Making Global Trade Frictionless. Empowering People and Businesses to Connect

Transcription

1 Empowering People and Businesses to Connect

2 Foreword In September last year, I had the opportunity to talk to the World Trade Organisation at the 2012 Public Forum. This was a chance for me to present ebay s vision of connected world commerce and share insights from economic research we have commissioned. Our research confirms the very belief ebay is founded upon: there is tremendous potential for economic growth where technology enables trade to take place across borders. However, this potential is not yet fully utilized. We learn from talking to sellers using the ebay marketplace that most of them want to reach and transact with customers across borders. But we also hear about practical, administrative and legal concerns that hold them back. So while I could share with the WTO a very optimistic outlook of a world where businesses of all sizes and countries at all stages of development are able to participate in the global economy, it was also my task to highlight the urgency of simplifying trade practices. To that end, I promised Director-General Pascal Lamy a list of the key trade barriers that webenabled businesses face. This report is that list and a bit more. You find a description of the key frictions that exist in today s global trade as well as our suggestions on what could be done to reduce those frictions. You find tables and graphs presenting the results of economic research and surveys. And you find case studies as illustration. The report reiterates ebay s commitment to work with the WTO to make global trade frictionless. Let s together empower people and businesses to connect. Nicholas Staheyeff Vice Chairman & CFO ebay International April

3 Making global trade frictionless The Internet and technology are revolutionising international trade: solutions such as secure payment systems, discovery and trust-building tools, and mobile technology empower firms of all sizes. We are entering a new era of globalisation where the smallest traders have access to the global market. (See our EU and US reports.) Research into ebay cross-border transaction data demonstrates how transformational technology-enabled webbased commerce can be, and the benefits and opportunities that accrue to: Consumers in terms of welfare and real income increases Small businesses due to faster growth and greater chances of survival Countries especially developing ones via gains in real GDP Yet numerous trade obstacles or frictions are impeding the full potential of web-enabled commerce. ebay is particularly aware of the effect that these frictions have upon small online traders and is continually seeking innovative solutions to address them. The WTO has a crucial role to play and the purpose of this note is to highlight the areas where we believe it can help. ebay welcomes the progress that has been made on both the trade facilitation negotiations and the recent attempts to reinvigorate the WTO Work Programme on Electronic Commerce in particular the decision taken at the 2011 WTO Ministerial Conference to examine access to electronic commerce by micro, small and medium sized enterprises. We look forward to the Bali Ministerial Meeting in December as an opportunity to make further progress. The list of barriers / frictions provided below is a contribution to the linked e-commerce and trade facilitation agendas. Three categories of frictions are provided: customs, shipping, and legal & transparency. In each case, the problem is defined and supported with evidence from ebay buyers and sellers. Most of our examples come from sellers in our more developed markets. This is natural as they are more numerous, generally trade at higher levels, and tend to have been in trading existence longer. In each category, we offer our proposed solutions on how the frictions can be addressed. ebay would welcome the opportunity to engage further with WTO members in this area, and to provide additional information that would help the to address the obstacles identified. 3

4 Customs Frictions Customs complexity that increases administrative burdens and leads to delivery delays. Responses by 67 German sellers on ebay to a 2012 Questionnaire showed that 57% consider customs issues to be among their most burdensome regulatory challenges, with 46% attributing the burden directly to controls and formalities. One of the sellers called for an initiative for worldwide basic rules for internet trade. Blue Water Sports, a multichannel online retailer of sports equipment with 10 employees, serves 88 countries from the UK. The expectation in 2013 is for over 50% of sales to come from overseas markets. Selling internationally is key to our survival in the current economic climate, says Director Adam Mackay. The experience of Blue Water Sports is that customs processes and administration is a key barrier to trading outside of the EU. Mackay calls for it to be targeted for improvement. A 2013 Report by the World Economic Forum similarly stressed the disproportionate impact on small businesses resulting customs procedures, such as clearance delays and administrative burdens. Also a recent survey by the European Commission among micro, small and medium sized companies identifies customs control and formalities among the top three most burdensome policy areas. Too low de minimis levels coupled with unexpected duties increase costs unnecessarily. The current de minimis levels or customs relief thresholds i.e. the monetary level below which an importer is exempted from customs duty and paperwork requirements is at very low levels in many countries. The low de minimis level creates barriers for small, technology-empowered businesses to access what would otherwise be a lower cost global supply chain. It also significantly increases the cost of goods for consumers. Both in the EU and the US, the de minimis level, or customs relief threshold, is inconsistent with policies allowing higher thresholds for travellers who import merchandise in their luggage. A particularly unhappy Buyer experienced a combination of both customs inefficiencies and unexpected fees. After purchasing a suit from a Korean seller for delivery to Belgium, the Buyer was informed by the Belgian postal service that the suit had been retained due to a missing invoice. While the Seller insisted that the invoice had been included, a copy was rapidly provided. It took a further 19 days for the suit to be released and delivered. As well as the delay in processing, the Buyer was required to pay a large customs administration fee. Such experiences act as a deterrent to participation in e-commerce. A survey by FreshMinds with 869 of the top 10,000 ebay sellers in Germany and 759 of the top 5000 in France revealed that 73% of the German and 52% of the French respondents considered tariffs and customs duties to be a significant barrier to trade outside of the EU. 4

