 Came to CSIS and said you know I have a I have a question We see this growing Growing online trade movement, and we have some real challenges about how to facilitate that the physical security Aspects around that how do we get ahead of that? How do we frame it and so through the generous support of ebay and through the brilliance of CSIS adjunct fellow fellow Katya Salmanin We said well, how would we do that? Let's gather some really smart people together and let's wrestle that question and we wrestled it in a Workshop and we wrestled it some more with a draft and today the final report is the product of that question and answer and this is what I think makes think tanks so valuable trying to get to future answers as Great luck would have it The generous support of ebay. Also the timing brings to us today. Mr. Devon Wenig the CEO and president of global ebay marketplace which looks after ebay ebay classifies and the favorite stubhub my personal favorite And mr. Wenig is here in Washington. We thought this is great Let's ask mr. Wenig to kick off this Distression and we're looking forward to your keynote And then we are going to welcome a very distinguished panel following mr. Wenig's comments to talk about the report And to offer some reflections about how we fuel this online trade revolution Just as a brief word of introduction prior to coming to ebay mr. Venig was the chief executive officer at Thompson Reuters market division of Thompson Reuters He is the master of disruptive technologies and how to bring this all together So we need the master of disruption to tell us how the future of online trade So with your applause, please join me and welcoming mr. Devon Wenig Don't trust any master of disruption who's wearing a tie. I'll just Tell you that Right off the bat. So this is great. Thank you for having us and thank you for being terrific partners we're really proud of the report and we're proud of the partnership and I'll just give a bit of context for why we're here And then I'm just going to put a couple of brief markers down To give you a little bit of context from what I think you're going to hear from the panel so once a year we do a fantastic event in Washington, which is why I'm here and we bring merchants from around the United States who happen to sell on ebay and We bring them up to the hill and to the White House and to various places to regulators and policy makers and It tends to be a couple of issues, but they're all issues that relate to small business and These meetings are fantastic because they put a real face on the issues that oftentimes get abstracted in Policy speak or in big data and I'm going to tell you a story a bit later about one of those But this week feels like it's trade week in Washington So it's all trade all the time up on the hill. So great. That's we care about that, too that's kind of what we do for a living at ebay and The biggest issue for us this week has been putting a real face on the export opportunity and on the ability for small businesses to Meaningfully grow if we and when I say we I actually mean a public-private partnership because part of it is technology and part of it is Regulation and customs and all the other stuff and if we can get our act together together We have an enormous opportunity and that Opportunity is literally to give global access to small businesses the concept of the micro multinational is real there are a million of them that are live and well and thriving on a platform called eBay and There's still a lot of challenges and issues That we need to solve because we've only scratched the surface and that's why we're excited about the report And that's why I'm delighted to be introducing the panel Let me just give a couple of contextual points That I think could be useful and they're things that I think about all the time So I wake up in the morning, and I basically worry about everything Because in the world that I live in It's changing so incredibly fast and sometimes you're so close to it. It's hard to see I'm sure that at the turn of the century when the industrial revolution was coming Nobody really saw it until it was there and I'd argue that we're in the middle of an even bigger revolution right now And it's happening so fast that I've never seen anything like it Certainly in my career and that is that global commerce is being upended by technology Consumer patterns are changing global markets are changing the entire commerce landscape in the last five years Looks nothing like what it looked like just before it and to me. They're three enormous megatrends that are shaping that They are mobilization globalization and democratization Pardon the alliteration, but you know, maybe you'll remember something Mobilization is not something there's there are some kids that were playing with smartphones somewhere on Facebook There are lots of kids playing with Facebook on phones There is also billions and billions of dollars of serious trade that is happening through mobile technology What I often say is that 20 years ago eBay turns 20 this year e-commerce began it was an internet phenomena and The internet opened to crack in the door for global markets and five years ago It's only five years the smartphone was really launched in anger and the smartphone blew those doors wide open because what happened is billions of people around the world skipped a generation of Laying cable and getting desktop access and they couldn't afford a computer and we went from about a billion desktop internet connected devices to four billion connected devices in about two years and This is the prevalence of the rise of the low-cost smartphone and all of the associated technologies Now the question is okay, so some people are buying and selling some things Actually, I think there is no Non-mobile future of commerce. Let me be that strong and say it that way My business is now 40 percent mobile in the first quarter We just did our quarterly announcement on Wednesday in the first quarter eBay sold eight billion dollars of goods on smartphones So if you want again some statistics to make that real We're now at a place where we sell about 13,000 automobiles a week on a phone About a month ago somebody bought a 1.4 million dollar Bugatti Veyron. I'm told that's a car on a smartphone On a smartphone so this year will be on track to do roughly 40 billion of trade