Published 26 February 2020

SME exports and the state's export promotion role

This study is the first of three on the economic effects of the state's efforts to promote SME exports. The report analyzes (i) which companies that become exporters, (ii) which markets they trade with and the role of various trade barriers, (iii) how exports affect business growth, employment and productivity, and (iv) the role that export promotion agencies can play.

SMEs export and what hinders their trade

Among the smallest companies, exporting is rather uncommon, especially in the service sector. The larger the firm, the more likely it is to export, and the greater share of sales. Exporting firms tend to have higher productivity and grow faster than the industry average.
The export journey often begins in the EU and Norway where goods and services can be traded on basically the same conditions as in the domestic market. Many firms stay in the regional market, while others move on to the world market, often to the US, Switzerland and China as the first stops. As far as the market choice is concerned, firms prefer large markets over small, close markets over distant, and low trade barriers over high.

According to a company survey conducted by the National Board of Trade with the help of Statistics Sweden, the EU's common market is functioning quite well. However, the survey shows that some barriers to trade remain, such as finding out what the rules are for selling different goods and services.

Other problems mentioned in the interview responses are linked to the service trade and the public procurement. In both cases, one-sixth of the respondents argued that they do not have the same opportunities to compete as domestic firms. Yet another area that draws many complaint is the clearance of value added taxes in the intra-EU trade.

Similar problems were raised by the business community in the trade with third countries, but to a larger degree. In addition, there were complaints about high import duties and red tape at the border, issues that are not present on the common market of the EU.

The role of export promotion agencies

The objective of export promotion is to lower the thresholds in foreign trade to get more companies to enter the world market and create jobs and growth in Sweden. The tasks can be divided into two parts:

The first task is to tear down as many trade barriers as possible in the world market. This task rests with the government with support from the National Board of Trade. Since Sweden is a member of the EU, it cannot act independently but has to do so via the EU. If the world market would become as open as the common market of the EU, most of the problems would be solved for the export industry.

The second task is to help businesses deal with the barriers that cannot be removed in the short run, which is a task for all export promotion agencies. The assistance could take the form of export education, specific market advice, financing, export credit guarantees and other services that are not available on commercial terms.