Converging markets and blurred borders – challenges for e-commerce in Europe – WS 11 2018
6 June 2018 | 14:00-15:30 | EVENT ROOM |
Consolidated programme 2018
In the digital economy services are merging more and more across different sectors. Many of these services are bundled into integrated offers. In addition, markets are integrating and national borders are becoming less relevant and therefore allow increased cross-border trading. This development coupled with shorter innovation cycles may require to rethink consumer rights. One of the core issue to address is how to achieve an effective legislative framework which ensures trust and empowers consumers, with clear and predictable rules for both users and industry - creating a well-functioning market. These issues are part of ongoing legislative debates on an international as well as national levels.
- consumer rights
- cross border
- Internet economy
With the development of the Internet and continued speed up deployment of Internet Access Services (IAS) around Europe, e-commerce has continued to grow to be a central force in the economy. A rather broad concept, according to the WTO, it can be defined as involving among other things “the electronic delivery of services, meaning transactions in which services products are delivered to the customer in the form of digitised information flows;” and “the use of the Internet as a channel for distribution services, by which goods and services are purchased over the net but delivered to the consumer subsequently in non-electronic form.”
The economic impact has been immense. While global e-commerce was valued at $150 billion in 1999, it has multiplied to $2.3 trillion in 2017. However, global e-commerce as well as within Europe, has far from reached its full potential and there are many issues that needs to be resolved. These involve: developing trustful payment mechanisms, ensuring cross-border data flows, intermediary liability, as well as fragmentation of tax rules and consumer rights. Some of the negative effects is the problem of making consumers buy goods online, having companies develop platforms to trade goods.
The legal framework for e-commerce should be sufficiently flexible to accommodate the rapid evolution of technologies and markets. It should also allow the development of online commercial activities respecting fundamental principles and rights, recognized at the EU level. Current discussions within WTO were blocked last year in 2017 as some countries did not want to discuss these issues on an international level.
The questions that will be addressed are:
- What are the most important Internet Governance issues that should be part of E-commerce rules that is sought to be negotiated in various fora- FTAs and WTO?
- What are the implications of these E-Commerce rules on internet governance issues?
- What are issues are most pertinent to address from a consumer, business and government perspective respectively (net neutrality, privacy, security, online payments, digital literacy etc.)? What are currently the biggest hurdles to further develop e-Commerce in Europe?
- How can we ensure a broad stakeholder participation in the development of e-commerce rules?
- How can we make sure that national/regional legislation does not contradict developments on an international level?
- What are the necessary steps to agree on an international framework for e-commerce rules, what are the processes we need to ensure?
The format of the session will be based on an interactive framework with
- 1) Human spectrogram with the audience
- 2) 5-7 minutes presentation by the panellists
- 3) Discussion with the panel
- 4) Q&A with the audience
Links to relevant websites, declarations, books, documents. Please note we cannot offer web space, so only links to external resources are possible. Example for an external link: Website of EuroDIG
- Kristina Olausson, Policy Officer, European Telecommunication Network Operator's Association (ETNO)
Organising Team (Org Team)
- Erika Mann, Senior Advisor, Covington & Burling
- Oliana Sula, University "Aleksander Moisiu Durres" Albania/Estonian Business School
- Eka Kubusidze, Ministry of Economy and Sustainable Development of Georgia
- Sophie Tvalavadze, Ministry of Economy and Sustainable Development of Georgia
- Guram Keleptrishvili, Ministry of Economy and Sustainable Development of Georgia
- Jonathan Cave, Senior Tutor in Economis at Warwick University & the Economist Member of the UK’s Regulatory Policy Committee
Except for his engagement at Warwick University and UK´s Regulatory Policy Committee, he is also an associate of GNKS and a Turing Fellow at the Alan Turing Institute. Cave's research is focused on privacy and security in networked environments, the value of information, data analytics and artificial general intelligence and games played on networks. More info [here].
- Tornike Jobava, Project Manager for BFD (Broadband for Development), Georgia’s Innovation and Technology Agency (GITA)
Georgia’s Innovation and Technology Agency (GITA) – In order to enhance innovation ecosystem in Georgia legal entity of public law (LEPL) Georgia’s Innovation and Technology Agency was established under Ministry of Economy and Sustainable Development of Georgia in February 2014. Agency is assigned to coordinate and mediate an important role in the country in terms of innovation and technology development; Agency has to ensure strong collaboration and cooperation between various stakeholders in the field of innovation and technology; GITA’s main target is to provide legal framework for innovation (drafting law on innovation, amending existing laws related to the subject, etc.); support knowledge and innovation commercialization and create infrastructure for innovation(building TechnoPark; FabLabs; iLabs; running the program “BroadBand for All” – providing high-speed internet access throughout the country).
- David Lawrence Lee, Chief Executive Officer, European Business Association Georgia
Came to Georgia in February of 2004 and was the CEO of Magticom, the largest telecommunications company on Georgia, until the end of 2016 and President of American Chamber of Commerce from 2008 until 2012. He is currently the CEO of Lee LLC and Chairman of the Europe Foundation and CRRC. David has an MBA from Warwick Business School, qualified as a Chartered Accountant with KPMG and speaks Georgian and Russian. A former Royal Navy Officer, he has led companies in developing markets since 1990.
- Kristina Olausson, Policy Officer, European Telecommunication Network Operator's Association (ETNO)
Olausson joined ETNO in March 2017. She works with the Regulatory Affairs and Public Policy teams, working mainly on issues related to content and services. This involves privacy, consumer law, trade, and connected cars. She previously worked as Project Assistant within the Dutch 2016 Presidency of the EU Council on a conference on digital government and as Information Officer with the Swedish Association of Local Authorities and Regions in Brussels. She has experience from working with data policy and digital governance. Kristina graduated with a double-degree MA cum laude in European Governance from Utrecht University and Masaryk University (2016). She also holds a BA in Political Science and Economics from Lund University and completed an exchange semester at Istanbul Bilgi University (2010). She has been awarded with scholarships for her prominent achievements.
