A literature review on the effects of regional trade agreements (RTAs) on micro-, small- and medium-sized enterprises (MSMEs)

Abstract

This document presents a literature review of the effects of regional trade agreements (RTAs) on micro-, small- and medium-sized enterprises (MSMEs). It focuses on the extent to which MSMEs use RTAs to engage in interna-tional trade, and addresses other recurrent themes in the literature, such as the determinants of RTA use, MSME chal-lenges in utilizing RTAs, and potential benefits RTAs can have for MSMEs. Most of the studies available in the literature focus on economies in North America, East Asia and the Pacific, with limited coverage of other regions such as Africa, Europe and Latin America. These studies do not provide definitive conclusions on the direction of RTA effects on MSME trade participation given that their principal focus was RTA utilization rates and not effectiveness of MSME- specific RTA provisions. Rather, the literature describes the potential benefits MSMEs can experience from RTAs such as access to cheaper intermediate goods due to lower tariffs, increased exports, more business opportunities, larger production net-works and further participation in regional and global supply chains. Studies, however, also document challenges MSMEs can face to use RTAs including complex regulatory requirements and high administrative costs or downside effects RTAs can have such as increased competition from foreign firms.