on tablets and phones and By the way, we're only one company there are a few others out there that are technology commerce companies So it the statistics have been moving so fast. It's hard to keep up with them But this is not a small thing Mobilization has happened. It's happening and it is an enormous force Mobilization has led to globalization because of what I said the surface area of consumers Changed radically in the last just few years and now you've got billions of consumers around the world who walk around believing that they have the world's shopping malls in their pocket and This has also changed both consumer demand And the way merchants think or need to think about running their businesses Our business is about 35% cross-border and that's been growing every year We think half the business in a couple of years will end up being cross-border and in aggregate. We're gonna sell About a hundred billion dollars this year. So again in the scheme of global trade. These aren't necessarily small things, but The trend is enormous Consumers are in control. There's no putting that genie back in the bottle. So if you think well, it may be Merchants and customs rules and other things will be able to stop that trend That isn't possible because consumers are in control through mobile technology and are demanding it and Systems are you can already see beginning to adapt Another interesting trend I'll come to the third mega trend, but just as a adjunct The on and offline worlds are fully coming together and mobile is causing that as well So e-commerce was this cute little thing on the side But where serious commerce happened was in the physical world, of course people bought things in stores or Face-to-face and that's the way real trade happened. That also is not a meaningful concept anymore because today We think in the US alone over 50% of retail is digitally influenced Meaning I go into a store and maybe I scan it and I research it I research the price on the internet Maybe I go into the store I walk out and I buy it on eBay. Maybe I buy it online and pick it up in the store these this is happening incredibly quickly and We think when we think about our market and opportunity. We don't think about e-commerce anymore. There's a 14 trillion dollar retail Business market, that's the opportunity anything that's sold in a store Canon will be sold through mobile technology and vice versa. That does not mean the end of stores by the way I don't believe in that. I actually believe consumers love stores and there's a reason for stores They'll be reconfigured, but it does mean that stores have to become fully digitally capable and aware and Probably the role of stores changes, but I'll give my remarks on that some other day um Mobilization globalization and then democratization and by democratization what I mean is Sometimes I hear maybe when I'm in Washington mostly That globalization is a big company. It's a big company thing. It's huge multinationals and It's all about them and this is this is bad for jobs And it's it's you know, there's 50 companies in the world and those are the real exporters And that's what's happening Well part of our mission here is to say that is not the it's great that big companies export But it's actually the action is with the small and medium-sized businesses and For us, this is the idea of the micro multinational Our role has been to be a technology partner to small businesses and to give them access to global markets And as I said before There are in the United States for eBay 190,000 businesses that are selling to more than four continents The average size of that business less than a million dollars of sales So this is real and the other data that we find fascinating and Overwhelming and that we were sharing at the White House and we were sharing with the US TR and in other places is Those businesses that export the businesses that acts access technology are much more likely to export and those that do are much healthier They grow they create jobs and they stick around longer 95% of eBay businesses export when we were with Secretary Pritzker this morning at the Commerce Department her statistic is at 5% of businesses in the physical world export 5% verse 95% For those 95% that export we see them growing more We see that 75% of them on eBay are around three years after they started selling What's the statistic for small business health and vitality in the physical world 15? 15% of businesses last three years so You know I could go on and on with the data, but this is not another thing. This is the thing This is the thing. This is the way that small business can grow and thrive and By adjunct. I think it's an existential issue for the US economy If small businesses can't get access to global markets. What is the path in a globalizing world? for the US economy and I promised I was gonna put a face on it, so I'm gonna give you that one story Maybe your data maybe your data nerds like me. You don't care about the story, but I'm gonna give it to you anyway We had 35 sellers Here and one of them was Travis Baird great guy. I just spent the day with him. We went up to see Senator Bennett. He started his automotive parts business in Elkhart, Indiana right after college He funded it out of his own bank account with $3,000 He has a brick-and-mortar location, but he sells his products online He now exports 41% of his products and he reaches consumers in 131 different countries Compare him so 41% of his business is export If I went down the list of Amazon Walmart target, they would all be in the 20s and 30s so Travis's business is more global than Walmart's business and What he told me is that he started selling globally three years ago. He had 25 employees and he added 10 the year that he started exporting And I you know there are others and I could go on I could go on and on that is the reality So first of all, I love those stories. They make my job fun Don't worry There are plenty of parts of my job that are not fun But that's one of them because it's easy to root for entrepreneurs and it's easy to root for people That are growing jobs and businesses But rooting isn't enough. We got to help them and that's part of what this is all about So part of helping them is better and better technology like mobile to give them more and more access and Part of it is public-private partnerships to take