The Remote Moderator is in charge of facilitating participation via digital channels such as WebEx and social medial (Twitter, facebook). Remote Moderators monitor and moderate the social media channels and the participants via WebEX and forward questions to the session moderator. Please contact the EuroDIG secretariat if you need help to find a Remote Moderator.
- Jana Misic
Current discussion, conference calls, schedules and minutes
See the discussion tab on the upper left side of this page. Please use this page to publish:
- dates for virtual meetings or coordination calls
- short summary of calls or email exchange
Please be as open and transparent as possible in order to allow others to get involved and contact you. Use the wiki not only as the place to publish results but also to summarize the discussion process.
- Strengthening eCommerce in Eastern Europe should be based on a country specific context, and consider issues such as infrastructure, language, geographical position, consumer culture, algorithms and education.
- Understanding the ’consumer culture’ is necessary for finding a balance between advocating e-commerce or regular commerce. This helps avoid the ‘channel biases’ that harm overall trade.
- When setting e-commerce as a policy objective for economic development, developing countries should be careful in opening up their markets. Consolidating competition and consumer protection is key.
- Infrastructure remains one of the main challenges for e-commerce in Europe. Improving it can also lead to increasing inequality between the rural and urban areas, and this should be clearly addressed in the economic and development policies.
Find an independent report of the session from the Geneva Internet Platform Digital Watch Observatory at https://dig.watch/resources/converging-markets-and-blurred-borders-%E2%80%93-challenges-e-commerce-europe
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This text is based on live transcription. Communication Access Realtime Translation (CART), captioning, and/or live transcription are provided in order to facilitate communication accessibility and may not be a totally verbatim record of the proceedings. This text is not to be distributed or used in any way that may violate copyright law.
>> KRISTINA OLAUSSON: Hello. Can you all hear me?
Sorry, we are about to start the session. There are many interesting discussions going on already, I see, but we would like to just bring you all together.
Thank you all for coming. We are here today to discuss a bit on eCommerce. Today about half of all Europeans shop online. But unfortunately, the company side, it's a little bit worse, it's only about 16% of all SMEs that sell online.
And at the same time, the governments start to look at regulation and entering this field which traditionally, eCommerce and Internet, of course, has been a very multistakeholder process without regulation and now with new actors and interests, trade interests, this field is changing.
Maybe I can first present myself, my name is Kristina Olausson, I work for ETNO, the European Telecommunication Network Operator's Association. We are starting a little bit since EuroDIG this their General Assembly in this room just before and those meetings all turn out to be filled with interesting discussions.
May I -- today we are technical. We are using a phone call called Mentimeter. Do you all have a phone in here? May I ask you to type in menti.com and add the code up there to answer the questions we have for you. First one being have you shopped online in the past month?
I will do the same myself.
All find the site? Great.
(Off microphone comment).
>> KRISTINA OLAUSSON: Okay. So please answer that question. We will not sell the data to companies selling online. We want to understand the habits of this audience on the Internet.
I see. I think there's a technical problem, but let's skip to the next question on that slide. And yeah, I think this is the question you all got to answer. What would make you shop more online?
And -- exactly. And so the options that we have, per security, more cross border shopping. The possibility to shop on another device or another computer. So we will get back to these results later today.
And thank you all for participating.
But now, let me introduce the speakers we will have here today.
So first of all, we have Mr. David Lee of the European business association of Georgia, representing European businesses here and we also have Mr. Jonathan Cave, researcher at Warwick University, and Mr. Tornike Jobava from the GITA agency, it's the innovation agency of Georgia, linked to the Ministry of Economy and Sustainable Development. Thank you very much for joining us here today.
We will now turn to our panelists to give us a little bit of their view on eCommerce in Georgia, what's the situation for Georgian or European businesses here, and could I please ask to put on the presentation of the European Business Association.
And please, Mr. Lee, go ahead.
>> DAVID LAWRENCE LEE: Thank you. When I was asked to speak today, I thought the most relevant thing I could do would be to bring the visitors to Georgia up to speed on the state of play of eCommerce in Georgia. It's still relatively under developed, but we have some advantages. The advantages are that we have excellent 4G coverage over the whole country. There is almost nowhere in the country that you can't get 4G, therefore, it's available as a tool.
The second advantage is that to register a business in Georgia is amongst the easiest places in the world. In fact it's number nine in the world in the ease of doing business. The question is. Why haven't eCommerce and transactions on the eCommerce taken a bigger step?
It's wildly recognized that Armenia is ahead of us in that area. So it's not all bad news. So we have a lot of online applications coming from banks. We have pretty much completely IT savvy younger generation. So everything is in place now to do something and it's not quite happening. EBA is involved very heavily with start-ups and start-up grind, there's an international organization called Start-up Grind. We are one of the countries. Georgia is one of the countries, one of the three countries that will be featured in London next week at the Start-up Grind meeting. So it's beginning to move.
We also have problems with the infrastructure in terms of funding. It's not very easy to get funding for start-ups in Georgia. So that's another area that needs to be looked at.
I wanted to talk about factual issues then. I just hit this? The European business association, it's only six months old. I will try to give you a feel for where we are. It's very much from the European perspective. This is about Europe. So I'm talking about European companies here and companies that wish or are trading with Europe. So very much European focused discussion.
Sore let's have a look at just a few members. I thought we would look at menu.ge, which is a sort of modern pizza delivery service. It has hundreds and hundreds of cafes and restaurants and food outlets in Georgia where you can simply go on the phone and have it delivered.
Yfisher is a company that offers free Internet access in return for you giving them some information, everywhere from the airport through to -- through to galleria and Dunkin' Donuts. This one, however, I will focus on a little bit and that's Georgia post.
The post office here is actually very involved now in trying to re-invent itself as an online platform to support eCommerce and I think that's quite important.
Finally, let's -- I thought we would actually mention ourselves, the European business association. We are very much focused on -- on the Internet and I will talk about that a little bit later.
