For Micro-Multinational Entrepreneurs: Reduce Trade Regulations to Increase Trade
A recent post at the Kauffman Foundation’s Policy Dialogue on Entrepreneurship site, titled “Promoting Micro-Multinational Entrepreneurs,” looks at the success of online sellers, compared to traditional firms, in finding and keeping customers overseas. Trade policy reforms could help U.S. sellers reach more customers in China, Japan, SK, Taiwan and other countries.
eBay Public Policy Lab’s Brian Bieron and Usman Ahmed report that selling goods and services overseas is difficult and most firms give up:
The World Bank has studied exporters in five upper-income European countries and found that 85 percent of small businesses that start exporting quit the effort by the end of the third year. That is a 15 percent success rate. Exporting is hard!
Online sellers, like those using the eBay platform, enjoy far more success with overseas sales:
On eBay, the success rate for US small businesses was 74 percent for 2010 to 2014. 85 percent failure versus 74 percent success.
The authors note that online sellers still face regulatory barriers when marketing their products overseas:
eBay recently testified about the rise of the micro-multinational before the House of Representatives Small Business Committee. We wanted to inform policymakers about the tremendous positive socio-economic aspects of the Internet on entrepreneurs and small businesses. But, we also wanted to ask the Committee to foster policy changes that could further clear the path for US micro-multinationals. We asked the Committee to raise the US low-value customs “de minimis” threshold (the level below which goods are exempted from import duties and paperwork); modernize the global postal system; and tailor government export promotion programs to the needs of micro-multinationals.
eBay Public Policy Lab’s 2015 US Small Business Global Growth Report (pdf) provides a series of policy recommendations:
Poor government policies can have a particularly powerful effect on SMBs. The International Organization of Employers finds that proportionate compliance costs can be 10 to 30 times greater for small firms than for larger firms.ix Moreover, micro-multinationals are a relatively new segment of trader, which means they have never before been a meaningful part of trade negotiations and thus the policy solutions needed to facilitate micro-multinational trade have not been proposed, let alone implemented within the traditional trade regime. This section will highlight four policy recommendations that would enhance the ability of US micro-multinationals to access the global market.
Listed recommendations (p. 18-19) are:
Raise de minimis levels: The de minimis threshold is the monetary level belowwhich an importer of physical goods is exempted from customs duty and paperwork requirements. …
Modernize and Harmonize Postal Regimes: Harmonization and simplification of policy and regulation, …
Protect Intermediaries Against Third Party Liability:…
and:
Tailor Government Programs to Fit the Needs of Micro-Multinationals: The US has several trade-promotion programs designed to help educate, finance, and facilitate export-oriented businesses. Unfortunately, many of these programs are tailored to fit the needs of larger manufacturing and agricultural SMBs. …
The eBay 2015 US Small Business Global Growth Report concludes:
Pierre Omidyar, eBay’s founder, frequently says, “[E]veryone is born equally capable, but lacks equal opportunity.”xi The Internet has opened up a world of opportunity for businesses of all sizes throughout the United States. At eBay, we are committed to creating products and services that continue to enable new opportunities for businesses of all sizes. We are interested in partnering with private sector entities, governments, and nongovernmental organizations to further clear the path for micro-multinationals to grow.