digital trade

MSME Threshold for E-Commerce Shipping

MSME Threshold for E-Commerce Shipping

The good news continues: your soap is sold in bar form. This is important, as liquids are prohibited items. Bar soap is unlikely to be found on lists of goods not allowed to be sent to certain markets (although you should be cautious if sending to Australia, which has a long list of restrictions to maintain agricultural quarantines). But then you face another serious and unexpected problem. There is a declaration form that needs to be filled out for the package. The requested information can include your sender IOSS number (for the EU) or the GST/VAT number of your recipient. The form asks for HS Codes and country of origin. You make soap. You have no idea what these questions even mean to you and you quickly have to find someone who can help. You might get incredibly lucky and find a post office staff person who can unravel these questions. Or not. In some markets, there are either written guides or help sheets built into the websites of the postal service. In some locations, there are government officials or business association staff who can provide some assistance. But in many instances, you are on your own to sort this out. If you get your information wrong, it can be a serious problem. Once the details are filled in, the package is ready for shipment. The costs shown on the invoice reflects the shipping charges and may need immediate payment. Flush with success, you prepare a second package. However, this time you are suddenly presented with a different set of bills. In addition to shipping charges, you are getting charged import duties and taxes. These import duties on soap could be as high as 25-40% and the taxes can easily be another 10%. Plus the customs forms are much more complicated.

The WTO: Less Than Half a Glass

The WTO: Less Than Half a Glass

Think about that again for a moment—the World Trade Organization, in 2022, continues to have no explicit rules related to the digital economy and no obvious path to getting something in place either. [The side discussions on electronic commerce did not yield any announcements from participating countries.] Members did agree to start talking about doing something to reform the organization. They have “reaffirmed” the foundational principles and agreed to work towards a solution to a specific challenge on dispute settlement in two more years. Given this dispiriting list of outcomes, why were trade watchers mostly glowingly optimistic? Two reasons come to mind. First, most trade watchers have spent a lifetime building up this institution in one way or another. It’s very hard to witness the slow extinguishment of a dream, passion project, and vocation. Second, because the WTO matters and watching it flounder is genuinely a problem. Given the importance of the global trade body to businesses and consumers, it can feel particularly wrong to kick the organization when it is down. After all, why continue to draw attention to limited outcomes and why not recast the latest outcomes as a historic achievement that highlights continued relevance? It is precisely because a functioning WTO matters so much that it is important to be honest about its pathway and prospects for the future. Sugarcoating a weak package of outcomes doesn’t help focus attention on why the institution has failed to make headway or why members cannot agree on doing important things. Let’s just review for a moment why a functioning WTO is so critical to all of us. It provides a common set of rules and principles that have allowed trade to flourish. It’s like oxygen for the trading system. Extinguish the air and everyone will start to suffer. Without the WTO in place, governments would be free to randomly reset their trade rules on a regular basis. Tariffs could go up or down without notice. Customs checks at the borders could suddenly focus on allowing goods from some locations to pass easily while blocking everything from other firms. It would drive up costs dramatically and the burden would fall most heavily, as always, on the smallest firms.

Repost: Impeding Collapse of a Key Digital Trade Rule

Repost: Impeding Collapse of a Key Digital Trade Rule

But what has not been noticed is that the WTO ministerial [now set to start on June 12, 2022] is likely to spell the end to a critically important digital trade rule. It goes by the innocuous name of the “customs moratorium on electronic transmissions.” It may be that the bland and unfamiliar phrasing has not captured imaginations. Or it may be that this provision has seemed to be under threat for so long that most have forgotten about it. Covid disruptions have not helped anyone focus on much. But now odds are high that the moratorium will actually fall at MC12. Companies and consumers will have an unexpected and potentially rude awakening to this apparently minor rule that did not ever get the support it needed. The WTO has famously few provisions that directly apply to digital trade. After all, the organization was launched in 1995 at the dawn of the internet era. Subsequent efforts to negotiate new rules for the institution have mostly foundered.

Congressional Testimony: Trade Policies in Asia

Congressional Testimony: Trade Policies in Asia

The trade and economic landscape in Asia is rapidly evolving. While there are many activities that I could mention, I will focus my testimony today on four regional trade arrangements: the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP); the Regional Comprehensive Economic Partnership (RCEP); a set of digital trade deals known as DEPA or DEAs; and the upcoming American-led Indo-Pacific Economic Framework (IPEF). I will attempt to explain how and why these agreements matter for Asia and describe some of the implications of this evolving regional architecture for the United States. I will conclude with a few brief suggestions about how craft an IPEF that best fits into a complex economic landscape. Let me begin with the CPTPP. The CPTPP came into force in late December 2018 and now has eight active members: Australia, Canada, Japan, Mexico, New Zealand, Peru, Singapore, and Vietnam. The UK is in the middle of accession talks and hopes to be part of the group by the end of this year. Three additional formal letters of application were received last fall, from China, Taiwan, and Ecuador. South Korea’s outgoing government pledged to submit an accession request this month. There are three important items on the CPTPP agenda for this year: members must review the agreement; conclude accession negotiations with the UK; and decide on a process for addressing pending applications.

Digital Trade Supports Economic Development

Digital Trade Supports Economic Development

Perceiving the digital sphere as winner-takes-all leads to an incorrect assessment of the market forces shaping the digital economy and suboptimal policy responses. In particular, the suggestion that developing countries should enact technology transfer, data localization, and internet filtering requirements, or force the breakup of large e-commerce firms, ignores both the benefits of these platforms to development and the potential consequences of pushing platforms out of small markets. Instead, governments should focus on creating an enabling environment for MSMEs to pursue digitalization, enacting regulation that encourages firms to leverage digital tools for growth and development. For MSMEs, there are several key reasons participating in digital platforms can beneficial. Firstly, digital platforms increase visibility for participating MSMEs, as large platforms are accessed by large numbers of customers. Participation in digital platforms contributes to lowering operational costs, as economies of scale and their marketing abilities reduce the burden of logistics, payment methods, and marketing on individual firms participating in the platform. For example, a small firm may struggle to navigate customs rules when engaging in cross-border trade, adding risk and increasing costs. E-commerce platforms with sufficient scale and expertise can easily navigate the complexities of cross-border trade, reducing costs for participating MSMEs. This has enabled the emergence a growing number of ‘micro-multinationals’ in the Asia-Pacific region, wherein small business engages in cross-border e-commerce. A further benefit in participating in platforms for MSMEs is access to their analytics capabilities and optimization programs. Using data analytics to collect information about customer preferences, MSMEs can leverage the platform’s data to optimize offerings to customers. Digital platforms, like any other business, are profit-seeking. But this does not mean that this profit-seeking behavior functions to stifle MSME growth or development. Instead, the opposite is true. Platforms tend to push capacity-building efforts to enable MSMEs to participate in their platforms, unlocking new growth opportunities. For example, Meta, Amazon, Gojek, and Flipkart offer training, advisory services, and more to MSMEs to boost capacities to participate in their platforms. From this arrangement, the companies benefit from an increased number of suppliers, and MSMEs unlock new growth opportunities, increasing access customer pools and addressing key barriers to growth.