So let's talk a little bit about, not about the pure plays like the online food ordering services or the people who give you the free Internet and then track your buying habits using the Internet. Let's have a look at Georgia Post. Traditional post office. You would think nowhere near the front line of this area, but actually, they are completely changing their business. They have a completely new strategic plan and the plan is about delivering products purchased through the eCommerce to Georgia and the other way around. So the post office itself is going to support your ability to sell online or buy online from Georgia to anywhere in the world, but particularly to Europe.
They have already developed the product name and concept. It's called Maleo, and it allows you that, that very practical problem, if you do buy online, how do you get the products to Georgia? What is the payment system that you will use? Although in most countries that you are probably from in Europe, this is something that you done even think about it, it is an issue in Georgia. How do you get it delivered? How do you get it through customs? How do you make your payment system? How do you go online?
I think it reflects the determination of companies like Georgian Post to get involved in this. These are the sort of things that you need to think about, the price calculations and declaration services and track and trace, all of that doesn't really exist for any company today that's in Georgia. It works within the country but not to export. It's the same when you go the other way.
Okay, let's have another look at -- very practically at some of these members we got in ourselves. So we are the social media impact market leader after ten months. It doesn't sound like very many people, like 13,000 but in a country like Georgia, it's the English-speaking Member States who are interested in Europe. To put it into perspective, I have think Amgen had 5,000. And others are down in the low 2,000. We are growing at 1,000 a month. So we focus on this. You can join our organization online, and we are now offering a mediation, an arbitration service and some of these services through our mediation and arbitration company will be available online. Mediation online. So this is new. And it will also work, of course anywhere in the world.
We have training services. And I wanted to focus a little bit on the right-hand company there. That's one of the very first tech products that's come out of a Georgian start-up. This is a ring with a proximity chip. A proximity chip at the moment can be used to gain access, for example to the cinema but, of course the potential is obvious to you all. It's a proximity chip. Anything a payment system could be put on there, it's made entirely in Georgia. It's popular and you can buy it right now on Amazon. It has also a slightly distinctive feature which I think is quite nice, it's environmentally friendly. It's made from local wood.
So one last point I wanted to make, regulation is an issue. Georgia is really struggling with this. A lot of the post-Soviet states that did not get absorbed very quickly into Europe do we go with Russia, do we go with the rest of the world or do we go with Europe. The problem with Europe is that you have to have regulations, both legal regulations, standards on your products and services and new standards on how you control the data collecting with your comments.
Georgia has the DCSA, which means we can export to Europe with no tariffs and all Georgian citizens have the right to travel freely without a visa in Europe for up to three months, which is a huge difference in terms of changing the mentality of the people here, particularly the youth. I think it's a country that's on the first step of embracing eCommerce but we are not nowhere.
You know, we have started and some of our big institutions are looking at this very seriously. Thank you very much for listening to me.
If you have any questions, I will be around for a while. But hopefully, when you come here again in five or ten years time, whenever it will be on your cycle, this will be one of the leaders not only here in this region, but in the world. Thanks so much.
>> KRISTINA OLAUSSON: Thank you so much, Mr. Lee. And as, indeed, you said, you have to leave a little bit earlier, but if not here, then I'm sure we can connect with you via your successful social media channels or on the Internet as well. Thank you.
May I now turn to Mr. Tornike Jobava from GITA, which is the Georgia innovation and technology agency. You are a project manager for broadband and development, and we will be intrigued to hear about Georgia businesses and eCommerce. Thank you.
>> TORNIKE JOBAVA: Well, hello. What's going on?
Hello. I'm happy to be here and happy to see you here in Georgia. As you know we are the country of wine. I'm happy that it's not digital and I hope you had a chance to taste it yesterday and every year, the wine experts and other product experts increase, but unfortunately, eCommerce of retail sales is quite low.
While there are several reasons why people do not trade in wine, why enterprises are not selling in wine and we with the world bank support launched the BFD, the broadband for development program.
BFD is part of the GITA product, the Georgia's innovation and it's on three continent. It aims to increase innovative activities of firms and individuals and of their participation in the digital economy. There are a lot of people in Georgia and a lot of SMEs who do not have access on broadband Internet from their homes and from their enterprises and as I said, there are several, but the main reasons are installation costs and the lack of the knowledge.
So I'm speaking now about the people, who are located in such regions and in such places, where broadband connection is, but people do not use Internet or do not use it as well as they can use it for their business and for their individual needs.
So Georgia's national -- the innovation and technology agency, took responsibility to increase demand on broadband and on e-commerce, and to increase awareness about eCommerce.
And I'm happy that -- and it's good news that we are here, that donor organizations and other government agencies are working hard with us to increase the numbers which was presented on the previous slide. Now, I will say, good fellows, that you are doing good things. Let's see how we do it.
Well, now we are developing online training platform for 2020. Our aim and our target is to cover 60,000 households with digital literacy and broadband connection and 10,000SMEs with broadband connection with high-speed Internet and with e-Skills.
So as I said, we are developing our online training portal where every SME can reduce and get and complete the trainings for the households, these trainings are in digital literacy, how to use the Internet, computer and MS programs. And for SMEs, there are three models, ebusiness, eCommerce and E-governance.
There are three stars with every participant and one star is needed to get success on the next model. Two stars are needed to get the benefit from GITA, and three stars are needed to get the certificate.
So the benefits are different for households. It's free broadband voucher for installation. For SMEs, this is for industry installation or upgrade and there's also for SMEs the free web page suitable for online sales and also free consultation in eCommerce capacity development. So every household and every SMEs get these vouchers and complete the trainings. As the trainings are online, we are providing spaces, free spaces with Internet and with computer.
With our consultants and to support them to get these trainings. Except for the online trainings, we have other training for the SMEs. We already have good results. We already launched our pilot of the pilot program to test how it works, how our training program works and as you see, from 50SMEs, 29 of them complete 9 training successfully and they have started selling online.
And finally, they have reached 11% sales growth, one month after the end of the trainings. Now we are on a pilot's stage and we have launched also our pilot program and we have started it with awareness raising trainings. We met up to 1,000 people, 45% of them were SMEs, representative of different business from different sector. From 37 municipalities of 60 different regions of Georgia and all of them got free eCommerce training vouchers. This training starts from September and for -- during one year, we will cover 10,000 households and 1,000 SMEs with the training programs.
