RESTRICTED  
  
JOB/GC/80  
 
22 July 2015  
(15-3749)  Page: 1/4  
General Council  Original: English  
 
 FOSTERING THE PARTICIPATION OF MICRO, SMALL, AND MEDIUM ENTERPRISES 
(MSMES) IN REGIONAL AND GLOBAL MARKETS 
COMMUNICATION FROM THE PHILIPPINES 
 The following communication, dated 20 July 2015,  is being circulated at the request of the 
Delegation of the Philippines.  
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 1  RATIONALE 
1.1.  The importance of small and medium ente rprises (SMEs) to the performance of national 
economies is a subject of increasing interest among policy makers in national government and 
international institutions, in both developed and developing countries.
1 This is not surprising given 
that globally, SMEs make up over 95% (in number)  of all firms, account for approximately 50% of 
value added and 60% of total employment2, and are important sources of innovation and job 
creation3, in particular with women and youth. 
1.2.  However, SMEs' share in trade is minimal.  In ASEAN, for example, SMEs form the backbone, 
comprising more than 96% of all enterprises an d contribute 30-35% of GDP.  Perhaps of even 
more significance is that they constitute the la rgest source of domestic employment – from 50% - 
95% of jobs – across all economic sectors and in both rural and urban areas.  In addition, they 
provide opportunities for women and youth to pa rticipate and contribute to economic growth. 
1.3.  Further breakdown of the SME sector indi cate that very small companies comprise the 
majority of SMEs.  In the East Asia and Pacific Region, 80% of the SME sector is comprised of very small enterprises, 19% are small, and only 1% ar e medium.  In Europe and Central Asia, 65% are 
very small, 30% are small, and only 4.5% are medium.  In Latin America and Caribbean, 62% are 
very small, 32% are small, and 5.5% are medium.  In Middle East and North Africa, 39% are very 
small, 40% are small, and only 21% are medium.
4 
1.4.  Traditionally, SMEs have focused their sales on domestic and sometimes regional markets. 
Recent technological advances and reduction in trade costs have made it possible to fragment production into individual tasks, allowing firms to specialize in parts of a supply chain.  This fragmentation of production or global value chains (GVCs) provides an opportunity for smaller 
firms to internationalize without having to produce every component of a good or service.  The 
"levelling effect" of new technologies, has likewise been a key element in the internationalization of SMEs. 
1.5.  These developments, not only heightened  the importance of SMEs, but has enabled the 
smallest component in the SME sector to likewise become more involved in regional and global markets, and have become relevant in policy discussions – that is micro enterprises.  In a study 
                                               
1 WTO Background Note on Aid for Trade and SME Competitiveness: Connecting Developing Country 
SMEs to Global Value Chains (WT/COMTD/AFT/W/53), 6 October 2014. 
2 ACCA 2010, Ayyagari et al., 2011, Edinburgh Group, 2013. 
3 Van Ark and Monnikhof, 1996. 
4 ITC and WTO publication, SME Competitiveness and Aid for Trade, 2014, p. 4. JOB/GC/80 
 
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  conducted by the World Bank and the IFC, it was highlighted that MSME density is rising at a 
faster pace.5 
2  INITIATIVES ON MSMES IN VARIOUS FORA 2.1.  The WTO has undertaken significant work in addressing global issues as it relate to SMEs: 
a. The WTO Aid for Trade (AfT) initiative plays an important role with respect to the 
monitoring of development financing for SMEs.  The 5
th Global Review of AfT, with its 
theme "Reducing Trade Costs for Inclusive, Sustainable Growth" discussed how trade 
costs affect developing countries' competitiveness and their ability to connect to regional 
and global value chains.  
b. The workshop on "Electronic Commerce, Development and Small and Medium-sized 
Enterprises"6 resulted in a general agreement of the importance of government 
intervention in creating economic growth an d in fostering the diffusion of technological 
innovations that can be addressed by nati onal policies and priorities. In the same 
manner, there was recognition that cross-border e-commerce issues pose challenges, if 
not more difficult hurdles, for SMEs and MSEs.  
c. The paper "Further examination of the effects of non-tariff measures on the exports of 
small economies”7 sought to further inform discussion at the Committee on Trade and 
Development's Dedicated Session on Small Economies. It provided data on the main 
export flows of 32 small economies and describes how non-tariff measures (NTMs) such as Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) measures can affect the exports of small economies.  
d. The paper on "Challenges and opportunities experienced by small economies when 
linking into global value chains in trade in goods and services"
8 focused on the most 
recent decision by Ministers to examine the challenges and opportunities faced by small 
economies in linking into global value chains (GVCs). It sought to further inform 
discussion at the Committee on Trade and Development's Dedicated Session on Small Economies and describes some of the challenges they face, or experiences they have 
had, with linking into GVCs in trade in goods and services. 
e. As part of its discussions of the relationship between trade in financial services and 
development, the Committee on Services discussed access of SMEs to financial services and mobile banking services.
9  Similarly, innovation policies for small and medium-sized 
enterprises was discussed in the context of TRIPS, whereby an enabling environment for 
innovation was particularly important for SMEs, and that IP played an important role in generating finance and maintaining competitiveness.
10 
f. The entry into force of the TFA is expected to bring benefits to SMEs.  The fragmentation 
that lies at the core of global value chains requires goods to cross borders several times during the production process. As such, trade-facilitation measures are crucial to 
foster participation in production networks and global markets — and they are necessary 
for creating sustainable, export-led growth.
11 
g. Equally notable are the various initiatives of the WTO committees in pursuit of their 
respective mandates, whereby the substance of the initiatives itself translates to benefits 
for SMEs.  These include the continuing effort s in further strengthening the transparency 
provisions of the WTO agreements and the further improvement of databases. 
                                               
