Russia is perhaps the most restrictive market for European small and medium-sized companies. Thirteen percent of EU SMEs find the EU’s ‘dual-use’ regulation aiming at curbing exports that could lead to the production of weapons of mass destruction a bureaucratic hell.
This is the kind of hands-on finding of a freshly released International Trade Centre survey of more than 8000 exporting EU-based small and medium-sized enterprises undertaken in collaboration with the European Commission. The ITC asked European SMEs to cite the most egregious barriers to their exports, except tariffs paid at the border. In in other words the survey is about NTBs – non-tariff barriers – in the trade policy jargon. The survey methodology was initially applied to countries in the developing world, but what it revealed was deemed relevant for Europeans as well.
The aim of the exercise is to offer a general first overview of the key barriers faced by European SMEs in international trade, and at identifying where the most important problems are. The stakes are high: SMEs provide the bulk of jobs in our societies. A report like this “can inform negotiations of trade agreements”, Arancha Gonzalez, the ITC’s director told Borderlex. The kind of information obtained by this survey can be used for the implementation of agreements too. “It’s good to identify what to fix in-house too”, the trade organization’s boss said. Knowing how to better serve the needs of SMEs in the way you craft your trade policy is a means to create more inclusive growth Gonzalez said.
Abroad, 36 percent of companies surveyed said they encountered “restrictive regulations or related procedural obstacles to trade while exporting or importing goods”, so the report. Not surprisingly it is easier to import – notably to source for production – than to export. Companies operating in the agri-food sector – 48 percent of the surveyed – face obstacles more often than companies in the manufacturing sector (33 percent), the study finds.
Among the many burdensome paperwork requirements, costs and delays encountered on their journey to the world market, those relating to sanitary and phytosanitary measures are the most dominant form of export hurdle for Europe’s small companies. Conformity assessment, technical requirements and ‘pre-shipment inspections and other formalities’ are also the most common type of hurdles across sectors.
Another set of problems encountered by EU exporting SME abroad are related to certification requirements and ‘rules of origin’, be it the requirement to issue a certificate of origin or to prove your product has enough home-grown input to qualify for duty free agreement in a bilateral free trade pact. For rules of origin the most problematic hurdles are ‘high fees to pay’ and a ‘large number of different documents’, the report finds.
The survey provides some concrete examples of what the different barriers mean for SMEs. Take ‘certification requirements’. “We have to certify our products with the China Compulsory Certificate (CCC), which can only be obtained after the products have been tested in China”, a Bulgarian wooden windows exporter interviewed by the ICT said. “This is burdensome because there is an unusually high fee of about €2,000 per product variety, but also because the testing requirements are not revealed by the Certification and Accreditation Administration of China (CNCA)”, the company explained.
The survey further finds that, compared to the volume of exports, the most burdensome countries for EU exporters are Russia, Saudi Arabia, Turkey, Iran and Egypt.
Single Market effect
The survey did not only ask about barriers to exports encountered abroad: it also asked about home-made barriers to exporting. Arancha Gonzalez explained to Borderlex that in the EU obstacles to export are generally lower than in developing economies. The proportion of domestic barriers to exports in relation to barriers encountered outside the EU is 20 percent to 80 percent, Gonzalez said. In emerging markets the proportion is 40 percent domestic barriers and 60 percent foreign barriers respectively.
More generally European SMEs tend to be better integrated in international trade than their peers in emerging economies. “This is very clearly the result of the internal market” in the EU, Arancha Gonzalez said. “It’s an often overlooked ingredient of European Union’s trade policies”, she added.
But all is not smooth sailing on the export front. “Exporters complain about compliance with customs procedures when shipping goods abroad in about 13% of cases”, the report reads. “A similar share of issues relate to EU regulations on export control, transfer and brokering of dual-use items and technologies (almost 18% of cases related to export-related measures) and 8.5% of cases involve sanitary and veterinary certificates and proof of chemical content under EU regulation on chemicals”, we learn.
So the EU has quite some homework to do.
