SMEs in the Global Market: SMEs Need TTIP and Customs Facilitation to Internationalise

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Despite the global orientation of German SMEs, smaller companies often find it tough to do business abroad. Many are therefore pinning their hopes on TTIP. Customs and export procedures must be made less bureaucratic.

The emblem of “German industry” is its internationalism. In industrial SMEs the picture is more mixed. Most of the larger firms in this sector already operate successfully in the global market, but their smaller counterparts hesitate to follow.

What characterises German SMEs is their close integration in global and regional value chains. Smaller and larger industrial companies work together to produce innovative products and services. If an SME’s customer is globally engaged, then in the medium- to long-term the supplier will also have to face the international competition.

Large family businesses internationally successful

A study by the Institut für Mittelstandsforschung (IfM) in Bonn commissioned by BDI and Deutsche Bank reveals that Germany’s largest family businesses (annual turnover at least €50 million) are already successfully engaged in the global market. In 2014, the average export ratio of the largest industrial family businesses was about 45 percent. Almost one in four industrial family businesses with turnover of at least €50 million employs at least 50 percent of its employees abroad.

The most important market for the biggest family businesses is currently France. In three years, the United States is expected to take its place. That is another reason why family businesses are hoping for a successful conclusion of the TTIP talks. Already today, 45 percent of the surveyed family businesses are active in the U.S. market. 74 percent of them expect TTIP to simplify customs clearance and administration.

The family businesses surveyed in the study represent an important element of Germany’s medium-sized industries. Six of every ten surveyed family businesses are in manufacturing, employing on average 1,658 staff. In terms of their structure and management strategy they are distinct from the large listed share companies. But they are not small and medium-sized companies (SMEs) under the European definition (less than 250 employees and annual turnover up to €50 million), because they all generate an annual turnover of at least €50 million.

Make exporting easier for SMEs

SMEs in the European sense are by no means as globally active as the largest family businesses. According to a recent study by the Federal Statistical Office the degree of internationalisation of SMEs remains small. In 2013, 77 percent of SMEs were not involved in foreign trade at all, and SMEs accounted for just 17 percent of total German exports. Action is still required here. Customs and export procedures need to be made as unbureaucratic as possible. State export credit insurance must be improved to encourage small and medium-sized companies to venture abroad even in an era of increasing global risks. Thus even if the larger SMEs are already internationally successful, work still remains to be done.