the barriers to trade down What we see is any small removal of friction tech friction phone friction Customs friction leads to better access more sales more jobs Small things make big differences when you're talking about billions and billions of dollars of export economy So that's why we're here. That's what we do we've been delighted to be your partner and Delighted to publish the report and I think That's enough for me and we have a fantastic panel and we're gonna invite them up and they're gonna double and triple click on some Of these issues that they think about every day. I appreciate you having me. Thank you Thank you so much the micro multi-national. That's my new that's my new term. Thank you so much wonderful stories with that Let me invite our panel up and we're gonna switch over to this side And we're gonna give you some details about this new report. So please panelists come on up Well, we're changing our set a little bit so we can see over everybody Let me begin again by just Warmly thanking my partner my co-partner in crime here Katya Sammanin Katya has been a colleague of mine who is steeped in trade trade Facilitation and we were just absolutely delighted to be in a position where Katya could join us as an adjunct fellow She has a day job. She has many day jobs actually Katya Sammanin is An adjunct professor at the Anderson School of Management at the University of California, Los Angeles But she also is an entrepreneur herself as a founder and CEO of an equity crowd Funding platform trade up capital fund and the trade research platform firm next trade group But she also does an extraordinary amount of work for the development bank As well as I we where is she now is she in Bali is she where what trade conversation is Katya part of And so Katya we are absolutely delighted that You are here that you have been such an integral part of this and have produced a Magnificent report why don't I just turn to you and have you briefly summarize the report and then then I'll introduce each Panelist maybe as we proceed down the line over to you Very thank you and thank you Heather for a wonderful partnership great to be here and thank you all for being here I also wanted to thank eBay. It's been an enormously productive partnership And we've learned a lot. We've been passionate about this topic and and the intellectual Input as well as the partnership has been has been terrific Furthermore, this is a team effort. We had a terrific group here at CSIS That Heather and I convened Including Marianne Rowden who is here with us today Giving inputs to this effort and this was a new issue that we tackled It's a new rather new issue for me personally, so I've been I've been learning as I've gone So let me introduce you quickly the report what it's all about and then we turn to our esteemed speakers So as as mr. Venig was saying international trade is changing. We're amidst the revolution. There's no question about it in my mind Small companies are entering markets by virtue of technology have brand new opportunities To access new markets become exporters as well as importers for the first time And of course, this is a very desirable objective from the US point of view We want small companies to thrive grow and grow through trade what better than e-commerce from that point of view And it's an enormous opportunity. So let me let me recite some of the figures that mr. Wenig was Discussing when you look at the offline the traditional traditional brick-and-mortar exporters if you look at US census data on exporters 5% of us SMEs export 300,000 companies out of five million Six six million Employment providing companies or manufacturers about 20% export, but when you look at the online sellers on eBay Practically 100% of them export 95% was what mr. Wenig was talking about So this is drastically a new era where technology enables these companies to gain visibility with International customers worldwide get discovered often times by virtue of being online and in fact what also happens What the other difference is that online exporters companies that are selling on eBay platform Sell not to one or two markets, which which is the typical case for a US company Selling to Mexico Canada perhaps UK Australia But the typical American company or 60% of our exporters sell to one market When you look at the ebay sellers bulk of them export to at least More than five markets and even the smaller companies export on average to 28 markets The larger ebay sellers export to 66 markets. They are diversified around the world They have spread their risk. They are scaling as they grow globally It's a tremendous new opportunity and public policy should definitely be behind this and and and it is now There are the the usual challenges of trade involved in this You if you're shipping goods online, you're selling goods online and you're shipping them, of course You're still confronting customs. You're confronting the traditional issues of trade facilitation. So let's look at what? The US international trade commission in their surveys has found when you ask American SMEs Well, what is them? What are the non-tariff measures that most affect your business? What are the greatest frictions customs procedures trade compliance number one? Issue it's some some burden for over 60% of companies a major burden for almost half of them If you think of the tomorrow sellers the ones that mr. Wenig was describing Companies that perhaps sell a million dollars or so. These are tiny companies. They are Few people they know their business Intimately, they know how to leverage e-commerce But they don't necessarily have the time and bandwidth to immerse themselves into these customs procedures Similarly, if you're on the import side and you're an importer of record a small company an individual consumer It's it's Honourous for you to meet all the all the necessary Paperwork it can be daunting Once you get a handle of it may be easier, but it can be rather daunting So the the question that we had was number one How can we make it easier for these small businesses to to comply with trade? Assuming trade regulations are good. There's a reason for them How can we make it easier for the small businesses to comply and the more amorphous challenge that we tackled Which is kind of a new challenge is how do we also secure this trade because in a way you might