For 2020, we are looking forward to see this picture with increased numbers of sales and access on broadband.
Thank you very much.
>> KRISTINA OLAUSSON: Thank you. Thanks for the interesting presentation and, indeed, when you look at the Eastern European region, while there is a gap to western and north Europe, when it comes to e-commerce, many Eastern European countries are having a much larger growth rate. So there seems to be a pattern of catching up with the western ones, but as I said in the beginning, of course the growth of eCommerce trade on the Internet creates a bigger interest from governments in this field. And also with regards on how to address certain issues created in trade online, data protection, et cetera.
And there has been efforts last year to start negotiations at the WTO, the World Trade Organization on eCommerce rules, which came to ail standstill as there's a gap between different regions in the world on how to address this.
Another aspect is that these discussions are not so open to companies who are the ones that will apply these rules. And now I would like to turn to Mr. Jonathan Cave, from your perspective on multistakeholder processes and when it comes to e-commerce, also the international outlook. Please thank you.
And now --
>> JONATHAN CAVE: Thank you. Now, I'm not actually a specialist at all in eastern Europe, but I do know something about ICT for development and, in fact, one of my first projects for the EU was back in the days of DG1A looking at posts and telecoms and liberalization projects in all the -- in what were called succession states which was Bulgaria and Romania and Hungary. I understand the unique role that posts play, not just in terms of being able to provide a physical analog to a network, but in terms of socioeconomic aspects, in particular, they were the major employer of young women which combines the community in a particular way.
At the time, we handled much of the packets much to the annoyance of Germans, because the packages went through Romania.
For example, telecom was privatized by sold to Oote, which was the Greek entity and what Oote did was to come in and -- there were two bits of infrastructure, the capital, one was the human capital, the people in their networks and the other was the physical infrastructure, the wires and so on and came in and got rid of the human infrastructure and kept the obsolete telecom backbones. So of course things didn't work out terribly well.
I wanted to speak about a couple of things that have come up. One is with regards to eCommerce as a policy objective, one has to be particularly careful about that, especially in a developing country context. The landing place, where there's free trade, low-cost trade, high effective competition, and lots of choice for consumers to make, easy, safe and trustworthy ways of making the choice, is a desirable place to get to opening up possibilities of eCommerce, however, doesn't always have that effect, because the development of trade goes in two directions. There are big global players and local entrepreneurs selling out to a global waterfront. And the same is true, of course on the input side. That you can buy cheaper inputs perhaps from abroad but that displays the impacts of those inputs at home.
Now, if the costs come too much in advance of the benefits, then the development is distorted and you never get to the good landing place and that's the kind of standard economic development lesson. You are appointed to Africa and created these big reservoirs in order to help people grow tomatoes to sell locally and for export. They then exported subsidized Italian tomatoes which killed that business and it drained the water away from the fields in any case, and so they couldn't grow anything.
So there is a sense where international development expertise and local experimentation, rather than applying a fix outcome is a good thing to do. In that respect, the Ike Communicate provided a particular reference. But the countries that adopted them achieved that status in a world that didn't have developed countries like Western Europe in it, and following the same pathway may not always lead to the same outcome.
The other thing about e-commerce, including the slow adoption, like in Italy. Commerce is not just getting predefined goods at a lower price with higher security. Shopping, commercial activity is a social enterprise. It's contact with other people, and so in countries that had rich and varied small scale local stores, the adoption of eCommerce was pretty slow and low because people didn't seal a reason for having it.
When you have it, if you have effective competition which perhaps within Europe you may or may not have, I will come on to that in a second.
It may be based on price and futures of goods, not necessarily on the benefits that they provide to the people who I buy them, because in a market competition, you compete with other people, the most visible thing to see, are things like price, for defined commodities. When you have a commodity that's locally produced, competing with one that already has a large brand presence, it is a steep hill to climb and opening up eCommerce may have a nice metric effect.
The other thing has to do with these infrastructures. I was very interested in what you said about, for example, broadband is a precondition for development. What we found certainly in the UK, where our rural broadband has been pretty patchy, is that as you increase the overall speed of the broadband network, the economic impact of differentials and speed becomes bigger, not smaller. So if you are slightly behind because you are in a rural area, and you are running at 10 megabits, and then when they start running at gigabit speeds, may not be in the market at all. Something that improves broadband across the country. If it's not balanced between rural areas and urban areas may disadvantage the rural areas particularly, heaping could haves on areas that often need economic advantage and maybe encouraging urbanization of a kind of dangerous form. So these things are not always silver bullets.
There's a broadband universal service. One thing regarding the training. The most valuable outcome of the training projects was the networks made among the people who attended. The knowledge, they can acquire knowledge, but acquiring partners, acquiring people that they can talk to in a sympathetic way, as opposed to let's say regulators or bureaucrats is an invaluable thing. And when you followed up with them five or six years later, that at bit that stuck. I think it's a great idea and you should encourage them to talk to each other as well as you.
Okay. Anyway. So some of the things that have been big developments in the eCommerce area. There has been slow progress. The closed model is a large part of this and the restriction to stakeholders of people in 9 game. So there are aspects esearch, efulfillment, epayment, and efollow-up. We are moving along this trajectory. It's one thing to look online for goods and buy them. Not only of them can be delivered online but very often, having a traceable connection to someone that sole you something, allows the market to work.
If goods are not reliable, you were want market forces to kill those goods off or encourage the people who make. Goods make their goods better. If you can't trace back to who those people are, then that mechanism doesn't work. It works in local economy, because you know the faces of people who sell you things. It works in larger economies about traceability which is not just about, let's say trade settlement arrangements.
Now, it's also that -- so, for example, the preparatory data for this session, talks about e versus non-echannels what we found in the ecosearch of appliances fold online. People made up their minds by searching online, even when they had to go to the stores to buy the objects like washing machines and so on. If you had a label on the washing machine that said how much energy it used, it was too late.
