A report, recently released by the Global McKinsey Institute (GMI), studied the complex web of global flows of people, goods, services, finance and data and explored the significance of those flows to nations, companies and individuals. In addition, the report poses several important questions to policymakers as they debate these issues.  eBay Inc. had the opportunity to contribute research and lend our expertise to the report.

A central finding of the GMI report is that, globally, we are experiencing a shift away from a world where governments and multinationals were the only actors in cross-border exchanges. As the report states, “today digital technologies enable even the smallest company or individual entrepreneur to be a ‘multinational’ that sells and sources products, services and ideas across borders”.

eBay’s Commerce 3.0 research contributed to the report’s conclusion that digitization is lowering the cost for individuals, small firms and entrepreneurs to participate in global flows. Consistent with our research, the GMI report discovers that the power of digitization comes especially from its marginal cost economics that reduce costs associated with access and discovery to nearly zero. This removes barriers to participating in global flows, and the result is seen in the emergence of micromultinationals that are able to tap into global opportunities. At the same time, and as described by the report, this change puts pressure on all companies to innovate their business models to capture these opportunities and respond to new sources of competition.

And the opportunities of global flows are indeed promising. The report confirms positive correlations between connectedness (i.e. integration into the global network of flows) and GDP growth: global flows raise world GDP growth between $250 billion and $450 billion annually, and countries that are more connected within global networks of flows experience larger benefits in terms of GDP growth than countries that are less connected. The report also confirms that the level of connectedness among emerging markets is rapidly rising, which fits nicely with eBay Inc.’s findings that digitization of trade flows “reduces costs where it is most needed”.

Importantly, the report stresses how governments and policymakers play a central role in enabling integration into the global networks of flows. To ensure participation and connectedness benefitting companies and individuals, the report identifies a number of questions that governments need to answer:

• Do you have the right ingredients to participate? The GMI report suggests that governments need to take on an active role as enabler of the private sector to participate in flows by, e.g. ensuring infrastructure such as logistics, transport and broadband telecommunications is in place. This is similar to eBay’s vision of the “Global Empowerment Network”.
• What trade policies do you need? The report promotes a role for governments as regulators who reduce both tariff and non-tariff barriers to trade. An example of non-tariff barriers includes onerous customs procedures, in particular for small businesses. As eBay has also been arguing, the report proposes to standardize, re-engineer and digitize customs processes across borders to increase trade and reduce administrative costs.
• Is your country prepared to capitalize on the growing trend toward digitization? The report reminds that much of current trade policy was created before the impact of digital flows. Policymakers now need to embrace greater openness and connectedness. For example, they should support global standards, avoid policies that restrict communication flows, balance the enforcement of intellectual property rights with fair use, and invest in supportive digital ecosystems.
• How can you work multilaterally to mitigate the stresses of increased connectedness? The report calls for internationally coordinated policy as connectedness creates a new level of interdependence between countries: “connected policy is vital in a connected world”.

Download the report: “Global Flows in a Digital Age: How Trade, Finance, Services, People, and Data Connect the World Economy” 

Watch Devin Wenig, President, eBay Global Marketplaces, speak about Global Flows.