think about this Conceptually we have more and more small companies involved in to trade millions of them worldwide We have millions perhaps billions of small parcels Circulating around the world by virtue of e-commerce every day and in a way you might say well The risk appears very fragmented and very amorphous. We don't really know what all those parcels contain We don't really know what these new traders are all about. So there is this element of what is this all about? What is the what is the risk profile of the new trade and as as? I'm sure everybody in this room agrees that we like to have Secure trade, but we also want to facilitate trade So how do we overcome this traditional tension between security and trade facilitation? That's what the report was all about and let me Conclude by giving come a couple of the policy options that our group came up with and and these very much turned on Much what eBay turns on technology. So how can we leverage technology? To access data to enable companies to trade online and one of the big ideas was big data So how do we leverage all this data that online platforms Amazon eBay? And others are collecting every day when companies make transactions on these platforms There's a massive amount of data being generated and if we can Deploy this data put it in the hands of or show it to government and we look forward to your comments, Mr. Secretary but and Get a feel for what is what are the patterns of this new trade? What does it look like and get our hands around it that will enable us to detect risk detect anomalies And target the most suspicious activity while allowing this Perfectly legitimate trade to flow more freely the second recommendation that we had actually was Heather's wonderful insight kind of a easier way for small businesses to Comply with trade whether it's on the import or export side For them to have a platform simple platform almost like a turbo tax where they would enter their product and they would enter the Destination country or the country of origin and so forth whatever requirements there are and they would immediately get the right Information in front of them and feel the right forms in the correct way This is a major challenge for small businesses How do you enter all the information and enter it in the correct way and perhaps technology again could ease this ease this Process and and enable these companies also to leave a paper trail That would that would make making more comfortable for the government to understand What what these companies are doing because they are oftentimes a new they don't necessarily have built the track record in international trade like G or Boeing or other large companies and in the final recommendation, which is probably Many of you have heard before is to raise the so-called the minimis levels in trade where the paperwork all of this is Less for parcels that are of certain amount. So today my understanding is still today The minimis is $200. So if you're a partial is below that value then the paperwork all the compliance requirements are are somewhat easier and it's easier faster for for these parcels to move and There have been long-standing recommendations to raise these levels higher so that Goods that are even more valuable could flow through More easily. So these were some of the recommendations We came up with and very much look forward to your your comments as well as the the panel's comments Cathy, thanks so much And as you said, we're absolutely delighted that assistant secretary Alan Burson could be with us Secretary Burson serves as the Chief Diplomatic Officer for the US Department of Homeland Security Prior to this position He also served from 2010 to 2011 as commissioner of the US Customs and Border Protection So you we understand about the customs and the physical security Prior to coming to Washington Secretary Burson Served as the chairman of the San Diego County Regional Airport Authority and it served in a variety of advisory roles for the mayor of San Diego So secretary Burson welcome and thank you. We would be delighted for your reflections on the report. Thank you, Heather And thank you for the opportunity. I think that this report from the perspective of hindsight five years from now will be cited as a Paradigm changing event. Let me share with you today how it affected my thinking and why I think we have an opportunity to Come together so long as with the help of institutions like CSIS or AEI we we actually can create the the the Mechanism by which the will Can can actually implement changes so on 9 11 After 9 11 on on the September 12th the way in which we dealt with that Attack was to shut down our land borders as well as our seaports and our airports We basically hunkered down behind the traditional Westphalian borderline and stopped for all intensive purposes Stopped commerce that was the reaction As a result of that the Realization that we would deal a catastrophic Self-defeating blow to our economy and would have delivered to al-qaeda the victory that it saw it by simply shutting down the modern economy over the course of the next 12 years 13 14 years we've evolved an approach that I think with some other adjustments can actually Take advantage of being pushed By the cyber development being compelled to further adapt and to do it in a Compressed time frame to telescope changes that in the past would have taken decades Will by definition have to take place very quickly. It will make many government officials very uncomfortable But it will also open up all of the Potential productivity gains employment gains economic gains that are laid out so well in the in the in the report There is one the basic lesson that we learned after 9-11 is that We have to stop looking at borders as being Lines on a map or in the sand that demarcate countries and Empires as they had in the Westphalian system since the 18th century But rather understand that in fact Borders are flows in a global context flows of goods people ideas labor capital electrons across the globe in an intensified and Often an increasingly Instantaneous way and that the job of border protection and customs Is to secure that flow as far away from the border line and as early in time before arrival and that out of that would come a Border and homeland security protection Dimension and then with the help of many people I see in this