E-commerce can make trade more inclusive, but greater coordination is needed

Over 1,500 stakeholders from across the globe met at the first ever cross-border e-commerce conference in Beijing, China from February 9-10, 2018. The goals of the conference were to discuss recent developments, challenges, and opportunities, as well as the enormous potential of digital trade.

Co-hosted by China Customs and the World Customs Organization (WCO), the Global Cross-Border E-commerce Conference featured remarks from key public and private sector voices, such as Yu Guangzhou, Chinese Minister of the General Administration of Customs; and Jack Ma, Founder and Executive Chairman of the Alibaba Group.

Changing the game

Worldwide e-commerce sales reached US$25.3 trillion in 2015 and many of these sales are international. According to a recent report from the United Nations Conference on Trade and Development, 7% of business-to-consumer e-commerce in 2015 crossed national borders, amounting to a total value of around US$189 billion.

Moreover, recent cross-border e-commerce growth in many markets has been nothing short of breathtaking. In China alone last year, e-commerce exports surged 41.6% while imports increased by 116.4%.

The emergence and rapid growth of cross-border e-commerce is all the more exciting because of its potential to make world trade more inclusive. Traditionally, trading over a distance has come with significant costs, limiting the ability of small- and medium-sized enterprises (SMEs) and companies in developing countries to benefit. The Internet, however, has changed the game. Data from eBay for instance shows that SMEs that use on-line platforms are more than five times more likely to export than those in the traditional economy.

A recent Google video competition taking place within the ICC-WTO Small Business Champions initiative challenged SMEs from around the world to show how the Internet had allowed them to trade. The resulting entries, which can be viewed on YouTube, speak volumes as how digital technologies help entrepreneurs connect with clients, promote their products and balance their books.

However, as participants at the Beijing conference made clear, a number of factors are currently limiting the positive potential of cross-border e-commerce.

A lack of global rules

Today’s trade rules largely reflect 20th century commercial patterns: large, containerised shipments made by relatively large companies on a business-to-business basis. It is become increasingly clear though that these rules are not always well-suited to supporting the growth of cross-border e-commerce—especially the kind employed by SMEs—which is typically based around small, high-frequency shipments to consumers.

The lack of consolidation on the multilateral level also means that different countries can have very different rules, some of which can be difficult to decipher. Fragmented national border and import regulations can create burdensome compliance costs and delays mean revenue loss that smaller companies can scarcely afford.

“The rapid pace at which e-commerce is developing and disrupting existing models makes it all the more necessary that stakeholders at the national and international levels form robust partnerships to elaborate common rules and best practices,” said Kunio Mikuriya, WCO Secretary-General.

Part of the reason for this lack of global coordination on e-commerce lies in the concerns of national customs and border administrations. For instance, increasing flows of consignments from new traders, stemming from e-commerce, may stretch the resources of customs administrations that apply onerous physical inspection regimes. Customs and border authorities also may worry that abandoning inspection rates close to 100% will lead to revenue losses or allow in greater amounts of illicit trade.

Customs solutions for the e-commerce age

On display throughout the Global Cross-Border E-commerce Conference—in both keynote speeches and panel discussions—were customs policies that can facilitate e-commerce growth. Risk management measures, for instance, and the use of risk-based selectivity allow customs officials to allocate their limited resources to high-risk areas while increasing the efficiency of the clearance process for legitimate traders.

Certification programmes such as Authorised Economic Operators (AEOs), along with mutual recognition, can also further facilitate the movement of goods by providing a baseline standard of screening and regulation along the supply chain. Guidance on implementing risk management procedures is outlined in the WCO Revised Kyoto Convention while ICC has developed recommendations on implementing AEO programmes.

Other customs policies can help fuel e-commerce even further. A higher de minimis threshold, for example, would save government agencies from expending resources on assessing low value parcels while increasing the incentive for anyone to engage in cross-border e-commerce. SMEs are hurt the most in countries with low de minimis levels because of the disproportionate amount of clearance fees paid for low value shipments.

While a higher de minimis threshold would likely mean customs authorities collect less revenue in the immediate term, studies have shown that government agencies benefit from refocusing public revenue collection energy on more efficient revenue sources rather than a greater quantity of sources—boosting the global economy and creating jobs.

Coordination is key

In the end, it is only through greater cooperation between business, customs authorities and border agencies that can unleash the immense potential that cross-border e-commerce holds for inclusive growth and development.

“ICC and the world business community have an invaluable role in engaging the private sector and developing a consolidated framework for cross-border e-commerce,” Mr Mikuriya said.

In recognising the voice of all stakeholders involved in the e-commerce supply chain, there is greater opportunity to benefit from each perspective and experience, thus contributing to more effective solutions across the board. ICC has long emphasised the importance of customs-business partnerships and commends the WCO for its multistakeholder approach, which brings together representatives from governments, business, international organisations, e-commerce operators and academia.

An inclusive model of dialogue and cooperation will form the foundation of the new global rules that allow e-commerce to propel a more inclusive globalisation of border clearances.