‘Small businesses need to capitalise upon FTAs following Brexit’

A major new report from the FSB and the UK Trade Policy Observatory at the University of Sussex has highlighted what small businesses need to capitalise upon from free trade agreements (FTAs).

The research involved a comprehensive review of recent major trade agreements and identified best practice for provisions in FTAs that will help SMEs achieve their trade ambitions.

The FSB cautioned that since small businesses’ share of global trade lags behind that of domestic economies, a key issue will be tackling the low use of preferences in FTAs by SMEs.

For example, it explained, the compliance costs of stringent rules of origin can mean small businesses choose not to take advantage of preferential terms of trade within an FTA.

“Small businesses are already the backbone of the UK’s domestic economy. For our country’s future prosperity, we now need to see their share of global start to catch up, by putting SMEs front and centre of all new trade agreements, especially as we depart the EU,” said FSB national chair Mike Cherry.

“It is essential that the needs of smaller firms are at the heart of future FTAs through a dedicated small business chapter in each agreement, and that the government has the necessary architecture in place, to ensure the small business voice is heard loud and clear.”

Meanwhile, the report revealed that 62 per cent of small business exporters and 55 per cent of small importers identify the EU as their most important trading bloc, ahead of the new US, Mexico and Canada (USMCA) and the already in force Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The US comes out as the most important individual country market for small firms hoping to export over the next three years with 46 per cent selecting the country, ahead of 38 per cent who chose Germany.

SME committee

The report also called for all future FTAs to establish a dedicated SME committee, which includes private sector representation. This committee is expected to have a meaningful say in the key areas that will affect small firms, whether that is e-commerce or trade facilitation.

“If the UK economy is to take advantage of the opportunities that are opening up, SMEs will be a central part of the picture. Making sure that trade agreements cater to their needs should be a top priority for government,” said L. Alan Winters, professor of economics and director of the UK Trade Policy Observatory.