5 Micro, Small, and Medium Enterprises Around th e World: How many are there and what affects the 
count, Kushnir, Mirmulstein, and Ramal;ho, 2010. 
6 (WT/COMTD/W/193), 8-9 April 2013. 
7 (WT/COMTD/SE/W/28), 15 October 2013. 
8 (WT/COMTD/SE/W/31), 1 May 2015. 
9 WTO Annual Report 2014, p. 61. 
10 Ibid, p. 64. 
11 Boosting Competitiveness through Trade Facilitation, ICTSD, 15 November 2013. JOB/GC/80 
 
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  2.2.  Other international organizations have like wise been at the forefront in addressing MSME 
challenges and opportunities: 
a. ITC, the joint agency of the United Nation s and the WTO, has a mandate supporting the 
internationalization of SMEs in developing countries.  ITC’s work contributes to the 
creation of a policy and regulatory environment conducive for SME internationalization as 
well as building the capacity of trade and investment support institutions to act as multipliers in the field.  Its flagship publication on " SME and Global Markets: The Missing 
Link for Inclusive Growth" provides a comprehensive analysis of opportunities and 
challenges facing SMEs in their integration into the regional and global market place. 
b. UNCTAD's work include "Entrepreneurship and SMEs Development" , as well publications 
on "Integrating Developing Countries' SMEs into Global Value Chains" , and Improving 
the Competitiveness of SMEs in Developing Countries, among others.  
c. The World Bank (WB) has also embarked on  various development projects in Latin 
America and elsewhere in recognition of MSMEs contribution to a country’s GDP.  It has 
also come up with programs/projects on micr ofinance, micro credit and micro insurance, 
among others. 
d. In APEC , the "Boracay Action Agenda to Globalize Micro Small and Medium Enterprises 
(MSME)" recognized that for many countries, MSMEs are an important force in economic 
activity, growth, job creation, community resilience, and innovation. Trade facilitation, trade finance, e-commerce, and institutional support have been identified as priority areas of cooperation.  
3  FOSTERING PARTICIPATION OF MICRO SMALL AND MEDIUM ENTERPRISES (MSME) IN 
REGIONAL AND GLOBAL MARKETS  
3.1.  There are robust studies and initiatives on SMEs. A stocktake of these initiatives indicate that 
(1) a critical element in the sector is often not specifically recognized – that is micro enterprises; 
(2) there are cross-cutting issues that affect th e integration of MSMEs in regional and global 
markets; (3) the discussions are currently sporadic and diffused; and (4) national and 
international policy makers are presented with an opportunity to pursue initiatives to help MSMEs 
internationalize and to ensure that insertion leads to improved economic performance.  
3.2.  MSME is a very dynamic sector, and fosterin g their participation needs to be based on a clear 
and coherent understanding of how the WTO as the main trade body could continue to further 
strengthen its resolve to integrate MSMEs consistent with its overall objective, as laid out in the 
preamble of the Marrakesh Agreement Establishi ng the World Trade Organization, to conduct 
relations in the field of trade and economic endeav or with a view to raising standards of living, 
ensuring full employment and a large and steadily growing volume of real income and effective 
demand, and expanding the production of and trade in goods and services. 
4  ACTIONS THAT COULD BE EXPLORED 
4.1.  The WTO Membership, at the 10
th Ministerial Conference in Nairobi, Kenya, could further 
strengthen its resolve to work towards the inclusio n of MSMEs in regional and global trade through 
a Ministerial Statement or a Decision with the following elements: 
a. Recognition of the important role of Micro, Small and Medium Enterprises (MSME) in the 
performance of national economies, and in in clusive and sustainable economic growth of 
all WTO Members, and in particular developing countries. MSMEs comprise the majority of firms, account for a significant portion of value added and total employment, and are 
important sources of innovation and job creation. 
b. Recognition of the work undertaken by the WTO and other international organizations.  
In this regard, the Council for Trade in Services, the Council for Trade in Goods, the 
TRIPS Council, the Committee on Trade and Development, and the Aid for Trade 
initiative shall continue its discussion and examination on aspects of MSMEs relevant to their respective areas of competence. Existi ng linkages with the initiatives of other JOB/GC/80 
 
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  international organizations such as ITC, UNCTAD, and the World Bank could likewise be 
strengthened. 
c. In recognition of the cross-cutting issues that affect integration of MSMEs in global trade 
and the need for a better understanding an d coherence in discussions on MSMES, the 
WTO Secretariat shall prepare a study to take stock of discussions and initiatives on 
MSMEs.   
d. The General Council shall consider the most appropriate arrangement to facilitate 
discussions for which information and experiences relating to opportunities and 
challenges of MSMEs are discussed in a horizontal manner. The General Council shall also aim to provide a report at the 11
th Ministerial Conference. 
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