5 What can be done? A number of countries operate Trusted Trader ( Authorized Economic Operators, AEO) programs to ensure a balance between secure and facilitated trade flows. Often there is very little information available on the uptake and functioning of these programs, and in particular on whether micro and small businesses (MSB) are using them. To the extent that MSBs do not want to become AEOs, we recommend exploring alternatives that would have the effect of linking MSBs to AEO programs (and the WCO SAFE Framework of Standards) e.g. granting equivalent trade facilitation through the use of intermediary AEOs. Web-enabled exporting MSBs have a very different risk profile to large corporations. Our research shows that, compared to traditional firms, they export to several countries and they trade in several product categories. In addition, the export pattern of web-enabled small traders is generally infrequent. We need to explore new types of data and data sources (including corporate sources) to inform risk assessment as well as compliance with AEO criteria. The WTO could be the much-needed forum for driving innovation in trade facilitation for micro and small businesses in electronic commerce. For example, the WTO could hold a symposium (similar to the workshop on e-commerce and development on 8-9 April) on flexible solutions to enable MSBs to benefit from AEO programs. The WTO could also set up a Task Force dedicated to trade facilitation for MSBs engaged in electronic commerce. Priorities would be innovation in the way MSBs can be linked to AEO programs and in risk management (assessment and profiling) The WTO should work for harmonized de minimis levels set at an appropriate level so as to reduce customs burdens and improve access to the global supply chain. An increase in de minimis thresholds would generate net savings to industries that utilize the express delivery industries, break down barriers to access to low-cost goods for consumers as retailers increasingly integrate online and mobile services into their business models, and overall increase trade. As a starting point for setting an appropriate level, in the US, ebay Inc. supports a bill that would increase the US de minimis level to $1,000. 5

6 Shipping Frictions Shipping in small volumes means that exporting is disproportionately costly for smaller firms. Andreas Voswinckel, founder of German trader LIMAL, which employs 80 people and sells everything from electronics to home and garden equipment on online marketplaces, notes that: A shipment from Cologne to Brussels is three times more than from Hamburg to Munich yet the distance is three times lower. See his testimonial here. The 2012 FreshMinds Survey also found that 72% of German sellers and 78% of French sellers considered high costs of international shipping to be a significant trade barrier. Inconsistent quality of shipping and delivery services, leading to a lack of trust. Consumers often don t trust current parcel delivery systems. They will only buy a product from their own country, out of fear that their parcel may be lost, and there can be long time delays involved in cross-border trade even within an integrated market such as the EU. As Andreas Müller, founder of Deltatecc, a German SME selling electronics on multiple online platforms, including ebay, Amazon and Deltatecc s website explains: Currently we do more than 95% of our business within Germany, and though we d like to grow our business, current legal barriers, and especially shipping barriers, make it challenging for us to do so. A package which may take days to reach a customer in France, located only 200 kilometres across the border, will reach a customer in Hamburg, located 600 kilometres away, the next day. Müller points out that At least 90% of the time a parcel will reach a German customer after only 24 hours, making it very difficult for foreign sellers to compete. Again, the FreshMinds Survey revealed that 49% of German and 47% of French respondents find poor international shipping services to be a significant obstacle to cross-border trade. What can be done? Voswinckel at LIMAL argues that: Each country needs a hub for returns. We cannot afford to treat each consumer differently based on their country. We must give the consumer the feeling he/she is buying from within their own country. We also recommend initiatives to develop partnerships between postal operators and express carriers in order to provide: end-to-end tracking; standardised return solutions; and affordable, sufficiently fast and reliable services. Infrastructure development in remote and poorer areas. 6

