Canadian Trade Policies Holding Back E-commerce

July 29, 2016

– The Institute for Research on Public Policy is an independent, national, bilingual, not-for-profit organization based in Montreal.

CANADA – Canada’s trade policies are creating obstacles for small businesses engaging in cross-border online trade, says a new study from the Institute for Research on Public Policy.

“Given that e-commerce reduces the extent to which distance limits trade, Canada can do more to realize the economic, social and political benefits of technology-enabled trade,” say authors Usman Ahmed and Hanne Melin (eBay Inc.).

They examine the experiences of Canadian businesses, using new data from eBay between 2008 and 2013. They find that e-commerce businesses export at a much higher rate, reach more countries, and grow faster than do their offline counterparts.

Virtually all the firms with annual sales of at least $10,000 on eBay were exporters, say the authors. By contrast, only about 10 percent of all traditional small businesses export. Even in the rare cases when traditional small businesses reach beyond the US market, they typically serve only one or two more countries, whereas exporters on eBay reach on average 19 different markets.

“In time, harnessing these emerging trade patterns could make international trade more inclusive, by empowering small business and reducing the traditional dom­inance of large firms. Technology-enabled trade has more newcomers who capture a larger market share, and as such, displays less concentrated market outcomes, than does traditional trade,” say Ahmed and Melin.

The current trade rules are creating obstacles to these cross-border transactions, they say. Building on recent calls to raise Canada’s low value threshold on duty-free imports, they recommend that the government:

  • Expand partnerships between customs agencies and businesses to update customs risk assessments and process goods faster at the border.
  • Include small businesses in trusted-trader programs.
  • Bring postal systems into mainstream trade policy discussions — since they are increasingly being used in international trade, simplifying and harmonizing them across countries is essential.
  • Devise a technologically neutral financial services policy to support the growth of digital payment systems.
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