E-Commerce the Anti-Trade Antidote?

AAEI's Rowden suggests growth of e-commerce could redefine the public's and politicians' view of international trade.

By: Eric Kulisch
Photo: Rido/Shutterstock
   Digital commerce has become so ubiquitous in people’s lives that it could serve as the means for changing negative attitudes toward trade, says Marianne Rowden, president of the American Association of Exporters and Importers.
   The perception of trade as a jobs destroyer in part helped catapult Donald Trump to the presidency and the same message of populism is spreading in Europe and other parts of the world. The strong populist movement in the United States scuttled the Trans-Pacific Partnership free trade agreement between a dozen Pacific Rim countries, while populism also contributed to Great Britain’s vote to leave the European Common Market.
   These major shifts place into question what type of deals governments can make to further liberalize trade and the free movement of capital.
   Rowden said e-commerce represents an opportunity to generate support for trade, which has been bashed by many as only serving large corporations and elites.
   “I believe e-commerce gives us the best opportunity to rebuild political support for global trade because its benefits will be broadly dispersed and will add more inclusive trade to micro- and small/medium-sized entities around the world,” Rowden said in an early October speech to an air cargo industry summit in Washington.
   Consumers generally aren’t aware of how trade occurs or how closely it is connected to their lives. Most assume there is some invisible market hand that brings cheap goods from other countries to their store shelves. They generally don’t check labels for the country of origin and don’t necessarily associate products they buy as imports. And most aren’t aware that about 14 percent of GDP is export-oriented and that exports support millions of jobs.
   But when a company closes a factory and moves production overseas, workers directly feel the effect of trade in a negative way and the news is publicized in headlines about losing out to foreign competition.
   People who make online, or mobile, purchases are more directly involved with the shipment. And if the order is with an international e-tailer, the buyer understands the merchandise is coming from another country, sees any customs duties on the purchase order at time of payment and can track the shipment’s progress through online tools or notifications. 
   If import duties are high, or orders they want right away are delayed because of customs issues and other regulatory red tape at the border, shoppers might begin to realize the benefits of trade agreements designed to simplify cross-border business. That could make it easier for politicians to negotiate trade deals again, Rowden suggested.
  Trade advocates also need to relate to ordinary people by talking in personal terms rather than using economic policy and statistics to make the case for facilitating imports and exports, AAEI’s president said in a follow-up interview with the Adam Smith Project.
   “People who are anti-trade talk in anecdotes,” she said. “When somebody from eBay gives a presentation, what they always talk about is a woman from the developing world who is able to feed her family because she makes such and such and she sells it on eBay. That is incredibly powerful from a political and public relations point of view. And they have perfected it.”
   eBay has about 165 million active buyers, and that number is expected to grow as the internet more fully penetrates the developing world.
   More than 90 percent of eBay sellers, most of whom are micro mom-and-pop businesses, export because eBay takes care of much of the complexity with systems and support services. 
   “The current regime is designed with the legal presumption that the importer or exporter knows all the relevant trade laws,” Rowden said. “I think we are going to have to flip that on its head and presume they don’t know. So then the question is: what obligation are we going to put on them? And I think the key is data."
    The government will have to say to online retailers, “you must have accurate data and then reallocate the regulatory risk to the e-commerce platforms a little bit and the air courier services a little bit. We’re going to have to run the compliance in the background,” so people don’t get discouraged from engaging international markets, she said.
   Express carriers such as FedEx, UPS and DHL, as well as some third-party logistics providers, do offer bundled services for larger customers. Amazon, Alibaba, eBay and others take care of many logistics issues for small shippers.
   The e-commerce revolution is also changing the way traditional companies do business and forcing customs administrations to adapt to the new trade flows and form factors, since e-commerce shipments tend to move as individual parcels rather than large containers with millions of dollars of goods.
    Rowden, a veteran trade attorney, said the challenge for regulators is how to deal with a safety and security risk that is diffuse, and how to facilitate trade that is irregular compared to goods movement through corporate supply chains that tends to be repetitive. 
   “We need to come up with a new framework and definition of what the legal responsibilities are for a U.S. importer and exporter,” because it’s difficult to apply the Known Shipper requirement to millions of people who are businesses unto themselves, she said. [In the United States, air carriers and freight forwarders must qualify their clients as Known Shippers through various security checks before they can do business with them.]
   AAEI, which traditionally has represented companies with large business-to-business import and export operations, is adapting to the new world of digital commerce.
   The association is starting to get e-commerce companies as members, convened an e-commerce working group open to non-members to assess trade needs, and is drafting a strategy document on how to facilitate e-commerce through trade simplification, Rowden said.    The World Customs Organization is also trying to help member countries better process e-commerce shipments. It has established an e-commerce working group co-chaired by Rowden and conducted an inventory of different business and regulatory models around the world, Rowden said.
   “I truly believe e-commerce is moving so fast and the e-commerce platforms are so large now, governments can’t kill it with regulations and taxes. It just goes to show the maxim, ‘if you want something to grow, don’t tax it,’ she said. “These companies aren’t going away. And customer demand now is driving that growth.”