7 Legal & Transparency Frictions Complex VAT regimes. Of the 67 German sellers responding to the 2012 Questionnaire, 48% consider VAT requirements to be one of their most burdensome regulatory challenges. Respondents to the European Commission s survey rate VAT among the top three areas where EU policy is most burdensome. The complexity of VAT calculations requires sellers to spend considerable money on IT systems to archive and report on sales and invest time in training and implementation. Adam MacKay, Director of Blue Water Sports: As our sales into other EU countries grow we will need to register in other countries and adopt multiple VAT rates, rules and actively monitor sales against VAT registration threshold. This increased obligation has the potential to discourage us from expanding further in the EU. See here. Insufficient transparency about consumer rights, and inadequate mechanisms for dealing with consumertrader disputes. The FreshMinds Survey showed that over half of the German respondents think that the multiplicity of different legal and regulatory regimes is a significant trade barrier, and 31% point to lack of trust in overseas selling as a significant barrier (ahead of demand). 61% of the respondents to our 2012 Questionnaire said that the rules for safe shopping (including distance selling) are among their biggest regulatory burdens; 40% point to legal redress and settlement of disputes; while one Seller complained that: The laws for online trading are still at the lowest level. In the experience of Blue Water Sports, serving customers in 88 countries worldwide, differing consumer rights legislation is a very top barrier to trade outside of the EU. Distribution networks that restrict web-based, commercial opportunities impacting SMEs in particular. A 2009 survey of UK ebay sellers revealed that half of the surveyed 400 sellers had experienced pressure from manufacturers/suppliers aimed at restricting their sales online. Recent competition law decisions in France (against Bang & Olufsen and Pierre Fabre), and on-going German investigations of sporting goods manufacturers, demonstrate that restrictions on distributors use of the Internet and other new formats remain common. Andreas Schmid, managing director of Sportsprofi (a sporting goods retailer) explains that: Different big manufacturers have prohibited us to sell on ebay or Amazon. This meant that over a short period of time nearly half of our revenues collapsed. This led to a lack of financial liquidity. We had to react and requested the opening of insolvency procedures so that we can get the support to restructure our business and put it on a new basis. See here. As of 1 January 2013, distributors of Adidas products will only be allowed to supply to customers in the EEA (European Economic Area) and Switzerland. That means that the Adidas distributors would no longer be allowed to supply customers in the Balkan states, Russia, Turkey, Asia and the USA. Nike and Asics are following suit. See here. 7

8 Uncertainty about legal exposure when using machine translation Online translation presents an opportunity to reduce the language barriers that separate sellers and buyers in distant markets a problem that particularly affects small firms that do not have the resources to make translations themselves. As a UK seller explains: ebay translating our listings would help us a lot. We don t have the manpower to do that. Yet the question of legal exposure remains a strong concern. The same seller poses the question: Will ebay take the hit if they mistranslate something and we end up in a dispute? Different rules and regulations for mobile payments that affect whether a product can be purchased via a mobile payment system. What can be done? One-stop-shop solutions for VAT payment and procedures to help both consumers and firms overcome the difficulty of dealing with foreign tax authorities. For example, as of 1 January 2015, EU and non-eu businesses providing digital services to final consumers in the EU will use a web portal in the EU Member State in which they are identified to declare the VAT due in the Member State of their customer. Registration, payment and reporting will be handled through the tax administration of that Member State. This type of solution should not be limited to digital services but also cover physical goods traded online. VAT registration thresholds must not discourage exporting by small businesses. The WTO should work for harmonized thresholds at a level high enough so as to not cause unnecessary administrative barriers for exporting small businesses. As an example, the EU should limit itself to one threshold (today, it is EUR 100,000) without an optional special threshold (today, EU Member States which fear that the general threshold might cause serious distortion of competition may limit the threshold to EUR 35,000). Online one-stop-shops for dispute resolution consisting of a single contact point in a country and an online process for filing complaints and solving disputes. Adam Mackay of Blue Water Sports: Clear and simple advice on cross-border trade needs to be made available to both retailers targeting the EU and EU consumers so that obligations and responsibilities are understood. Enforcement of competition rules and/or unfair trading laws to prevent distribution agreements between suppliers and retailers that restrict or forbid retailers use of the Internet and modern distribution formats, such as online platforms. Certainty about legal exposure when using machine translation. Unified, technology-neutral, rules and regulations governing direct operators to facilitate more efficient mobile payment systems, and accessible information on consumer rights through innovative applications. When asked whether it would be preferable for governments to focus on removing obstacles to business, or be more active in promoting certain types of small business, one seller responded firmly: Promotion [is] not needed, [and] regarded as a waste of government money. Instead remove obstacles! 8

