e-commerce

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.

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.

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.

An Obsession with Building Trade Platforms

An Obsession with Building Trade Platforms

My bleak assessment of the odds of government-led platforms does not mean, however, that governments have no role to play in encouraging the growth of digital trade in their domestic economies. Rather than invest money in building flawed platforms, governments need to focus with laser-like intensity on building the right domestic infrastructure and policy settings to support digital trade. For many governments, this starts with clear knowledge and understanding of what the digital economy looks like today and what sort of support will be needed for the future. Officials need to remember that firms deliver both goods and services online and build systems to support both types of companies. Another default decision made by many governments seems to be to insist that individuals be given coding skills. If companies are going to be competing online, it makes sense to officials that firms need the ability to craft webpages, apps, and other complicated pieces of programming. While this is not entirely wrong, for most smaller firms today, there are already ample free or low-cost solutions that solve most basic needs for companies moving online. Many firms no longer need a website at all, but can set up virtual storefronts on a range of platforms.

Dueling Views on Trade on Display This Week

Dueling Views on Trade on Display This Week

The latest Trump tariff threat, of course, is designed to facilitate conclusion of the trade negotiations.  Talks are scheduled for Washington DC on Thursday.  It is certainly possible that the impeding escalation of tariffs will concentrate minds once more, leading to a very speedy conclusion of talks.  Or not.  Either way, the coming few days promise more drama on the US-China front than trade watchers have seen in months-- a major escalation of the trade war will happen on Friday or a truce. A second notable set of events takes place early next week that will also help shape global trade for the future.  Dueling meetings are scheduled for Geneva and New Delhi for May 13-15.  The former is the setting for the first round of talks of what is called the “plurilateral” on e-commerce in the World Trade Organization (WTO).  Not all WTO member countries have agreed to join negotiations on the topic, so only a subset of members (74 so far) will sit down to start.