By the time they came into the store, they already decided what they were going to want to buy. So the chapels have different effects and if you emphasize eCommerce and forget about commerce or the balance between eCommerce and commerce, and one the big threats to brick and mortar stores is that people search online, and then come into the store only to buy the thing that they want. So that the store just becomes a kind of passive delivery mechanism for online retailers.
Now, one particular element of this is payment systems. Here the developed economies have not had the most rapid development. One of the particular things is NFC payments by mobile phones where it's Africa that leads the way. In part because of the weakness of the financial system. So many people not banked, lack of ATMs, rapidly inflating currencies, M-PESA became killer app to drive forward commerce and to drive it forward in a way that is local. The local acceptance of the means of payment, binds people together because one of the things that's really destructive is if you open up markets globally and where people depend on each other for -- I grow meat and you go vegetables and if we all start producing the same things, we become competitors and we saw this in Egypt when they built the high dam and everyone started growing sugar for the global markets.
So payment systems really matter. In particular, online payment systems, they should be trustable, but not infinitely trustable because that leads to abuse. It should be possible to repudiate mistakes. Among the things that are important, however, is taxation. If there's value being created in any economy, it's important, particularly in an Internet economy where some people get ahead very quickly, few firms come to dominate because of the network effect. It's important to rebalance that because it's value created by the whole economy of the country. It shouldn't be captured by one little part of it.
So the links through to taxation and also consumer protection and competition, which are sort of opposite sides of this same coin, these have to be preserved. If industry drives too much of the deployment of eCommerce and developing regulations for it, that benefits of development may be lost. Another thing is a lot. Commerce transactions are not monetized. Even sometimes they are forced back to that level.
There's a huge growth in local currencies. The economic value that's created locally is taken away to elsewhere. If I have a local currency, it may be a monetized like the Brussels currency, that benefit stays where it was generated, and that can help to raise the general level, rather than creating more inequality.
And these things are all tied up with these transactional payment systems. Two things wanted to briefly mention under that that are subtopics, the first is the payment systems are used by all kinds of commerce, not just specific ones. So they can be particularly useful for regulation. An example of this, we were talking about earlier, in the UK, they wanted to regulate children's access to online pornography. You will can't to that within a nation state because it came in over platforms, for other European and other countries. So can't actually force the people that run those websites to have age versification.
What was their solution to make the payment service providers liable? So if my website is used for distributing pornography without these protections then Visa is required to take services away from everything on my website. Now all ever a sudden, you have something that works quite well and that's because of the particular importance and ease of analysis.
The other thing to mention is the crypt toe currencies and digital currencies. The thing about cryptocurrencies, there are different government positions with respect to them. Some governments accept bitcoin as legal tender. Some are issuing their own.
And in US, the Minneapolis Federal Reserve and the bank of England have endorsed the digital ledgers for payment options but haven't yet adopted them.
>> Another problem in developing country context is keeping adequate records that can be trusted. And distributed ledgers or blockchain, can be used to keep the common references without a bureaucratic, costly and slow infrastructure of reporting. This has happened with a lot of things like business registrations and student registrations and all kinds of things. In particular, if it's a blockchain, you can observe the history of transactions and you can effectively enforce long-term relationships. It could be something very good. I have gone on quite a lot.
One thing I wanted to talk about that's important in the European context is geographic discrimination. When you buy things online, you may be buying from people in other countries. Now, to a certain extent, European law is very peculiar about this because it imposes something called the country of origin principle. And from a consumer protection standpoint, if buy from a Romanian firm, my rights are the rights that Romanian law gives to me. They may be different from those in my home jurisdiction, but somehow I'm meant to know about this actually the hidden agenda, I should know what's in European regulations and that will be enough for me but in many cases that's not enough, because not everyone is as empowered and is capable of bearing responsibility as the people in Brussels assume.
So that's one part of it. The other part is that trade requires certificates of origin, proof of origin when you do these trade things. So it's very good to have intermediaries for this, but that is the one the big costs that people are seeing in these free trade agreements that the documentation required is a huge market barrier. So you lower a market barrier. The big competitors they done even notice that barrier is from but the little firms meant to benefit get swamped by these very large firms.
Another problem that comes out in the electronic context is algorithms, and, you know, I won't bang on about them too much but we know that the use of pricing algorithms to adjust prices or adjust destinations for products can actually come into contravention of competition law and beak the -- because it's algorithms and not people doing it. They can put me in prison but if I use an algorithm, they can't put it in prison and they can't put me in prison using it, unless they can prove that I meant to do that.
Okay. So finally, in terms of the things that I think -- oh, there we go -- need to be dealt. With one the big challenges is identification. If you do transactions remotely online, you need to have a certain understanding, a buyer, supplier or commissioner of inputs, but there you run up against GDPR and the restrictions in the privacy regulation about what information you can keep, for what purposes you can use it and how long you can keep it. And for large durable objects, those duration limits may be a real limitation.
Also we don't quite know what competition and consumer protection means but that's a legal opinion. That's not really our topic here today.
I would, however, say that when you begin to open things up, particularly because you have countries whose let's say maturities is at different levels, it's quite possible that a lot of these freedoms mail lead to a change in behavior. It's not only the case like in Russia, for example, the oligarchs arose because they liberalized the market before they sort of dealt with the cultural appreciation of how markets should operate but it's also in very developed countries too.
So I mean the thing about Facebook and Amazon. Amazon is going to be a big problem. Alibaba is going to be a big problem. They don't necessarily pay their taxes certainly where the profits arise and they may not be very transparent. This is an area where developing countries in particular have to have a force in the fora where these policies are set as to what information should be observed, and by whom in order to get a handle on this.
And so the final thing is to do with multistakeholderism. Part of multistakeholderism comes from that not all things of policy importance are of domain and law. You can only do certain things with regulations and statute law. A lot of it has to be either regular regulators who can come to balance laws out and develop relationships with the people who can tell them the things they need to know.
