E-commerce mercantilism-practices and causes

Author:C.Y. Cyrus Chu, Po-Ching Lee
Position:Institute of Economics, Academia Sinica, Taipei, Taiwan (previously head of delegation of the Permanent Mission of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu to the World Trade Organization, Geneva, Switzerland)
Pages:51-66
SUMMARY

Purpose This paper aims to highlight in particular one commercially influential but subtle constituent of China’s mercantilist stratagem - asymmetrical internet access. The wider aim of the paper is to provide a solid basis of real-world facts and knowledge to the e-commerce discussions at the World Trade Organization and the ongoing plurilateral e-commerce negotiations. Design/methodolo... (see full summary)

 
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E-commerce mercantilism-
practices and causes
C.Y. Cyrus Chu
Institute of Economics, Academia Sinica, Taipei, Taiwan
(previously head of delegation of the Permanent Mission of the Separate Customs
Territory of Taiwan, Penghu, Kinmen and
Matsu to the World Trade Organization, Geneva, Switzerland), and
Po-Ching Lee
Permanent Mission of the Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu to the World Trade Organization, Geneva, Switzerland
Abstract
Purpose This paper aims to highlightin particular one commercially inuential but subtle constituentof
Chinas mercantilist stratagem asymmetrical internet access. The wider aim of the paper is to provide a
solid basis of real-worldfacts and knowledge to the e-commerce discussionsat the World Trade Organization
and the ongoing plurilaterale-commerce negotiations.
Design/methodology/approach This paper uses an empirical approach to reect the general
experiencesof consumers connecting from China to e-commerce platformwebsites in other countries and vice
versa consumersconnecting from other countries to Chinas e-commerce platform.
Findings The empirical data show that Chinesepotential customers trying to connect to the websites of
foreign internet retailers in 17 other sample countries are faced with prohibitively long waiting times. In
contrast, the averagewaiting time that it takes for customers in those other17 countries to link up to Chinas
major internetretail platforms is much shorter.
Practical implications The hard evidencepresented here serves to strengthen thearguments that such
internetcensorship is used by China to establish unfaire-commerce advantage. This paper further arguesthat
the General Agreement on Trade in Services is restrained from providing systemic solutions to the digital
mercantilismproblem. It is essential, therefore, that the ongoingplurilateral e-commerce negotiations address
this issue.
Originality/value This paper is the rst to publish detailed resultsof a systematic survey designed to
analyze theimpact of asymmetrical internet access in China.It is also the rst to examine the extent and effect
of differing internet connection speeds in the context of international trade. The outcome of the survey
providesa factual base for future rule-making at the multilaterallevel.
Keywords WTO, Data ow, Digital mercantilism, Digital protectionism, Great rewall
Paper type Research paper
Introduction
The internet has created a whole new marketplace, but it has brought with it a whole
new set of mercantile challenges for international trade as well. The fast-growing
prevalence of the internet and the anticipated boom in e-commerce may well induce and
fertilize a mercantilist mindset in governments. A government may thus be
incentivized to shield its e-commerce businesses from foreign competition, while
The authors thank their friends in various places of the world who help authors to accomplish the
eld tests, which generate the data in this paper.
E-commerce
mercantilism
51
Received30 August 2019
Revised6 December 2019
Accepted16 January 2020
Journalof International Trade
Lawand Policy
Vol.19 No. 1, 2020
pp. 51-66
© Emerald Publishing Limited
1477-0024
DOI 10.1108/JITLP-08-2019-0054
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1477-0024.htm
allowing its own industries to prey on the more liberal e-commerce market access of
other countries at the same time. Unlike traditional trade barriers, which are generally
applied directly to the object of the transaction (goods or services), the protectionist
measures used in the digital era of today often come in the form of government
interventions in the cross-border data ow by, for example, the imposition of internet
censorship or cross-border data ow restrictions.
China is the most prominent exponent of this so-calleddigital mercantilism. As observed
by The Economist magazine:
China is a sort of technological Galapagos Islands; a distinct and isolated environment in which
local rms ourish. Chinese rms are protected from external competition by government
regulation and the Great Firewall. And that protection means that they need not innovate but can
thrive by copying business models developed in the West (The Economist, 2016).
For long, China has been the best case study in the relevant researches(Wu, 2006;Aaronson,
2019).
Rather than attempting here to give an overview of the full range of Chinas digital
mercantilistpolicies, this paper will focuson one subtle but g reatly inuential constitue nt
internet connection speeds. There isno doubt that a long Web page loading time drives the
visitors away.For example, according to Googlessurvey, 53 per cent of visitsare abandoned
if a mobile site takes longer than 3 s to load (Google, 2016). Other data show that when the
page loadingtime goes up from 1 s to 10 s, the probabilityof a mobile site visitor bouncing
(enteringthe site and then leaving) increases by 123 per cent(An, 201 7).
Our empirical data show that, as a general rule, Chinese consumers need to wait much
longer to connect to foreign websites(if the connections are not bluntly blocked) than foreign
consumers to connect to Chinese ones. These two-way asymmetrical internet speeds are
caused by Chinas censorshipof cross-border data ows, also known as the Great Firewall
(GFW). Very little of the literature on the subject discussesChinas low internet speeds in the
context of trade. In our view, this is another rm evidence of Chinese digital mercantilist
practices.
Following this introduction,we proceed to present the current and projected market data
that demonstrate the signicant advantages already gained by China in the area of e-
commerce. The next section contains a short description of how Chinas digital mercantilist
policy works. This is followed by empirical data of the asymmetrical internet connection
speeds within China, showing that even when not being blocked, foreign e-commerce
businesses can hardly compete in the Chinese market. Finally,we explain why the existing
World Trade Organization (WTO) rules cannot effectively address these unfair practices.
We conclude by adding our observations of the ongoing WTO plurilateral e-commerce
negotiation and by suggestingthat a provision guaranteeing the free ow of data should be
included in the outcome agreement.
Before going further, we think it might be useful to clarify in advance some of the
terminology that we use in the paper. First, we use the terms e-commerceand digital
tradeinterchangeably. Both these terms refer to their broadest meaning, any
transaction occurring online, and their scope includes transactions in goods, services
and digital content. The same logic applies to the terms informationand data.
Although some authors tend to consider that they each refer to different concepts
(Aaronson, 2019)[1], we do not make such a distinction here. In this paper, data-ow
and transmission of informationboth refer to the transmission of electronic signals
via the internet. This includes any online communication and transfer of transactional
or personal data[2].
JITLP
19,1
52

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