room We introduced what is now the staple the center the pivot of our border Protection regimes, which is risk management and traffic segmentation the notion that if you identify high risk Goods and you identify low risk goods and you identify those goods about which you have Insufficient information to make a judgment about risk you can actually segment the the traffic And expedite the low risk traffic and that then unlocked perhaps the greatest Key, which is very relevant to the discussion today, which is that the old dichotomy between trade facilitation and security which in any particular Transaction is real in order to secure it you have to slow down and look at it and if you Don't look at it. You are sacrificing security. What we discovered was that systemically that's actually a false dichotomy and it's a Misconception of the process and that in fact security and trade Facilitation are the same in the context of risk management. They are the same process because by identifying low risk Lawful trade and traffic 97 98% of all the trade and traffic and by expediting that Across the various barriers and frictions you actually end up with a Security regime because you can focus your rare and force your your Allocated enforcement resources on those goods and people about which you've either identified as higher risk or about which you know insufficient Facts to make a judgment about the risk this notion then permits us to say that the way in which you Find the needle in the haystack from a security perspective is that you make the haystack smaller You don't look at each piece of straw, which is what we did after 9 11 You don't rely on very granulated intelligence to reach into the into the haystack and pull out the needle The high risk although occasionally you can do that But routinely and you build into the DNA of your border process This notion that we are going to make the haystack smaller by moving the 97 to 98% of lawful traffic that we can identify. So Now we come to the cyber world most of what we had designed the system to deal with As Jerry and cork must know two customs officials is we designed it for large to large exporter We designed it for the big company And now we get forced by Cyber as we are in so many other areas to actually adapt quickly to the fact that we're dealing with many many more events and actors And they will not take no for an answer so What are the what are the opportunities that we have in the cyber context to solve problems that have been that have been plaguing customs authorities for Generations SME small and medium size enterprises We have not been able to get them involved in this risk management regime Because the costs are too great. They don't scale up well enough big problem Second problem. We have not been able for all of the talk and the goodwill been able to bring the public and private sectors together in a Much more seamless way in terms of information sharing. This Requires us to do it. It requires us to do it because we cannot otherwise Engage in the risk management processes that have become central to to our function so I I must say that I Think that this development will revolutionize not only business But it will revolutionize and create a new regulatory regime Because in fact, there is no other choice now that doesn't mean that it won't take a lot longer than it should Because of the nature of political process and bureaucratic change But I must tell you that if you had told me when I was a United States attorney actually in the 1990s in Southern California responsible for movement across the US-Mexican border that we would Actually be able to adapt after 9-11 as well as we have so the 10 years afterwards with all the complaints and all the problems We've actually changed the culture of Our government official them. I think that in fact we we can we can move We can move to both change the nature of Customs brokers to become aggregators and verifiers in this e-Trade track pilot So that we get over this problem of scale by actually creating intermediary mechanisms to Mediate the the process and then I think public private exchange is Possible, let me end by just giving you an example when I say the basic building blocks of this system are in place Is to give you an example a the example of a cast the air cargo advance Screening process that was implemented after the Yemen cargo plot of 2010 and the reason it's so important was that it affected the air the express air carriers Which account for perhaps eighty percent or eighty five percent of air cargo? And since most of what Cathy writes about will be handled by air cargo not all but to the extent It's an online ordering and a physical delivery. It will be through the the air cargo Let me give you a quick thumbnail sketch of how we solve that and why I'm so hopeful about this so 2010 Al Qaeda in the Arabian Peninsula put PETN explosives into car print rich printer cartridges and then loaded them on to UPS planes and FedEx planes with the idea that they would move through the Arabian Peninsula into Europe and they would be They would be Exploded over the air in Chicago both packages were actually addressed to Synagogues in Chicago now. I was the commissioner of customs border protection. I want to assure you That packages coming from Yemen addressed to synagogues in Chicago would have been looked at and They were targeted for review, but they were targeted for review in the O'Hare Mail depot in Chicago and of course the terrorist act would have been completed beforehand So as the Abdul Mutalib event had revolutionized passenger screening on Christmas Day 2009 so this event led to to the ACAS and the way it happened basically was John Pistol was the head of TSA and I I called John and I said look we could do this the the we could either do this the old-fashioned way Which is wait for there to be a congressional hearing and then have a Legislative solution imposed on the private sector and on the public sector as in the 10 plus 2 the ISF Earlier in the decade or we can actually bring the private sector in and co-create the solution and What had led to that was Six months earlier, I had been at a DHL hangar in Kennedy Airport. I said to a middle manager I said you get all of this information Weeks in advance about the shipments that you have you have very sophisticated data systems Why don't you share