factors were found to explain the varying 
RTA utilization rates among small businesses. Macro -level factors that are supportive of RTA use by 
businesses are industrial infrastruc ture, production networks, and availability of business support 
organizations. When looking at firm -level characteristics, firms with more employees, awareness of 
RTA provisions, foreign ownership and business change plans were found to be more prone to us e 
RTA preferences. On the contrary, some of the obstacles constraining MSMEs RTA preference -use 
were lack of relevant information and compliance costs related to trade requirements derived from 
multiple rules of origin.  
 
 
  INF/MSME/W/40  
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