From the tropics of Southeast Asia to the mountains of Montana, small and medium business owners everywhere essentially face the same challenges when trying to internationalise, explains Jeffrey Ruffner, who has worked in Asia, the United States and Europe.
Most have limited finances and staff to devote to clearing the many complex and often overwhelming hurdles to compete in global markets, says Mr Ruffner, president and CEO of US engineering and technology company MSE Technology Applications, Inc.
“I am also the chief engineer of our company, the chief psychologist, and sometimes the accountant. And that’s the same for small businesses in the US, in Singapore, Malaysia, everywhere,” Mr Ruffner says of the need for SMEs to multi-task.
“So anything that can be done to help small businesses (internationalise) is going to help all of them. Bigger companies have dedicated staff and money to deal with these challenges. SMEs everywhere don’t.”
The challenges facing SMEs range from complying with differing standards for the same product across regions to lack of access to clear, transparent information on government regulations and tariffs as well as protection of intellectual property.
‘Next generation’ trade issues
Mr Ruffner was among small business leaders from the Asia-Pacific, including Chinese Taipei, Singapore and the Philippines, taking part in a seminar in May on SME internationalisation. The seminar was one of numerous APEC meetings held in Big Sky, Montana in the United States on a range of issues all aimed at enhancing free trade and investment in the region.
The culmination of the meetings was a gathering of APEC Ministers Responsible for Trade as well as Small and Enterprise Ministers to map the way forward. Trade Ministers agreed to focus on enhancing SME participation in global production chains as part of APEC’s agenda this year to tackle “next generation” trade and investment issues. Two other issues were also agreed as priorities for action; promoting effective, non-discriminatory and market-driven innovation policy and facilitating global supply chains.
“Enhancing supply chains to reduce the time, cost and uncertainty of moving goods and services throughout the region continues to be a top priority for APEC given its importance to trade and economic growth,” Trade Ministers said in their statement released at the end of the meeting.
The focus comes after APEC Leaders, meeting in Yokohama, Japan, last year, agreed to take concrete and meaningful steps towards establishing a Free Trade Area of the Asia-Pacific. They tasked APEC with making an important and meaningful contribution as an incubator of an FTAAP by playing a critical role in defining, shaping and addressing the “next generation” trade and investment issues that an FTAAP should contain.
SMEs account for 90% of businesses in APEC region
SMEs are the lifeblood of many economies, accounting for 90% of the businesses in the Asia-Pacific and employing well over half of the workforce for the majority of economies in the region.
“Consider the fact that small businesses in America generate15 times more patents per dollar of R&D than large firms. Or that they employ more scientists and engineers than America’s universities and federal government agencies combined,” US Secretary of Commerce Gary Locke told a seminar in Big Sky.
But small companies continue to face hurdles in the APEC region. The US International Trade Commission and the Organization for Economic Cooperation and Development (OECD) identified excessive transportation costs and customs clearance delays; difficulty protecting intellectual property and taking advantage of preferential tariff rates; and lack of access to financing and information as the main barriers to growth.
Secretary Locke urged APEC economies to put the empowerment of small businesses at the centre of their economic agendas.
Mr Ruffner pointed to the need for greater harmonization of standards and conformance for products across the Asia-Pacific region that often creates barriers for SMEs, an issue that APEC is working hard to address.
“We are a small company making a product line. If the standards are different in each of the APEC economies, we cannot afford to make 18, 19, 20, 21 different products to meet those standards. So anything that harmonizes standards across the region that makes it easier for small businesses, is good,” he said.
“Big companies can do that. They can go in and plant the flag and customise their product line to meet all those very specific requirements, especially in the technical arena. But when I have to pay for different certifications, sooner or later, I just can’t afford it.”
He also identified the need for information on tariffs and regulations for trading across borders that is transparent, consistent and easy to understand. “I’m talking about very simple mechanisms, tools, and information that can really help all small businesses,” he said.
APEC has developed a website on tariffs and rules of origin (ROOs) that aims to serve as a portal to the region for such information. The WebTR provides up-to-date and accurate tariff and ROOs information in each APEC economy.
APEC’s many working groups and other committees and taskforces are forging ahead with further practical and concrete actions to address SME participation in global markets and other “next generation” trade issues that promote innovation and support global supply chains.