that information with us? And the answer was because if we give you that information you will inspect more of the packages And I remembered that very carefully and the predicate or the the driving force of this ACAS was bring in the private sector and they all participated the express carriers and Co-create a system of advanced data sharing so that in fact you could mitigate identify Problems and mitigate them way in advance of the shipment date and in fact the number of inspections became a fraction of What it had been before Because in fact the private sector the air express carriers were dealing with all of the issues that were raised well in advance so that they did not have to be they did not have to be inspected when they got to the Westphalian borderline so That is the outline of what I think is the Is the first us approach here in addition to the de minimis and informal entry issues that Cathy talked about But you have advanced data sharing risk assessment mitigation by the private sector and That solves that is the germ of a new regulatory regime Paul Valerie the French poet said the challenge of our times is that the future is not what it used to be We we can seize the moment and in concert with think tanks and The private sector we can devise a new regulatory regime that will serve the world economy. Thank you That's just terrific. Thank you so much and thank you for your your time and Engagement in our process Marianne wrote in president CEO of the American Association of Exporters and Importers This is near and dear to your heart and you've been a wonderful colleague to us I'm going to quickly turn this over to you and then we'll have our benediction by Jim Lewis the CSS director of a Strategic Technology Program, please and you need this. Yes, ma'am Thank you so much for allowing me to participate when Cathy Invited me to sort of a think session. I guess idea sessions last year I was running in between built a new office and I just had about enough time and it was really a revelation I literally had an out-of-body experience because I follow Charlie Munger who is the partner to Warren Buffett who gave a great line When faced with an intractable problem Turn the problem the question on its head and the two questions that I had when we were talking to eBay and other people about this issue is Knowing our trading system and the trade compliance and security protocols How do you deal with Risk that is diffuse right I mean the top Trading companies the top 1,000 the top 10,000 multinationals are responsible for 70% of the trade and Even within that 70% of that is traditionally intracompany trade, you know, so The numbers that mr. Wening were talking about you know hundreds of millions of people trading the government is just not set up to deal with it So that's the first problem. The second problem is how do you facilitate trade that is not necessarily regular trade So for example a pharmaceutical company will have a shipment of you know, they're blockbuster drugs Every Wednesday at the port of New York, New Jersey that's not necessarily the case with Companies that are using eBay as its platform So I want to show you just quickly What the current world is in trade compliance and this is a chart my parents Help me spend forty thousand dollars on a law school education so I can draw charts for Congress But you know a picture is worth a thousand words and this is the risk segmentation that mr. Burson referred to and We are in the middle of Implementing the president's executive order on streamlining export import processes for America's businesses. It was a huge Advancement and I had written the Legislative provision in the safe port act to mandate ITDS Which originated with Al Gore's reinventing government in the 1990s and finally we have an executive order that will implement it by next year but we do need to bring all those government agencies to follow customs lead for electronic data and We've come up with a white paper showing agencies Actually how to do it and we want to leverage the dollars that private enterprises are spending already on compliance So we really have to Get the agencies to learn how to do risk management on the count basis, which they really don't do they do it on a transaction basis And so we I put agencies in different buckets. We have four buckets. So this is the commercial compliance bucket, which is primarily concerned with miscibility of goods and collecting customs revenue But what the agencies really need to do is they need to look at what are the factors contributing to the risk profile of that company and What we're basically going for here with these risk factor is these risk factors is how new is that company to importing or exporting and How complex is that business? How many source countries? How many market countries? The more complexity It's not how new the company is It's how complex is that business and how many product lines and you can get to a risk score And then you want to flip it on its head and saying okay now given that risk profile How is that company mitigating the risk? Okay, how do they deploy their dollars are they deploying dollars in security programs and trade compliance programs? Do they adopt? Best industry practices do they have internal controls? Have they been audited recently? Now, you know in the social responsibility areas and many of these areas as mr. Burson was discussing with templates to We're really trying to pull back from an audit-based system because it is so labor-intensive And when you're dealing with hundreds of millions of traders, it is not going to work So the irony is yesterday. I was at the t-tip negotiators negotiations in New York Doing a presentation on this system because we'd like to use this as a proof of concept with US Agencies and then go to the Europeans and t-tip and saying we think this is a way to bridge the regulatory gap between the US and the EU This will not work for the eBay companies Because it requires dollars upfront and people to administer this system And we know trade patterns are changing when I first came to the association We had our big importers most of the textile companies and retailers and we had our big exporters like Boeing Couple years ago. I went to the BIS update in July and Toyota was there. I'm like, what are you doing here last year? I went and Walmart was there. I'm