The challenges and opportunities of global e-commerce
Consumers aren’t just buying more online these days. Increasingly, they’re buying online from other countries — nearly half of all U.S. shoppers now make purchases from international retailers.
Many countries around the world are recognizing this new trading environment and embracing the vast economic opportunities created by global e-commerce. Unfortunately, there are other countries missing out on the economic activity and jobs as they grapple with the complexities of change.
The private sector has worked tirelessly to help governments understand the policy and regulatory changes required to support their domestic businesses while encouraging small and medium-sized businesses (SMBs) to embrace the opportunities to go global that digital trade provides.
At the 2019 World Economic Forum Annual Meeting in Davos, UPS participated in a panel discussion on next steps for governing digital trade, and our CEO, David Abney, pushed for a “multilateral trading system that creates a level playing field for trade and investment.”
In Davos, a group of 76 countries announced their intention to embark on negotiations to establish an e-commerce framework to set the policy standards for a better business and regulatory environment.
UPS and other multinationals are encouraged by the approach of the governments involved in the effort. They intend to take stock of existing rules, identify gaps and then create new disciplines to enhance — not inhibit — cross-border e-commerce.
Like sliding your smartphone’s power button to “on,” these policy efforts will energize the growth of small business sectors through the creation of this WTO International Digital Economy Agreement (IDEA).
The power boosters
A company no longer needs to be big to be global. There are an estimated 25 to 30 million small- and medium-sized enterprises in the world. They contribute up to 60 percent of total employment and up to 40 percent of national income in emerging economies, according to a World Bank report.
We know that the internet allows for even micro enterprises to sell products and services to consumers across borders. However, their full potential is unrealized if they can’t tap new global markets.
In terms of driving cross-border e-commerce growth — and the ensuing economic benefits — two parties are key to creating the right environment: the private sector and governments.
Private sector growth
Companies have always played a major part in shaping how lawmakers approach e-commerce policies and regulation.
As we seek to clarify and improve upon these trade rules, businesses will have the critical role of sharing their experiences, frustrations and expertise. UPS has a key role because we can share our knowledge of the expectations of both the buyer and the seller in many of these transactions.
On any given day, approximately 3 percent of global GDP is speeding through our network to make it onto those shiny brown trucks and arrive in consumers’ hands within hours. Our aim is to solidify UPS’s position as the largest, fastest, most technology-enabled and responsive company in logistics.
Today, buyers want a global online retail environment that’s easy to navigate and fully transparent — one with the ability to track incoming shipments from pickup to delivery, affordable global shipping options and easy international returns. With these desires met, demand for e-retail grows, the industry flourishes and buyers have more choices.
On the flip side, sellers have their own needs to satisfy international customers to grow international orders: They must show the total “landed cost” of a sale, including localized tax and duty information in the checkout cart.
They also must offer delivery options that balance speed with cost while navigating customs processes at the border. And to retain their customers, sellers rely on real-time shipment tracking, proof of delivery and seamless returns capabilities.
In short, the e-commerce ecosystem that serves the buyers and sellers depends on rules and regulations that foster harmony between both parties and enables data to flow across international borders.
The government’s role
Trade rules are traditionally written for traders who send ocean and air containers, not small parcels.
The significant growth of e-commerce in a short amount of time puts us in uncharted waters, and some governments around the world have sought to restrict its reach. Their concerns focus on:
- The surge in import volume and its impact on staffing of customs officers, as well as the ability to catch illegal and harmful packages.
- New foreign competition for domestic retailers not covered by domestic sales tax or other regimes.
- E-commerce users’ lack of understanding or application of a country’s existing trade rules.
While these concerns are not unfounded, UPS sees them as opportunities for governments to address the process complexities and possible gaps in a manner that still paves the way for e-commerce growth.
As we look at updating trade facilitation policies and regulations for cross-border goods movements, they should simplify the import process for low-value shipments and recognize that the rules for moving ocean containers should not be the same as those for a box with a pair of sneakers.
To that end, here are a handful of practical suggestions governments should examine as bedrock opportunities when creating the new e-commerce policy framework:
- Leverage new technology solutions to reduce administrative burdens and streamline border processes for low-value shipments.
- Simplify and harmonize returns processes, as well as duty and tax drawback procedures.
- Implement simplified VAT processes for imports of low-value goods.
- Provide for electronic submission of customs declarations prior to arrival of goods to allow pre-arrival processing and immediate release at the border.
A new era
The digital economy and e-commerce boom are creating unprecedented opportunities for governments and business to work together to craft an environment that will create jobs and grow global prosperity.
The announcement by the 76 WTO member countries to launch an e-commerce policy framework shows that the time has come for governments to foster — and not impede — the natural evolution of digitally enabled international trade.