E-commerce is revolutionising, raising new challenges on governance, regulation and traditional international rules. Time is ripe for a stakeholder-based World e-Trade Platform (eWTP) to propose new standards and incubate rules, writes Luigi Gambardella
Luigi Gambardella is President of ChinaEU
Who has not heard of (or participated in) the bitcoin revolution that is changing fundamentally the international financial transactions sector? Other sectors are on the verge of similar revolutions. Take for example e-commerce that starts revolutionising the retailing value chain. E-commerce opens tremendous opportunities for revenue growth through cost reduction and reach of millions of customers.
According to IDATE’s DigiWorld Yearbook 2016, the global e-commerce market reached almost €1.42 trillion last year. This number is expected to exceed €2.1 trillion by 2019. E-commerce is most developed in the Asia/Pacific area, where e-commerce market was good for €539.6 billion (38 % of the global turnover) in 2015, while the EU-28 and USA e-commerce markets reached €390.2 billion and €379.4 billion respectively.
E-commerce is revolutionising the retailing industry because it enables undertakings, and in particular SMEs, to bypass the traditional intermediaries, the major distribution chains, as well as to reach clients beyond their traditional footprint.
At the same time, these changes have raised many new challenges on governance, regulation and traditional international rules. Close-door intergovernmental negotiations in the framework of the WTO and of Free Trade Agreements such as the TTIP are likely to favour the interests of the incumbent intermediaries in the retail industry, who have the means to lobby the negotiating parties, at the expense of the e-commerce new entrants.
But is there an alternative? Yes, in preparation of the G20 that will take place in China, the business associations of the countries concerned are preparing their wishlist that they will submit to the world leaders.
Prominent on the list is the proposal from Jack Ma to establish a World e-Trade Platform (eWTP). eWTP will be a private sector-led, international platform, open to all stakeholders. Stakeholders will not only have the opportunity to share their views on the latest trends, main problems, business practices, their success stories in the internet economy, but also to propose new industry standards and incubate rules.
Self-regulation is key for the success of e-Trade worldwide. Having to comply with hundreds of different consumer legislations and legal frameworks in general is not an option.
Jack Ma’s initiative has received wide attention from both private and public sectors in China and abroad.
How will eWTP benefit you?
eWTP will have four pillars or priorities: SMEs, youth, globalised spending and inclusive trade.
Nowadays SMEs are facing numerous obstacles stifling their expansion, such us limited access to information and high cost of logistics.
According to the World SME Competitiveness Outlook 2015 of ITC, logistic costs for small businesses with annual revenue of less than $5million can be as high as 42% of its revenue, while the equivalent for businesses with annual revenue of $500milllion and above is less than 15%, in particular in the case of cross-border e-Trade.
According to B2C e-Trade market report published by Accenture and the Alibaba Group, the value of the global cross-border B2C market will grow from $230 billion in 2014 to $994 billion in 2020, accounting for 29.3% of the global B2C e-Trade market and 13.9% of global consumer goods trade.
But the eWTP should not only defend the concept of free trade and free flow, and also explain what are the benefits for the consumers to keep the market open and competitive.
In order to boost the development of cross-border e-commerce, eWTP should advocate regulatory reforms, starting in an initial stage with three main areas, also covered by the Digital Single Market plan from the European Commission:
- Preventing discrimination based on nationality or place of residence
National governments should apply the principle of non-discrimination not only between residents but also regarding relations with clients living outside of their territory. For example, if traders apply price differences, these differences should only reflect possible differences in delivery costs. When a consumer enters a shop in a foreign country, the shop owner does not ask for the consumer’s ID in order to accept a purchase or to adjust the price or conditions. But in the online world, consumers are often blocked from accessing offers in other countries, for example by re-routing the consumer back to a country-specific website, or asking to pay with a debit or credit card from a certain country. Such discrimination should be outlawed, if traders do not abolish them voluntarily.
- Making cross-border parcel delivery more affordable and efficient
Consumers and retailers should benefit from affordable deliveries and convenient return options even to and from peripheral regions. Consumers and small businesses complain that problems with parcel delivery, in particular high delivery charges in cross-border shipping, preventing them from selling or buying more in outside its own country. For example, in Europe prices charged by postal operators to deliver a small parcel to another member state are often up to five times higher than domestic prices, without a clear correlation to the actual costs.
- Ensuring the same level of consumer protection by acknowledging self-regulation, thus increasing consumer trust in e-commerce
Global harmonisation is not an option. What we need is more self-regulation. For example, Alibaba increasingly invest resources in adjudication disputes between consumers and the merchants making use of its marketplace. Governments’ role would be to assess from time to time the effectiveness of self-regulation in place and possibly to introduce certification schemes.