SMALL and medium enterprises (SMEs) should integrate themselves into global value chains (GVCs) to boost their chances of succeeding in international trade, the World Trade Organization (WTO) said in a report.
Global value chains help SMEs access foriegn distribution networks and get the most out of economies of scale, the WTO’s A World Trade Report released over the weekend said.
“GVCs provide SMEs with the distribution network and their brand names. This significantly reduces SMEs’ distribution costs, thus making exporting profitable for SMEs that become suppliers of a GVC,” it said.
The cost of acquiring information on the requirements in terms of products, processes, technology and standards in global markets are also reduced.
Being a part of a value chain connects an SME to a large customer and buyer base and provides learning opportunities from large firms by “engaging and surviving in the hotly contested sectors of the global marketplace.”
Trade in GVCs involves the exchange of goods and services along the production and distribution networks that are fragmented across countries. GVCs help SMEs overcome some of the difficulties in accessing international markets.
“Logistics and infrastructure are key factors affecting GVC participation. Low import tariffs, the implementation of trade facilitation and the enforcement of property rights are also keys to GVC participation,” the report said.