The list of obstacles could go on. The point is that the promise of selling globally comes with increasing challenges. Hence the very good news that the World Trade Organization (WTO) has launched talks in Geneva to begin to create some global rules to sort out some of these issues. For smaller firms, global rules can at least ensure that added expense and time becomes a necessary part of doing business, rather than an irritating element of doing business with some countries. The size of the “prize” is huge. Estimates are all over the place on the current size of the digital economy, but Asia tends to lead the way. An extremely useful series of reports just released by the Hinrich Foundation on eight economies in the region (five out now: Vietnam, China, Indonesia, Malaysia and Australia) shows how much additional trade might be gained from eliminating barriers to digital trade.
Policymakers should not assume that MSME firms will always stay MSMEs. Yet frameworks in many economies seem designed to trap smaller firms into a set category and entrench them into a “small” mindset. There will always be MSME firms. They form the backbone of most economies, as much as 97 percent of companies across Asia, employing the overwhelming share of workers. The goal of MSME policies should be enabling the current crop of smaller firms to grow, allowing firms in the “medium” category to reach large scale in relatively short order, while encouraging new entrants to the MSME ranks. Trade policy is one tool to help MSMEs grow. In most economies, the domestic market alone can be too small or even too competitive for success. E-commerce and digital technology, however, have allowed MSMEs to reach regional or global audiences.
Start with the aerospace workers. An interviewer went to a plant in California and talked to several employees who had struggled with keeping their jobs. One had already been laid off for an 8 month period and all were worried about their positions being outsourced to Malaysia in the future. All blamed trade for undermining their job opportunities. But this surely gets the situation exactly the wrong way round. Most of the jobs in the aerospace sector are driven by markets outside the United States. The interview did not specify exactly what products these workers produced, but the domestic demand for aerospace will never be as large as global demand. Absent trade, there would be very little demand for whatever rolls off the assembly lines in California. Without trade, there would be very few jobs of any kind in aerospace.
That is the simple part. Simple, but crucial—and yet a narrative that is often not explained sufficiently by politicians when discussing trade agreements. Trade agreements are about access to products, yes; but they are also about the prices of those products for consumers, and the kinds of products and services available to consumers that may be affected by in future.
Firms cannot assume that government policies will remain benign. Companies cannot keep their heads down, their “powder dry,” or hope that some other organization will do the important work of ensuring that policy and regulatory frameworks stay supportive. Conditions can literally change overnight.