eBay Talks Trade at London School of Economics

November 8, 2012

Dr. Dr. Simon Schropp speaks to students at the London School of Economics

eBay and the economists behind the Commerce 3.0 research were invited on 7 November to present our economic research findings and the potential policy implications to PhD trade students. Their questions showed a great interest in discussing trade and policy from a Commerce 3.0 perspective.

Simon Schropp and Andreas Lendle (economists at Sidley Austin) walked the students through the research methodology and key findings on how trade flows have developed online compared to offline. “Death of distance is happening online, not in traditional trade,” explained Schropp. In academic circles, the expectations have long been that over time the negative effect that distance has on trade flows would become less and less pronounced, i.e. that trade costs will come down as transactions become more efficient. However, economists have not been able to observe such a development offline. “They have been barking up the wrong tree, looking at the wrong data”, Schropp said.

Indeed, the research based on eBay data shows how distance matters 65% less online compared to offline. Lendle explained how this fact cannot be attributed to traditional trade factors, such as shared border, common legal system, trade agreements, etc. Rather, it comes down to the technology tools that eBay offers to users to facilitate communication, information transparency, search and trust building.

The research points to how online marketplaces significantly reduce important trade friction, thereby making international trade a reality for also small firms. However, trade barriers impacting particularly on smaller firms remain to be tackled – something that should be made a regional as well as global political priority. “I foresee a less clear divide between policy solutions and private sector solutions in the area of trade”, said Hanne Melin, of eBay's Government Relations team. She suggested as an example that we should explore new forms of partnership and collaboration between public and private sectors to deliver the tools needed for streamlined customs and delivery processes – two key pain points for sellers engaging in international trade.

Questions from the audiences clearly suggested a real interest in studying trade policy from a technology, small firms and development angle: Does eBay have a voice in trade facilitation talks? How do you build trust more generally to ensure online trade participation? Should digital skills become an issue relevant to the WTO and trade talks?

This event is part of our Commerce 3.0 campaign setting out to adapt trade rules and policy to the 21st century where trade is technology-enabled and works for firms irrespective of size and location.