like, what are you doing here? So trade patterns are changing This week being the week of trade as mr. Wenig said and the president is advocating TPA and TPP saying we want the United States to write the trade rules of the 21st century Now that is certainly true, but don't tell the trade negotiators, but they're not writing the rules This is going to write the rules for the 21st centuries because it's going to be based on customer demand for product and The ability of companies using electronic platforms to supply those goods anywhere in the world And we have a huge opportunity with the WTO trade facilitation agreement to try out this pilot So that we can see that it works and come up with a proof-of-concept The eBay companies have one half the battle When mr. Burson was commissioner and past decade or so We struggled with the data who has the data Can they get it into the government's pipeline at the right time for the assessments? That world is coming to an end. I think The eBay model of an electronic Selling platform they have the data So that's not the problem The issue is can we scale it appropriately without being so Labor intensive for the companies to do a risk management system that will probably be Self-correcting Using the courier services using the intermediaries that they use to Physically move the goods and that is our big challenge, but we are certainly up for it at AI and hope to be a part of it Man, thank you so much Jim as Director of our strategic technologies program, but also a former senior commerce official state department official You have lived in this world. I think you've negotiated some of these Various types of first I'd love to get in concluding thoughts from you on both the project the challenges and the opportunities Jim to you Thanks, Heather and thanks to everyone else on the panel a great report a lot of fun the statistic that I picked out it was in the ebay remarks is the Survival rate of small companies and that's really significant right so that you look at you want startups You want new companies you want entrepreneurs and most of them fail One advantage in this country is it's okay to fail But ebay reduces the chance of that so there's a huge Benefit to this kind of trade. Let me talk a little bit about this one of the problems We've had is measuring the digital economy Measuring intangible trade intangible transfers and in fact we tend to undervalue it and that's reflected in the policy And people are trying to adjust to this and OECD Did a report you've seen GDP figures bumped up a little bit as people people trying to better better handle on Digital trade I got off the plane last night at two in the morning, so I'm not going to be speaking English for the rest of my talk When we get better measurements, we will do better at adjusting policy, right? And I think this is one of the goals for the next few years is our economic measurements Don't adequately reflect the digital economy, so that would be a good goal reports like this help Second thing to think about is you heard a lot about disruption You know, I don't I'm always like the word disruption It sounds anytime it sounds like a PR firm came up with that you should always be suspicious Big data cloud disruption. It's not really disruption. It's it's change, right? And this is a predictable disruption implies sort of discontinuity, right? This is continuous change It's just at a much rapid or rate with many more people involved and in looking back at the industrial revolution One of the things I was thinking about during the speeches It's not really that changes is that much faster in some ways. It's just that there's so many more entrepreneurs There's so many more companies that it gives the impression that it's very difficult to manage and that's part of why coming up With good statistics would be useful. We need to get a window on How do we actually scope this change out from a technology point of view change really isn't that rapid and we were talking about eBay I was on one of the I was on the electronic commerce working group that helped commercialize the internet 15 years ago and we were talking about eBay and these problems. So it's not technology It's more the lack of measurements and a couple other things Well, there will be change, right and it will be dramatic and I think you know When every time I drive down the Pennsylvania Avenue and go by the site of the old tower records Right for those of you who are old enough to remember that Tower is gone. It was a four-story store. I loved it, you know CDs tapes everything No one no one buys from record stores anymore That's the kind of change we're going to be seeing and just if I can be a little science fictiony for a minute Some of the other things we're looking at is robotic delivery I think robots are going to be much more important when you think of smart cars or drone delivery The first time someone told me, you know, Domino's is going to deliver pizza by drones. I was like, I'll go away But but this will happen, right? We will get to that point Autonomous agents we've been talking about this for a long time more than a decade You'll have software programs that represent you in these online markets and will make deals for you And we'll buy things for you You will not be doing your own purchasing anymore and then you may not even be picking the stuff at anymore Some machine will be delivering it for you. So That one a little further out, but that's the future. We're looking at and of course when people hear this what they say is Sort of the old Luddite thing jobs will go away jobs will go away, but others will appear You know, if you if you didn't want to do if you wanted a more hands-on type job robot repairman It's gonna be a We know that right and so the picture I'm gonna post this picture eventually All companies have had computing sections since the turn of this the 19th century and you can find the picture online type in computer computing section 1950 and you've got a picture of rows just like this with dozens or hundreds of people sitting in front of Calculating machines, you know with a little tape coming out doing the numbers They've been replaced by computers They were white collar jobs And so that was the end of the American economy when that happened in 1920 as we all know no, of course not right This will be a tremendous boost to productivity