INTERNATIONAL TRADE IN A WORLD WITH MULTIPLE OPTIONS
The case of SMEs with a sustained presence in their own niches and in
by Félix Peña
English translation: Isabel Romero Carranza
Several factors are introducing profound changes in
the global trade of goods and services. These help as understand the relative
obsolescence that can be observe in the theoretical aspects, paradigms,
concepts and operative methods of international trade that, for the most
part, originated in a different era.
Some of these factors are: the number of countries capable of influencing
world trade and its ground rules; the greater connectivity between markets,
among other reasons due to the collapse of physical distances; the growth
of the urban middle class, especially in developing countries; cultural
diversity; consumer empowerment with its multiple options; and the dynamics
of changes that are likely to continue and accentuate in the future.
These are factors with a marked impact on the three priority fronts
for the development of a country strategy aimed at facilitating the projection
to the world of the capacity to produce goods and offer services.
Such fronts are: the policies and methods that countries use to support
a sustained presence of their firms especially niche SMEs, in foreign
markets; the strategies for international insertion developed by the companies
themselves, especially the SMEs that seek a sustainable projection in
other markets, and the strategies and modalities of international trade
negotiations of each country or organized region.
As we have pointed out on other occasions, various factors are introducing
profound changes in the global trade of goods and services (see, among
others, the May
2018 edition of this newsletter on www.felixpena.com.ar). These are
impacting the strategies and behavior of many protagonists of the competition
for world markets, whether at global or regional scale. They can help
understand the relative obsolescence that can be observe in the theoretical
approaches, paradigms, concepts and operational methods of international
trade, which largely come from the period following World War II.
Among other factors, it is worth mentioning the following due to their
- the growing number of countries with the capacity to influence, in
one way or another, the development of the competition for world markets
and the institutions and ground rules of international trade, for example
through the effect of various modalities of agreements of regional or
- the greater connectivity between the different markets, partly because
of the shortening of physical distances aided by the new methods of
communication and transport, and by the growing development of e-commerce;
- the significant growth of the urban middle class in many developing
countries especially, but not exclusively, in the Asia-Pacific region;
- cultural diversity with its impact on the preferences and priorities
of consumers in their choice of products and services;
- the empowerment of well-informed consumers who have multiple options
when deciding what goods or services they prefer, and
- the dynamics of continuous change that will be observed in each of
These factors have a marked impact, which will probably be greater in
the future, on the priority action fronts for the development of country
strategies, aimed at facilitating the projection to the world of the capacity
to produce goods and offer services by firms whose relative competitiveness
is based on the availability of natural and human resources (knowledge,
creativity and talent). Particularly, this is the case of the strategies
aimed at developing and projecting to the world "niche companies",
whose internationalization is based on their ability to specialize in
satisfying the potential consumer demand for high quality products and
services. In general, consumers are well informed about their options
and quite demanding when choosing the products and services of their preference.
Gastronomy, tourism, education, health, clothing, entertainment, household
equipment and footwear, are just some of the many examples of sectors
The first front of action is that of the policies and methods that countries
use to support a sustained presence of their companies, especially SMEs,
in foreign niche markets.
In a federal country, as is the case of Argentina, such support may come
not only from the central government but especially from the provincial
or state governments. It would even be logical to think of the latter
as the natural environment for the support of niche SMEs that try to project
themselves to the world, since they are usually located within provincial
geographies This is what happens in federal countries such as, for example,
Brazil or Canada.
In this case, the federal agency for the promotion of international trade
-which often includes an area of investment aimed at developing valuable
goods and services in international markets- can play a very important
role in supporting provincial agencies, which would have the main active
role due to their physical proximity to the SMEs.
It will be necessary to follow closely the new initiative of the recently
launched program Argentina-Exporta, in which the Federal Network will
play a special role. It will help assess the advantages that could result
from the joint efforts by an articulated set of provincial agencies.
We should bear in mind that the aim of this recent initiative, which
is starting to develop in Argentina, is to make a quantum leap in the
number of SMEs that aspire to have a sustained presence in foreign markets,
including niche SMEs. It has been said that a country like Argentina should
attempt to have, in the upcoming years, approximately 40,000 SMEs that
sell goods or supply services in multiple markets in a sustained manner
and not just in occasional operations. This number is considerably higher
than the current one. An indicator to recognize the sustained projection
of a company in other markets would imply a minimum of three years of
presence in each market, for example through sales outlets or the participation
in value chains.
A second front of action refers to the strategies for international insertion
developed by the firms themselves, especially SMEs that seek a sustainable
projection in other markets. It would seem unlikely for a company, especially
a small or medium one, or even a micro business, that seeks to project
itself in a sustained manner in other markets, not to develop or adapt
its respective strategies to the new realities of global economic competition.
This implies, as a necessary condition to compete in other markets, to
have a good diagnosis, not only of the opportunities that eventually open
up for the goods or services that the firm can offer, alone or associated
with other companies of the same country or of other countries, for example
from the same region, but also of the options that the consumers of a
certain country could have in their supply demand. Fully understanding
a market is thus a necessary condition for having a sustained presence
It is in relation to this aspect that the joint efforts of government
agencies and business technical and academic institutions can provide
great value to ensure the competitive intelligence required to understand
the priorities and preferences of consumers and the dynamics of change
of other markets. In the case of Argentina-Exporta, an important factor
for its effectiveness will come from the ability to develop together with
other institutions, including mainly the academic and technical networks
of people with deep knowledge of the cultural factors that prevail in
other markets, and which provide the necessary insights to detect the
priorities, preferences and tastes of its consumers. Also sharing this
capacity with other countries of the region would seem quite sensible.
Finally, a third front is that of the international trade negotiation
strategies of each country or organized region. At a time when the multilateral
system of international trade is in need of a revision (see the conclusions
of the Meeting of Trade Ministers of the G20, held in Mar del Plata, on
September 14), it is worth asking about the new approaches that the trade
and investment agreements in which Argentina and its Latin American partners
participate, including those of Mercosur, will have in the future.
An advisable approach would be precisely procuring ground rules that
encourage different modalities of productive linkages between SMEs of
developing countries and, especially, the niche internationalization of
SMEs. In this regard, it can be assumed that in the next regional and
interregional agreements, especially when developing countries participate,
the emphasis will be placed on mechanisms and rules that can ensure both
the necessary flexibility to navigate a world characterized by strong
change dynamics, and the predictability required by those who run the
risk of investing with the aim of producing goods and providing services
in multiple markets. In this perspective, rules that contemplate different
types of safety valves, which allow adjusting to unforeseen changes in
market behavior, become more relevant (see, among others, the contributions
of Dani Rodrik, in his book "The Globalization Paradox. Democracy
and the Future of the World Economy", W.W.Norton & Company, New
York - London, 2011 and of Krzysztof J. Pelc, in "Making and Bending
International Rules. The Design of Exceptions and Escape Clauses in Trade
Law", Cambridge University Press, New York 2016).
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More