Chapter 25 Small and Medium-Sized Enterprises

I. INTRODUCTION.

 

The inclusion of Chapter 25 in the USMCA is significant given that its predecessor, the North American Free Trade Agreement (NAFTA), did not include a chapter specifically dedicated to small and medium-sized enterprises (SMEs). Based on this, and considering the impact SMEs can have on the economy, Chapter 25 and its proper implementation by the three Parties is a significant step toward recognizing the integral role SMEs have in increasing trade and investment in the North American economy.

 

II. EXECUTIVE SUMMARY.

 

Owing to the fundamental role of SMEs in the Parties’ economies, Mexico, the United States and Canada have agreed to cooperate to increase trade and investment by SMEs by promoting, among other items: i) cooperation among the Parties’ small business support infrastructure; ii) collaboration on activities to promote SMEs owned by underrepresented groups; iii) exchanges of information and best practices in areas related to access to capital and credit; and iv) participation in platforms, such as web-based platforms, to share information and best practices to link SMEs with international suppliers, buyers and potential business partners. Furthermore, Chapter 25 provides for the creation of a Committee on SME Issues comprised of government representatives from each Party and sets forth the programs and activities to be carried out by such SME Committee. Lastly, Chapter 25 includes a reference to provisions in other chapters of the USMCA that seek to enhance cooperation among the countries on SME related topics that may be of benefit to SMEs generally.

 

III. LEGAL DISCUSSION.

 

Chapter 25 is divided into several articles, the most significant of which are summarized as follows:

 

Article 25.2:  Cooperation to Increase Trade and Investment Opportunities for SMEs. This article sets forth the principles that will guide the Parties’ cooperation in the creation of an international network to share, among other items, best practices and information to strengthen collaboration among the Parties on activities to promote SMEs owned by underrepresented groups, such as women, minorities and start-ups, and to enhance cooperation for the exchange of information related to access to capital and credit, to support SME participation in government procurement opportunities and to help SMEs adapt to changing market conditions.

 

Article 25.3:  Information Sharing. This article provides that each Party agrees to establish or maintain its own free, publicly accessible website with information regarding the USMCA, including the text of the USMCA, information designed for SMEs, including the provisions in the USMCA that each Party deems relevant to SMEs. Accordingly, a Party’s website should include links to the other Parties’ websites and to its own government agencies providing useful information as to trading, investment and doing business in the respective Party, such as customs, intellectual property, foreign investment and other areas relevant to international trade.

 

Article 25.4: Committee on SME Issues. The USMCA establishes an SME Committee consisting of a governmental representative from each Party. This article sets forth the activities to be performed by the SME Committee, which include, among others:

 

  1. the exchange and discussion of each Party’s experiences and best practices in supporting and assisting SME exporters with respect to training programs, trade education, trade finance and trade facilitation, and establishing good business credentials;
  2. collaboration with other committees, working groups and subsidiary bodies established under the USMCA, and other relevant international bodies to avoid duplication of work programs to identify appropriate opportunities for cooperation to improve the ability of SMEs to engage in trade and investment opportunities.
  3. facilitating the development of programs to assist SMEs to participate and integrate effectively into the Parties’ regional and global supply chains; and
  4. submission of an annual report on the Committee’s activities, with recommendations, to the Commission.

 

The USMCA provides that the Committee will meet at least annually. The Committee is required to collaborate with experts and international donor organizations while performing its programs and activities.

 

Article 25.5:  SME Dialogue. A framework is provided for the establishment of SME Dialogue, involving the private sector, employees, non-government organizations, academic experts, SMEs owned by diverse and under-represented groups and other stakeholders from each Party. The objective of the SME Dialogue is to provide formal input and relevant technical, scientific or other information to government officials on the implementation and further modernization of the USMCA, thus ensuring that SMEs continue to benefit from the Agreement’s terms.

Chapter 25 also sets forth numerous references to articles and other provisions of the USMCA that may be of interest and benefit to SMEs, including those related to origin procedures, government procurement, intellectual property, labor, competitiveness and anticorruption.

  

IV. CONCLUSION.

 

Chapter 25 of the USMCA recognizes the fundamental role of SMEs in the North American economy.  Notably, this is the first time an SME chapter or significant provisions supporting small and medium-sized businesses have been included in a free trade agreement signed by the United States. It is very important for SMEs to carefully review all the USMCA, not just the mechanisms set forth in Chapter 25, in order to understand how the USMCA can increase trade and investment for SMEs across the North American region.  This is especially true given the significant impact SMEs can have on the broader economy.  Also, it is important for SMEs to understand their position as stakeholders in the SME Dialogue and to become active participants in the implementation and further modernization of the USMCA.

 

CONTACT INFORMATION.

 

Daniel Cavazos | dcavazos@ccn-law.com

Tel: (956) 686-5883

Robert M. Barnett | rbarnett@ccn-law.com

Tel: (210) 222-1642

Adrian Salgado | asalgado@ccn-law.com

Tel: (210) 244-0221

Marissa S. Rodriguez | msandoval@ccn-law.com

Tel: (956) 686-5883

Natalie Ceron | nceron@ccn-law.com

Tel: (210) 244-0230

Michelle Romero | mromero@ccn-law.com.mx

Tel: (210) 244-0206

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