Trade and Investment

Online shopping may have just changed the rules of global trade

An eBay logo is projected onto white boxes in this illustration picture taken in Warsaw, January 21, 2014. eBay the world's second largest Internet retailer expected to post a 16% profit increase in its fourth quarter January 22, 2014.  Picture taken January 21. REUTEwhite RS/Kacper Pempel (POLAND - Tags: BUSINESS) - BM2EA1M0VTN02

When eBay and MallforAfrica paired their online marketplaces, they bypassed traditional trade policy Image: Reuters

Jake Bright
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Could global e-commerce partnerships become an alternative to trade agreements? It would seem so, if a recent eBay collaboration in Africa is anything to go by.

The sales giant has teamed up with another digital marketplace, MallforAfrica.com, to open Africa to US vendors, while allowing African artisans to sell products to Americans on eBay. It's a significant development at a time when transatlantic trade is under threat from political protectionism in the US.

For US-Africa trade, the 17-year-old Africa Growth and Opportunity Act (AGOA) has been a boon for African exports to America. The legislation - amended several times and extended to 2025 - created duty free access to the US markets for over 40 African countries across many product lines.

Image: agoa.info

While AGOA has facilitated some $700 billion in exports to the US, in recent years trade between Africa and America has stagnated.

As for options to boost US-Africa goods exchange under AGOA and overall, there are structural impediments on both sides. According to Atlantic Council Fellow Aubrey Hruby, “AGOA was instrumental in opening up access for African merchants to sell into the US. The technicalities of how they actually do it, however, are more complicated,” she said.

An additional option, a full US-Africa Free Trade Agreement (FTA), faces more hurdles than just a lack of congressional or presidential political will.

“There are still too many intra-African trade barriers to make an FTA possible between the continent and another big region of the world,” said Hruby. “Progress is being made, but African economies are still reducing their own cross-border trade friction and in early days of creating a Continental Free Trade Area to from which to negotiate with other regions.”

So with exports under AGOA stagnant and little possibility of new conventional trade agreements between the US and Africa, what alternatives exist to boost goods exchange between the regions?

Enter eBay and MallforAfrica. In August the two e-commerce sites teamed up with DHL to allow vendors from African countries to sell select products on eBay’s US shopping site. MallforAfrica chooses the sellers and handles payments on its proprietary platform. DHL is the shipping partner. Online shoppers can browse the entire collection on eBay’s Mall for Africa Store.

The new online channel expands an existing relationship between the two companies. In 2016, they launched the eBay Powered by MallforAfrica site allowing US merchants to sell in Africa.

MallforAfrica CEO Chris Folayan gave an indication of the value of trade under the eBay partnership: “We’re definitely talking seven figures on US exports to Africa, and expect to also do seven figures on African goods to the US within the next 12 months,” he said.

The MallforAfrica eBay partnership is also creating jobs in the US, Africa and Europe. “We’re hiring and expanding,” said Folayan. To process exports to Africa, MallforAfrica maintains product processing centers in the United Kingdom and in Portland, Oregon. MallforAfrica will open another US warehouse in 2018, according to Folayan.

What does this mean for traditional trade?

So has the eBay-MallforAfrica e-commerce partnership leapfrogged conventional trade arrangements? Aubrey Hruby and Chris Folayan differ a bit in their perspectives. “AGOA created the duty-free access for the African products MallforAfrica is selling,” said Hruby. “The eBay partnership enables African merchants to reap the benefits of that US market access by making it much easier to actually sell, ship and get paid for their products.”

Folayan noted the partnership has “created a means for American eBay vendors to sell into Africa”. On African exports to the US, he referred to the trade agreement’s approved duty-free goods list, saying: “Many of the product categories we are importing have nothing to do with AGOA. And we did not have to speak to anyone in the US government to get this done,” he added.

There’s clearly a lot more technically for trade experts, legislators and lawyers to dig into on the efficacy and legality of e-commerce partnerships versus government policy to increase exports between regions. But to some extent, that could be the point.

Basically, eBay and MallforAfrica are boosting commerce between the US and Africa and creating jobs; and they’ve largely bypassed governments and conventional trade policy to do it.

As the US Congress stymies the Trans-Pacific Partnership and President Donald Trump threatens to withdraw from the South Korea free trade agreement, digital platforms could offer a workaround for buyers and sellers to increase business between regions.

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