Wednesday, February 15, 2017

Cross-Border Ecommerce Growing at 25% Per Year

E-commerce has experienced exponential growth rates over the past few years and shows no signs of slowing down anytime soon. The growth of online retail giants like Amazon, Alibaba and Walmart has made online trading and consumerism commonplace in recent years. This increase in demand for online goods has sparked debate among policy makers as the growth of the online retail market continues to challenge conventional trade regulations. Policy makers, as well as politicians, must rethink their approach to trade regulation with the advent of online consumerism and retail. 
Populism has been on the rise lately as many countries have adopted political outlooks that tend to favor policies that emphasize domestic economic growth over globalism and free trade. Advocates of free trade would argue that protectionist policies, which would likely be instituted under a populist political agenda, would hurt economic growth and consumers in the long-run. According to a recent report published by DHL in 2016, the increases seen in cross-border e-commerce trading show that the top reasons consumers are looking abroad for their products are lower prices, brand loyalty, trustworthiness, greater variety of products, and better buyer terms/conditions (p.11). Despite the benefits e-commerce can yield for consumers, policy makers and governments may be inclined to regulate and tax online purchases from foreign companies in accordance with populist movement ideologies; believing that regulating their intake of foreign products (i.e. e-commerce) will boost demand for domestic ones. This could potentially pose a threat to the vibrant growth online retailers have experienced under looser cross-border shipping laws, and may signal the end of the lower prices and benefits consumers have enjoyed through e-commerce.     
The recent rise of populist movements across Europe provides an example of how e-commerce can be influenced and affected by the regulatory environment of trade, particularly with regards to cross-border transactions. Many were shocked when Britain decided to succeed from the European Union (commonly referred to as the “Brexit”) following a referendum vote in June of 2016. Although the actual legislation facilitating technical aspects of the Brexit won’t go into effect immediately, questions still remain regarding the impact this will have on trade policy and regulation in Europe for years to come. E-commerce in the U.K. can dwindle if Britain imposes harsh tariffs on cross-border transactions via online retailers, subsequently translating into higher prices paid on the consumer's’ behalf.  
The United States is not safe from this imposing threat to e-commerce either. Several claims have been made under the Trump Administration to implement tariffs on imported goods (most notably from China). This, along with proposals to make major revisions to trade deals such as NAFTA and the TPP, can have an adverse impact on the flow of free trade, let alone cross-border consumerism through e-commerce. Lower prices and higher quality products have proven to be advantageous for consumer welfare under e-commerce; however, taxing cross-border online transactions may become the norm under protectionist policies.  

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