Multilateral Negotiations on MSMEs and the Challenges for the Survival of Labour-Intensive Firms : A Case of China, EU, India and the US

Small businesses are increasingly becoming the drivers of the holistic growth of a nation and also contributing to global development across sectors and some regions. Despite these considerations, overall the participation of MSMEs in international trade has remained insignificant and sparse. The primary drivers have been the heterogeneity of the group across different countries in terms of financial assets, technological capacity and spread, and real asset endowments. Additionally, they are also hindered by their relatively small size (at the domestic level) and faced with various obstacles that hinder their growth and development at the global scale. The negotiations at the WTO (since the failure of NAMA sectoral in 2008) have shifted towards attempts to harmonise the MSMEs as a sector for the liberalisation of tariffs and other barriers faced by them across countries. The MSMEs are based on national definitions with differing capacities in terms of annual turnover, capital assets and number of employees which could impact the overall competitiveness. There are no attempts at the multilateral levels to harmonise these differences, and it would not be appropriate to do so. However, there is a growing attempt towards the creation of inter-operable functioning of the MSMEs as a single entity at the global level by setting new disciplines and rules. It may disproportionately impact countries with smaller national definition of MSMEs. In this context, the paper analysis of the largest four markets, divided into labour- and capital-intensive industries reveals some interesting patterns. We have modified the existing UNCTAD classifications, which is primarily based on the OECD (2011) four categories (high, medium, medium-low, and low-technology industries) further segregating into a broader skill, the technology content, and domestic resource endowment of each product. Developing countries like India and China suggested a higher trade creation effect across both labour- and capital-intensive products compared to developed economies for the MSMEs sector. An informal arrangement at the multilateral level can lead to furthering some of the domestic challenges to the global level. It does suggest that wide variations in definitions can pose serious challenges, irrespective of the development status of a country from three capital-intensive industries to a few sectors belonging to chapters 84, 85, and 87 which are primarily electrical and electronics sectors, drying machines, boilers, and automobile parts