Opinions

Is Ecommerce Without Borders Doomed?

Why the world is not yet ready to embrace open borders when it comes to online sales.

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Why the world is not yet ready to embrace open borders when it comes to online sales.

Opinions

Is Ecommerce Without Borders Doomed?

Why the world is not yet ready to embrace open borders when it comes to online sales.

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Jack Ma is proposing an electronic World Trade Platform. The EU is discussing creating a Digital Single Market, but in the UK, ecommerce is facing tough market conditions. Ecommerce without borders sounds like a great idea, but I think it may be the right idea at the wrong time.

The Brexit vote in the UK means the country is set to leave the EU at the very moment that its closest trading partners are developing useful initiatives for online businesses. In the EU, the Digital Single Market (DSM) legislation aims to make cross-border ecommerce easier, shipping more efficient, simplify VAT and provide a more up-to-date framework that is fairer across Europe. But the result of the referendum means the UK is unlikely to benefit.

In September last year, at the G20 summit in China, Jack Ma, CEO of Alibaba, proposed once again an Electronic World Trade Platform (eWTP). This aims to create an ecommerce world with no borders, to truly globalise SMEs, as explained in a CNBC Exclusive Interview.

This was of course music to my ears, because much like the DSM, it calls for easier cross-border trading. However, I believe populist movements and the current mood towards the tightening of borders means that the move towards ecommerce without borders is now more unlikely to happen than ever. Why? Let’s consider this more closely in relation to the eWTP.

Ma’s proposal would be to remove government complexity to allow any consumer or seller to buy anywhere from any nation. The world would create a free trade zone specifically for SMEs using the internet to conduct business. This is a great idea in principle.

By nature, I am a free trade, Friedrich Hayek economist and open border idealist, so my vision for the world would have no borders for goods or skills and no barriers for people. That a product or person is defined and restricted to its point of creation is on the very face of it a ridiculous idea. Unfortunately, as with most things, it is never so simple.

The Newtonian tax effect

The Newtonian tax means there is always an equal and opposite reaction. If you or your goods can get out, others and their goods can get in. Here is the crux of the problem: The products and people coming in compete with local products and people and this raises tension. Add to that the risk of poor quality or substandard products, counterfeits or goods made from exploited people and you can see the potential downsides open borders can bring.

The eWTP is a vision that allows SMEs to trade across borders, bypassing the barriers that normally exist. Ecommerce without borders is a great idea. Help the little guy deal with border issues, open choice for consumers and bring countries closer together. Except the little guy can be just as good, bad or ugly as anyone else, so the pressure to close the borders will be as high as it has always been.

In an age where populism sells in both media and politics, the eWTP concept looks likely to walk straight into the same political hype and negative news coverage as any other open border agreement. You only have to look at the UK news coverage on the EU to see that bad and ugly news sells faster than good.

There will be groups and businesses motivated to push the bad news because A) There will be genuine bad news and B) Some things will genuinely, negatively affect certain groups and are newsmakers.

The weather effect

Initiatives like trade agreements often suffer from what we call at Spreadshirt the weather effect phenomenon; meaning good news is not always visible. For example, we sell T-shirts and when the weather is bad — we blame the weather. But when the weather is good, we credit our hard work and strategies that are driving business, and nobody mentions the weather!

The same is true with trade agreements. When things go wrong it’s attributed to the trade agreement, but economic and social uplifts are credited to local political or social changes, not the trade agreement. This is what is currently happening with the EU, NAFTA, and TTIP never even had the chance to prove itself. The eWTP is therefore likely to become just another great idea that might not survive the current climate.

I do believe that ecommerce without borders will one day happen, but I suspect there are currently forces more motivated to prevent it than working to make it happen. In the end I expect the eWTP proposal will probably fizzle out before it comes into existence. Global political results last year are an indication that the world is not yet ready to embrace open borders.

Localised deals are hard enough, we just need to look at our current difficulties with of our closest neighbours, so I think a truly global deal is sadly still a generation or two away.

Philip Rooke is CEO of Spreadshirt.

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Is Ecommerce Without Borders Doomed?

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