How can SMEs increase their cross-border trade in the EU?
Thursday, June 16th, 2016
The European Union Single Market is the largest free trade area in the world and it hosts around 20 million small and medium-sized businesses. These businesses have the opportunity to access freely customers from every Member State of the European Union while at the same time finding the most convenient providers of goods and services in this gigantic free market area.
Practically speaking, however,only 17 % of European SMEs firms buy from another EU Member State from the one they are located in. The share of SMEs selling abroad in the Single Market is limited to 14%. These percentages vary considerably across Member States, ranging from 39% of SME intra-EU exporters in Estonia to 4.6 % in Malta.
This is because, even in such a free market area, SMEs face many hurdles in trading abroad. First and foremost, language. To access markets in other Member States, companies need to have staff proficient in the language of that country. They can also rely on hiring new staff there, but that entails substantial additional costs. Costs that can be saved by having personnel capable of fluently interacting with clients in the country. But such skilled employees are not always readily available.
Moreover SMEs willing to expand have to become acquainted with different taxations, bureaucracy and legislations from their country of origin. The variation in tax systems of Member States creates a real burden on smaller businesses which can actively discourage them form venturing in new markets without a certainty of profit. The European Commission new Action Plan on VAT, while not perfect, is a good first step in trying to harmonise taxation systems. Different legislations also require a certain amount of time to be learned, time that staff and management of enterprises do not always have.
A good solution to many of these issues would be for SMEs to create a bridge to a country of interest through a cross-border exchange program for SME employees. By temporarily sending an employee to another business abroad, small and medium-sized business can create a contact point for new commercial agreements that can help them overcome these hurdles. Moreover the participating employee would be quite fluent in the language of the country of the hosting SME, ensuring a steady and valuable relationship.
If you think such an exchange program is a real opportunity to increase your market share abroad or to get access to better providers, take the MobiliseSME survey to learn how you can join.