If all international trade was done through eBay, the world would be 30 per cent richer

Frictionless trade is closer than ever before online, according to a new paper.

If all trade was as frictionless as it is on eBay, the world's real income could be almost 30 per cent higher, according to a new research paper from the European Trade Study Group, in a phenomenon known as the "death of distance".

The study looks at a dataset of cross-border transactions performed over eBay, modified to only include sales from businesses which were concluded with a fixed price; in other words, no auctions, and no customer-to-customer sales. While this removes the majority of transactions from their dataset, the modification is necessary to make eBay sales more accurately represent offline trade.

They find that, unsurprisingly, the effect of distance on trade volume is lessened online. Controlling for standard trade costs "such as the absence of a common language, a common legal system, a border, a colonial history, or a free-trade agreement", the distance effect is 65 per cent smaller online than offline.

That effect may be due to a mixture of three different frictions on trade: shipping costs, information frictions (you can, after all, only export to a country if you know someone there who wants to buy from you), or trust frictions.

Shipping costs appear to have little to do with the death of distance online – partially, it appears, because they have little correlation with distance. For instance, the average shipping cost, as a proportion of the cost of the item, is less from the USA to Iceland than it is for shipping from the USA to Canada or Mexico:

Instead, the real reduction in friction comes from the provision of both trust and information; as a result, "the distance-effect reduction is largest for exporting countries with high levels of corruption and which are relatively unknown to consumers, as measured by Google search results."

Worldwide, the increase in real income achieved by the reductions in distance effects is equal to 29 per cent, but that increase is spread very unevenly. At one end of the extreme, Brazil would see an increase in real income of 80 per cent, if only it could conduct all its trade with the rest of the world as efficiently as it does when that trade is on eBay.

At the other end, Belgium would actually lose out. It currently gains from information frictions, and would lose 0.9 per cent of its real income from trade if those frictions were abolished. It is the only country in the dataset which would lose out in such a way, though, and Britain would be up by over 40 per cent.

Of course, the study doesn't address every aspect of the online world. One of the reasons why eBay is so frictionless is that the company takes a (rather large) cut of the transaction in order to keep that infrastructure maintained. If all the world's trade was carried out on eBay, its annual revenue from international transactions alone would be in the order of $400bn, a significant increase on the $12bn it's earned in the last year. And let's not even talk about the Paypal fees.

Still, the paper strikes a blow in favour of those of us who think there are still significant gains to be made from the online economy.

eBay. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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Our treatment of today's refugees harks back to Europe's darkest hour

We mustn't forget the lessons of the Second World War in the face of today's refugee crisis, says Molly Scott Cato.

In the 1930s, thousands of persecuted people fled Europe. Our own press ignominiously reported these as "Stateless Jews pouring into this country" and various records exist from that time of public officials reassuring readers that no such thing would be allowed under their watch.

With the benefit of historical hindsight we now know what fate awaited many of those Jews who were turned away from sanctuary. Quite rightly, we now express horror about the Holocaust, an iconic example of the most shocking event of human history, and pledge ourselves to stop anything like it happening again. 

Yet as Europe faces its worst refugee crisis since the Second World War we are witnessing a deafening cacophony of xenophobic voices in response to people fleeing their own present-day horror. We must therefore reflect on whether there is an uncomfortable parallel in the language being used to describe those seeking asylum today and the language used to describe Jews seeking refuge in the 1930s.

Our response to the current refugee crisis suggests we feel fearful and threatened by the mass movement of desperate people; fearful not just of sharing what we have but also of the sense of disorganisation and chaos. Does the fact that these refugees are from Syria, Libya, Iraq and Afghanistan, and so not part of our continent, provide an excuse to allow them to be bombed at home or drowned during their desperate journey to safety?

We are not helped by the poorly informed public debate which—perhaps intentionally—conflates three quite different movements of people: free movement within the EU, irregular or unauthorised migration and the plight of the Middle Eastern refugees. While our misguided foreign policy and unwillingness to tackle change may give us a moral responsibility for those fleeing famine and conflict, our responsibility towards refugees from war zones is clear under international law.

Due to our commitments to the UN Refugee Convention, the vast majority of Syrian refugees who reach our territory are given asylum but the UK has taken fewer Syrian refugees than many other European countries. While Germany admitted around 41,000 asylum-seekers in 2014 alone, the UK has taken in fewer than 7000.

The problem is that any sense of compassion we feel conflicts with our perception of the economic constraints we face. In spite of being the fifth largest economy in the world we feel poor and austerity makes us feel insecure. However, when actually confronted with people in crisis our humanity can come to the fore. A friend who spent her holiday in Greece told me that she saw local people who are themselves facing real poverty sharing what they had with the thousands of refugees arriving from Turkey.

A straightforward response to the growing sense of global crisis would be to restore the authority of the UN in managing global conflict, a role fatally undermined by Tony Blair's decision to go to war in Iraq. Our role should be to support UN efforts in bringing about strong governments in the region, not taking the misguided ‘coalition of the willing’ route and running foreign policy based on self-interest and driven by the demands of the oil and arms industries.

We also need EU policy-makers to show leadership in terms of solidarity: to co-operate over the acceptance of refugees and finding them safe routes into asylum, something the European Greens have consistently argued for. The EU Commission and Parliament are in clear agreement about the need for fixed quotas for member states, a plan that is being jeopardised by national government’s responding to right-wing rather than compassionate forces in their own countries.

Refugees from war-torn countries of the Middle East need asylum on a temporary basis, until the countries they call home can re-establish security and guarantee freedom from oppression.

The responsibility of protecting refugees is not being shared fairly and I would appeal to the British people to recall our proud history of offering asylum. Without the benefit of mass media, the excuse of ignorance that can help to explain our failure to act in the 1930s is not available today. We must not repeat the mistakes of that time in the context of today’s crisis, mistakes which led to the deaths of so many Jews in the Nazi death camps. 

Molly Scott Cato is Green MEP for the South West of England.

Molly Scott Cato is Green MEP for the southwest of England, elected in May 2014. She has published widely, particularly on issues related to green economics. Molly was formerly Professor of Strategy and Sustainability at the University of Roehampton.