In other cases, may use soft law, certification programs and standards, and in some cases you may use self-regulation or co-regulation. So in Illinois, my first faculty position. We had price fixing laws. To get it on to the trains, they had to go through an elevator, a grain elevator, it stacks up and then you can put it in the cars. The grain elevator operators were a cartel and so they allowed the farmers to fix prices so they could balance this. It's a bottleneck through which you have to go to get to these markets. They have a huge amount of power and they are not afraid to use it. You need to have alternatives and some of it may be allowing the farmers where people use these sites to sell, to set some of the rules and claw this back from the global players.
The other thing is that we -- we already talked about SMEs. I won't mention that. A lot of the laws assume that people are buyers or sellers. A lot of what happens on the Internet is not like that. People are sometimes buyers and sometimes sellers. I may use apps and I say this doesn't do it for me and then I find there are lots of people who are just like me.
All of a sudden a different set of rules apply to me and the way I develop this bottom up, has to be done in different ways in restraining a big firm.
And then finally, I guess we all know that, for example, TPP fell apart because the US was kicked out and then they resurrected it, sort of, we don't know. TTIP, well, that's sort of in the doldrums, it's sort of parked. I don't want to say what these things. Turn into but it creates massive amounts of uncertainty. One thing is to stand still and wait for it to come into effect. You can use that to demand a voice in some of these -- in some of these fora.
And so play the outside game as well as the internal development game, I guess.
So that's far too much, but thanks.
>> KRISTINA OLAUSSON: That was great. Thank you for the holistic overview of eCommerce.
First, before we start the discussions, since we are quite few here, I wonder if we could all introduce ex-other -- to each other around the table before we start the discussions.
Maybe I will have my colleague Marta start.
>> Well, I'm Marta and I work with Kristina for the European telecommunications network operators association, I had all.
I'm from the embassy of Hungary, I'm located here in Georgia.
>> I'm Yuliya I'm a legal advisor at a law firm and I'm dealing with the eCommerce in the international aspects as well.
>> We take legal charts down from the internet. And the information in this session goes back to the points that I just made on the left about the regulatory aspects we are an industry-funded models and we are working with the industry and the law enforcement. I really agree with some of the challenges that were outlined there. That was very useful.
>> My name is Malhasnik. I work for Deloitte. My research is in eCommerce. I did my Ph.D. there. I own and operate several eCommerce websites. I mean, businesses. Yes.
>> KRISTINA OLAUSSON: Great. We have a lot of different perspectives around the table, I hear. So maybe if I may start with a question to our panelists, and online moderation is welcome to fit in when they want to if there's any questions. From GITA's perspective, how do you advocate the interest of Georgian -- the companies you work with and the start-ups with regards to the problems you have?
What I identified from your presentation was very much focused on the e-Skills but also the infrastructure. So I guess that would be two different channels to address, but if you could tell us a little bit more about how you raise these issues, and maybe in which form as well.
>> TORNIKE JOBAVA: Well, thanks for the question. The main issues and the main problems were met during the sessions and the trainings. While, of course, it was about awareness, tourism, growth is high in Georgia. So every year, we have more and more tourists and that's why the people engaged in the tourism sector, they see this perspective, and they are happy to have this training where we help them to reduce their own tourism platforms.
But for those people who are producing some crafts, handcrafts, some Georgian food, for example, people from agriculture, they do not see -- or they do not imagine how it can help them, how they sell their products. That's I didn't think it's the main challenge for us to make sure that it really works, not only for the fields from the tourist sector, but for the businesses from agriculture, from hand crafts and the others.
And the other, it's also a transportation. Many people don't know how transport and also one of the main issues that -- well, okay. They can -- we can teach them how to sell, how to reduce, or how to deliver, but the shipping costs are too high, and Georgian product is not competitive on -- for example, on Amazon, because of the shipping costs.
And that's why now GSIT with enterprise of Georgia, they are working on an eCommerce strategy which will be focused on Georgia market, on specific businesses and after that we will have a strategy for the specific businesses. How we can help them to be competitive on this market, and how to sell online successfully.
>> KRISTINA OLAUSSON: Yes, thank you so much. And, yes, please.
(Off microphone comment)
>> JONATHAN CAVE: It did pique a few questions. Are you seeing a local home version of the gig economy things that go with the tourist industry and gracing that? So airbnb-type things and what is it called, taxify.
So are you seeing a growth in that kind of business model, that sort of -- yeah.
>> TORNIKE JOBAVA: Well, for sure. It's the knowledge of the language. So for airbnb, for example, booking them is more easy because you have booking, but at airbnb, you have a message from the people and then you should negotiate with them. And that was also the problem. But now we are working on localization, and soon it will localize their platform and soon it will average Georgian language, but about the airbnb, we see growth on the airbnb and that's why soon airbnb will add experienced for Georgia. Now it's close for Georgia but it's very good, very good opportunity for individuals to -- because, you know, while -- so for tourists, they can kind a hotel or a place to live, but what elsewhere they can do? Yeah, when they visit, for example?
So that's why we are teaching them to place these activities on airbnb on trip advisor and such.
>> KRISTINA OLAUSSON: Yes? Please.
>> JONATHAN CAVE: That makes an awful lot of sense.
It sounds very positive. With respect to selling the hand crafts, there are some models that are probably worth looking at of people would set up hyper-local media platforms and is called Connemara online. There was a little village in Ireland who this as diaspora, and they set it up sell to these people would went away but the platform just grew and it was used for all kinds of things. It reached out to people who had no connection to Connemara and people began to participate in the life they left behind so that they weren't quite so far away.
Anyway, and there's a similar kind of thing in Sicily that was done. So perhaps later, I can point you at those.
Part other thing I wanted to mention, though, was that in terms of things like the transport costs and all the rest, I know I said bad things about a Alibaba but as a business model for Federating lots and lots of little industries and providing the complimentary services that they need, which could include shipping consolidation, for example.
So you know, if I have just my shop and I have to ship something, that's a big problem. But if a whole bunch of people can coordinate their shipments it becomes much less of a problem or if I can make a reciprocal arrangement so that my shipping cost is paid for by the shipping cost of somebody importing in, then things become sort of easier.