9 Data Surveys Case Studies Empowering People and Businesses to Connect 9

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16 Case Study: LIMAL Employing 80 people Trading in electronics, home & garden and fashion Ten years ago, Andreas Voswinckel was approached by a large corporation that wanted to sell their surplus refurbished inventory, through a controlled sales channel that was not their own. He immediately saw an opportunity and decided to start his own company, which would fulfill needs like this one. Starting in Germany, LIMAL today has subsidiaries across Europe the UK, the Czech Republic, Poland and Slovakia and is looking to start up businesses in other countries such as France. Andreas Voswinckel, founder of Limal LIMAL currently faces three problems in the area of cross-border parcel delivery: Trust consumers don t trust current parcel delivery systems and will buy a product from their own country out of fear that their parcel might be lost; Time consumers have high expectations and current systems are often too slow; Costs even if a seller has a competitive advantage with the price of their item, the shipping cost is often so high that it diminishes any such advantage. Even though on paper the European Union seems to give us many advantages to foster trade, the reality is actually quite different. We are finding solutions to language barriers, to payment barriers, with systems like PayPal, yet shipping remains a problem. Andreas Voswinckel, founder of Limal See: 16

17 Case Study: Blue Water Sports Employing 10 people Trading in sports equipment Serving customers in 88 countries worldwide from the UK Product listings translated into 3 languages Transactions accepted in 4 different currencies Business growth achieved through: Adam Mackay, Director, Blue Water Sports Increasing international sales expectation is for over 50% of sales to come from overseas markets; Increasing product range - 20,000 unique products are currently offered for sale, compared to 800 products in Key barriers for trading outside of the EU: Customs processes and administration; Differing consumer rights legislation and consumer expectations. Selling internationally is key to our survival in the current economic climate. If we had failed to expand internationally our business would no longer be operating. Adam Mackay, Director, Blue Water Sports See: W5Uk0FgI7YxD367bpSg/pub 17

18 Case Study: Deltatec Employing 50 people Trading in electronics and household goods Currently we do more than 95% of our business within Germany, and though we d like to grow our business, current legal barriers, and especially shipping barriers, make it challenging for us to do so. When various laws and shipping issues become more streamlined, SMEs will have a better chance to grow. Andreas Müller, founder of Deltatec Case Study: SportsProfi Trading in sporting goods Different big manufacturers have prohibited us to sell on ebay or Amazon. This meant that over a short period of time nearly half of our revenues collapsed. This led to a lack of financial liquidity. We had to react and requested the opening of insolvency procedures so that we can get the support to restructure our business and put it on a new basis. Andreas Schmid, Managing Director Sportsprofi See: nethaendler-sportsprofi-muss-insolvenzantrag-stellen.html 18

19 Talking trade with ebay sellers January UK sellers and 3 German sellers 6 sell within the EU: 4 to Australia, 5 to the US, & 4 to other countries. Findings: Some sellers have a real appetite to grow their business and actively pursue cross border sales as a way to increase sales volumes, margins and achieve overall business growth. A challenging UK economy makes international selling a particularly attractive option, especially for businesses who retail smaller items that are easier to ship. There was evidence that other sellers had stumbled into overseas trade, often in response to overseas demand for niche products like sought-after comics and lego pieces. Other sellers were fearful of cross border trade due to the perceived complexities and additional expense involved. High shipping costs were highlighted as a key factor in steering clear of international trade. Sellers were also concerned about language barriers and translation issues. While Google Translate can help to support overseas transactions, sellers recognised that this method of translation is not always perfect. Other factors that cause apprehension amongst sellers included: a) difficulties and expense involved in managing returns; b) time delays in communications; c) prohibitive costs of covering warranties and insurances. 19