Policies that impact online platforms can also have an impact on international trade. Digital media are essential for many Australian small businesses to compete with international rivals.
Policymakers in Australia should be cautious not to undermine the positive effects of a world increasingly connected as they begin to tackle the challenges brought about by digital platforms. This includes the crucial role that these platforms play in helping retailers to sell their products overseas.
Read more: The law is closing in on Facebook and the ‘digital gangsters’
Platforms facilitate exports
Digital platforms, as my new study with Danielle Parks shows, significantly reduce economic distances and trade costs between buyers & sellers.
Facebook is a good example. Facebook is a digital marketplace and social network platform. Facebook’s Marketplace allows business owners to connect with customers.
Social networking allows buyers and sellers to communicate and exchange information on what they have and what they want. Marketplace features such as identity verification and customer ratings facilitate faster and more trustworthy connections.
Researchers must be creative in order to analyze digital platforms and cross-border trade. There aren’t many large-scale data available. The results are astounding.
A study revealed that 97% of US eBay sellers sell to buyers overseas. also found that “economic effects of distance” on eBay were 65% lower. The digital platform makes it easier to sell products in foreign countries.
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Research conducted by PayPal showed that 79% of US small businesses on its platform sell to foreign markets. And PayPal merchants that exported, outperformed businesses in general. Interestingly, that finding held for coastal and non-coastal businesses, and for rural and urban businesses alike.
In our study, we surveyed Australian businesses on Facebook. We found that businesses with a presence on Facebook were 63% more likely than others to export their goods internationally. Export propensity was high across all sectors of business and almost all sizes of company.
This new pattern shows that world markets are becoming more accessible to smaller companies who might not have been able to compete against their multinational competitors. This can be partly attributed to the fact that export-oriented firms are more likely to use digital platforms than other companies. There is no doubt that platforms can facilitate trade.
The majority of governments recognize the need to remove barriers to foreign market access. Any new policies regarding digital platforms shouldn’t make it more difficult for small and mid-sized businesses to engage with trade.
Regulations that could harm small businesses
At the request of Treasurer, the Australian Competition and Consumer Commission is currently investigating digital platforms.
The ACCC’s preliminar report acknowledges the way digital platforms have revolutionised how consumers and businesses communicate. The report highlights data privacy concerns and the influence bad actors have on spreading misinformation.
In the final report, due in June, policy recommendations will be made to address these concerns. These policies may also unintentionally threaten the revenue streams for businesses who advertise on these platforms or use them to facilitate sales online.
Restrictions on the flow of information across borders could affect everyday business practices. Search engine techniques are a great way to target customers and reach a larger audience, which is a major advantage for e-commerce. Search engine restrictions may limit how businesses advertise to customers and, therefore, the ability of a business owner to reach clients abroad.
Other regulations may restrict the ability of business owners to store personal information about customers, such as credit card numbers, preferences of consumers and purchases. This would limit how businesses interact with their customers, both at home and abroad.
Read more: Taking on big tech: where does Australia stand?
What’s happening at the moment
Australia is not the only country to be concerned about these issues. Globally, governments are still figuring out how to deal with digital data flows, privacy, and ecommerce.
The EU has recently passed a data privacy regulation known as the General Data Protection Regulation ( GDPR), designed to:
[…] will fundamentally change the way data is managed in every sector, from banking to health care.
The United States Congress is likely to consider a new Internet privacy legislation in this year.
Recent international trade agreements have included provisions on digital data flow. The Trans Pacific Partnership and the United States-Mexico Canada Agreement ( TPP ) both bar localisation of data requirements. The Trans Pacific Partnership (TPP) and the United States-Mexico-Canada Agreement (USMCA) both exclude data localisation requirements.
USMCA or TPP, on the other hand, do not permit participating countries to demand that platforms reveal their source code and algorithms. These provisions don’t necessarily prevent countries from adopting privacy laws, but they make it easier for platforms such as Facebook to operate with no fear of being asked to turn over important intellectual property.
When the government considers the Australian Competition and Consumer Commission reports, it should be made clear that any policy changes must not ignore the role these platforms play in helping Australian small business sell their goods to customers on the global market.