>> TORNIKE JOBAVA: That's a very good point. So we have engaged different transporter companies in our program. They are engaged as stakeholders and where we also offer to our beneficiaries, it's not only the trainings but also this networking. So we took them with us, and we are explaining them, that can -- if they can shape much cheaper if she ship it together. That's why we have Georgia Post and different posts that were presented to.
>> KRISTINA OLAUSSON: So thanks both for those interventions. We have about 15 minutes left, even though I'm sure we can be a bit over time, but as we should have time for the online moderation. I would like to ask how do we identify these problems? There are both problems with infrastructure and the post system. So -- and as Jonathan mentioned, the culture of selling online, what we also heard from the European business association that people are -- there are these chances but people don't really take them yet.
So there might be differences in how to address these issues. I also want to point you to the picture we have here on the slide, since I cannot show you the results yet for our survey, I'm taking the ones from the mobile economy, where we identified a few issues such as -- yeah, interconnectivity, goes very high up. So what we have discussed here as well, the infrastructure. But also cybersecurity data protection. Maybe these issues are more connected to when the commerce actually starts taking place online.
And as I gather from you here, the main challenge you have is actually getting to that stage, but if I could open to the panelists to share their views on where should we raise these issues? Who are the actors we should talk to?
>> TORNIKE JOBAVA: Well, I will start from the point of E-governance. While in Georgia we have very good platforms. We have people, citizens and others as well that can get services online.
I can okay we are in the top ten countries that have the eCommerce. The problem is that people do not use it or very little people use it, and that's why we are working on the demand side. That's why we are trying to increase this awareness and of course, infrastructure is a problem, but except infrastructure, there is a problem of education, problem of awareness, problem with trusts, et cetera, et cetera.
>> KRISTINA OLAUSSON: And how can we address those problems?
>> TORNIKE JOBAVA: Well, what we do from our side, we are increasing this awareness. We are teaching them. We are showing them, we have work examples and people need to see some examples to believe. And so we had an example when during our trainings we have, we have to one SME to push the advertisement on Facebook. It was one the budget and the second day he got the order for 2,000 -- it's about 800USD. So with one USD, he got 800 USD. So we are increasing demand and we think it's one main important point. And what we can do from our side is this, I think.
>> KRISTINA OLAUSSON: Maybe if I may ask Jonathan then, with regards to the differences we see here of the challenges on the regional and country level, are the discussions of global eCommerce rules in the WTO premature or how should we address that?
>> JONATHAN CAVE: They are not premature because the problems are real and pressing. The danger is that it will be shaped by a few models of development in a few very large countries and it's one the problems with multistakeholderism, is that it's fairly easy to tick the box of participation and particularly when specific countries, they have a lot of values. Even though they are voting -- they are voting either out of their notion of their current problems, more likely out of the current problem, plus the solution that's been promised by somebody else.
The EU succession process is a bit like that. We have all observed the fact that in many domains the new succession states outperformed the old, and in part because they had so little fixed capital and such low levels of ownership of devices. So everything they got was state-of-the-art, and kicks off the feedback loop and things accelerate quite fast.
Before that happens everything appears risky, an access not to capital, but to capital with a good structure, is very difficult, and there's a kind of sort of chicken and egg problem there, that makes it particularly problematic. But with respect to the specific question of how you get these voices, there are certain fora, many of which are represented in the EuroDIG community, which are at least in principal open, the door is open. The key point is to go in through the door with a useful message and enough critical mass. So they are networking not with large strategic companies but people in a similar position can help hugely as we have seen in developmental matters. You know, the developing countries developed a different position which everyone ignored until they developed it all together. And then all a sudden they begin to be listened to.
There are certain things you can do to reduce -- or change the nature of the problem so it appears that it can be solved by things like standards or reciprocal rules. In the 4G case, you have very good 4G coverage and it may not be affordable. In England in the rural areas, some farmers buy 4G and then resell it to their neighbors. That model worked with 3G.
A lot of communities just dug trenches in the ground and put their own glass. Glass is teach and people will give you glass. Once you have, that you have got very, very good broadband pretty much everywhere and then people start taking you seriously. So I think that they are -- in the choice of the platforms, and in the choice of the things that you do to prepare for the platforms, that's a very good thing.
Final thing I would say on the broadband business, is that in the west, mobile phones were complimented to fixed line phones. We started with fixed line phones, and in Africa and other developing countries, it was the other way around. There was not the infrastructure and people got mobility phones and everything that went with mobility, and M-PESA, it was a substitute for fixed line and not nor mobile.
The same is probably true for broadband, 4g and particularly 5G, although the investment is a little higher. It's a lot lower than the investment in wire line infrastructure and it's much easier to upgrade. So it's probably a better kind of thing to do. And I would tend to embrace 4G or 5G, or 6G or 20G.
>> KRISTINA OLAUSSON: Let me also open up to the floor. Maybe we have some questions around the table? No? Yeah? Please go ahead.
>> PARTICIPANT: I would like to ask questions about the cross border trading, especially for physical goods -- I mean, eCommerce. We mentioned some services like tourism, or digital goods can be traded everywhere quite easily, but when we are talking about the physical goods, distance matters.
We mentioned the shipping. So is there any, like tendencies or trends in Europe or does the European Union think about this -- I mean, first of all, inside European Union, and so China's experience shows that this shipping costs quite matters. Even Amazon shows that free shipping was one of the most important points for Amazon's success.
So -- and especially, of course for Georgia as well, for small countries to focus on export, this cost is quite significant. So this is my questions.
>> KRISTINA OLAUSSON: Thank you so much. And just before I open up for answers, if I may ask the gentleman and the lady joining us in the room, you are very welcome to sit here at the table too.
>> JONATHAN CAVE: So from my perspective, thinking about Europe, there's obviously the way in which they have tackled that is through the single market. And single market rules have been designed to remove all barriers, regulatory differences to trade within Europe.
That doesn't mean that they are committed at all to free trade as you undoubtedly know. And so, Europe as a whole has been quite protectionist, but even within Europe, despite the fact that this is a single market. When you do it online, geographical discrimination is a really, really big problem. I buy the same goods in Belgium as I buy in the Netherlands and when they see me with a Belgian address, the price is different for transport and shipping.
These are very heavily, and I know that the commission has made good noises about trying to deal with this problem, but nonetheless it's back to people to use VPNs to try to pretend to be in another country to get around it.
So they recognized the problem. It's a difficult one and in certain domains like public procurement it remains and interactable one where you can't even find the data to see how you just know the experiences of individual firms.
So I'm not sure that they have a particular solution to it, for physical goods. It's also true that it works more easily for high valued density goods, you know. If one -- yeah. Right like high-tech stuff, basically.
>> TORNIKE JOBAVA: I think Amazon needs to come to Georgia and let them think about how no ship it from Georgia to other countries.
>> KRISTINA OLAUSSON: Do we have any other questions? Yeah? Please go ahead.
>> PARTICIPANT: Thanks a lot, Kristina. A question in my personal capacity, picking up on what we were just discussing now. So we have been talking about the interests of the businesses, and I think it's really tricky to balance this with the interests of users, as well. When you are talking about deregulation, we have the consumer protection rules which are an advantage for consumers and businesses because these rules create trust in the market and if consumers trust, they are taking up the services and using more of the services online because necessity have certain guarantees, on the other hand.
And, of course, there are things that are discussed at your level is the localization restrictions of businesses, as you just mentioned. On 9 other hand, from your couple of interventions, I understood that it is also important to allow the business to tailor a bit what they want to do. So I have a certain product that's more efficient if I go and use this model like a more local market or if I have another product that can be more interesting for me to go to the broader market.
So I have these rules that are proposed and discussed against localization restrictions or they call this geo blocking but this is an ongoing debate that is not ending here. And on the other hand, balanced the interests of businesses, and also the freedom to have business wherever I want and do not have to face litigation costs if that becomes a rule.
How do I see this balanced user of business?
>> JONATHAN CAVE: Before I came to Europe, I was' regulator for the US Federal Trade Commission and upstairs were the antitrust people and we were the consumer protection people and we were downstairs. And we were always -- you know, you can't -- an empowered consumer, protected consumer will force firms to compete and that benefits the consumers. And if firms compete, then you don't need quite so much consumer protection, as long as consumers are informed and know what is going on. In this mar case, the localization issue is very important because from the Brussels perspective of the EU, difference is bad. They want a single market and particularly in networked markets that means a few large players.
They will be registered and playing taxes and employing people but they are still large firms and it's an inevitable consequence of having a network with externalities. And what one would like to see ideally is comparative advantage. Would you like to see some degree of commercialization and localization because that's an efficient thing to do.
It’s hard to evaluate. You can say that this firm is profitable in this country and they wouldn't make so much if sold in the other country. It's okay if there are different ones. And comparative advantage plays out very differently, if the customers come from all over the place.
If they pick something and think this is what we want, then you have a monopoly and everyone else is out of business and so it's between dynamism of competition.
If you think of economic models hike a hoteling modeling, you expect a degree of differentiation. In that sense, the fair competition regulation works against efficient competition, and I have always thought that competition was a means to an end and that was sort of better products that are affordable and match what people need.
But the final thing, I would say is in terms of freedom to open up a business everywhere, for large businesses, the commission sort of understands that and one of the new significant developments is something called the once only principle. That if you submit your information to a government anywhere, then that information about, for example, your business registration, your employees, tax status should be available to any other government anywhere else and you shouldn't have to be asked for it, let alone ask for it in a particular certified firm in this office if you were opening up in Italy, for example.
The European once only principle which is beginning to be recognized can really, really help with opening this up. A lot of the barriers are just procedural barriers and as I said before, they hit small businesses much more than big businesses, because the big business can always make a deal with a local subsidiary as a partner and just jump over that barrier.
>> KRISTINA OLAUSSON: Okay. It's almost half past. I don't know how our remote moderators are doing?
Are we ready for the messages? Or do we have a few more minutes. Maybe we see if there's any last questions from the floor to our panelists or for the room?
Okay. Then please go ahead, and sorry that I didn't present our two colleagues Jana and Bertram who are helping us today. Please go ahead. Jana.
>> Thank you. Kristina, so there are four messages that I will read out now. Also, if you agree with them or disagree with them, please say it. And if you think that something else should be added, then, yes, we ask you to do that.
Okay. So the first one goes, the future steps in strengthening eCommerce in Europe should take the country's specific context into consideration and reflect issues such as infrastructure, language, geographical position, consumer culture, algorithms and Internet connectivity. Kind of long.
The second one is understanding consumer culture is necessary for finding a balance between eCommerce and commerce. If consumers prefer owe eCommerce only it's reflected by potential biases and affect the overall trade. When setting eCommerce as a policy objective are development, developing countries should be cautious about opening up their market to achieve a balance between competition policy and consumer protection.
Improving it can lead to a higher dividends between the rural divides -- between the rural and the urban areas and this should be clearly considered in the developing policies. Are they okay? Are they not okay?
>> KRISTINA OLAUSSON: I think the whole floor agrees, understand there's a comment here?
>> JONATHAN CAVE: It's just an attorney comment. Something occurred to me in relation to the third bullet which is this thing about the order in which you let people in or send goods out. That if it's a mutual benefit, you could imagine that you could capture these -- you could capture these benefits, and share them, put them in escrow for a while. So if Amazon is selling into Georgia, was making a lot of money from the opening of this market, that money could be put in an being and used to develop local business and we have that now with industrial policy in Europe. You don't pick winners in technology anymore. And that helps the development all the way along. So it's not just A versus B. It's sort of getting A to help B along.
>> KRISTINA OLAUSSON: Great. Thank you so much for today. I think we have identified a few interesting issues such as both education here from the Georgian perspective but also culture, infrastructure, and -- and also foremost trust in these channels to make them work and it seems like we are going towards a big development of eCommerce in -- in the eastern region and in Europe, approaching western countries. Maybe that will spur more discussions on the global eCommerce rules when it declines. There are also problems of governments using protectionist measures to protect their own market.
So we will have to continue this discussion but thank you so much for your participation. I will close the session here and enjoy the rest of the day.
(End of session)
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