jobs will go away But new ones will appear and we will be wealthier. There are issues, right? How do you authenticate identity? I think that's gonna be a problem for online commerce. We don't do a good job I've only been working on authentication for about 20 years and I've clearly failed So maybe someone can do better data protection and privacy Currently it's not only a Unregulated in many parts of the world, but the regulations that exist are discontinuous Right, so what you have to do in Europe or in China or in Japan or the US are different This will be a barrier to trade and it's not going to get easier as people wake up and say wait I want my data to stay in my country, right? It's interesting when you look It's the companies that push back against this so the Brazilians Originally thought of a law that said commercial data for Brazilians will stay in Brazil And it was the Brazilian companies that came and said no, don't do that But we're gonna have to figure out some way and this is where the report is helpful How do you get agreement on these things on data protection and privacy? Finally, there's the non-tariff barriers to trade in talking to some Chinese officials. They Like the fact that they put constraints on companies like eBay because they think it helps them build domestic champions Could be true, right? So we're gonna have a problem with that it's when when do you get one of the largest economies in the world to play by the rules? Finally, let me talk about politics real quick because this is CSIS. So we have to talk about politics This is a political issue and Sometimes people say, oh well government moves too slow policy moves too slow, you know, look at how fast things are changing We need to move faster Governments move at the speed at which their citizens wish them to move, right? So it's not that government is moving too slow It's that citizens are being cautious or they have concerns that aren't being addressed. How do we address that? Governments aren't going to go away What we're seeing now is not the end of sovereignty, but the extension of sovereignty as governments Experiment with how do I extend sovereignty into the online world into online commerce, right? And that will be the challenge for us Is can we do this in a way that allows us to seize the economic opportunities that the new technologies will give us? So that's where I am. I think this is great Just love the data and here I am a data nerd. I guess Data nerds unite. Thank you, Jim and thank you also for you know be there We're gonna have to work hard on this absolutely for sure lots of issues I know the hour and we promised 145 and I know Jim you have to depart But I just thought well we have this incredible talent here If we if you could all indulge me for three extra minutes Can we take one question or two from the audience and then why don't we just take one question? You can fire it any of the panellists Sure, I'll make it a really long question No first of all Roger Libby with DHL and I do want to thank all the panels But especially assistant secretary Burson for his work and his previous role at CBP because honestly the work with a cast And I was fortunate to be invited into the room the week after Yemen and sit down with Deputy commissioner now deputy commissioner McLean and to find the solutions I wanted to point out what worked there and why I have a challenge now to all the panelists on this topic What worked there was government not coming to us with the solution and saying you implement this But rather the problem. I need advanced data to do targeting How can you business do that in a way that works and we weren't certain we could trust CBP at that point But it all worked out and we're very happy for it I heard that the topic one of the topics that the Express industry cares about a lot Which is de minimis because it's facilitating for these small and medium-sized enterprises that don't want to get into the big Customs work how they can move those low-value goods across borders quickly Yesterday when the house passed in the committee at least the customs reauthorization bill it included a provision to raise de minimis in the u.s From 200 to 800 This is great. We've been advocating for this for when Mike Mullen was here from EA a minute ago We've been advocating for this for about six years specifically in the u.s But our next step is how do we get the other trading partners to raise their de minimis levels? And it's always been tied to value-added tax or to how you calculate and all these other barriers that people throw up to try to say It's a problem How can we now use this example of a cast we take government saying this is a problem in industry with how we can work with you and Look at finding a solution to take those things like that Calculation which is not going to go away countries aren't going to give up their value-added tax But take it away from being a impediment at the border that slows down and adds that friction that mr. Venig was saying earlier Secretary Berson, I'll let you answer that and then Marianne maybe two seconds and then we'll conclude the the short answer is that it cannot be Increasingly we have to address this in a multilateral Fashion and the politics we still have a all of this is still based on the nation state Westphalian system in terms of regulatory regimes. We don't have a world government. We don't have regional governments but I think by senses that Taking the the issue of encryption for example and the competitive pressures that attach to that in the cyber context that more and more you're going to see the the Necessity for multilateral Approaches to these issues because there is no other way to do without losing competitive advantage To some other nation state so it starts in a smaller group of Nations that trust one another more or less and then it grows out because it becomes The the obvious the obvious solution. It's the old Schopenhauer Wisdom every truth passes through three stages and the first it is ridiculed and the second it is violently opposed And the third it's regarded as self-evident That's where I think we're going I Take a different tact one of the things that I did during the after the recession is read a lot of books From different perspectives about the causes of the great recession, but What happened? I think Particularly in the private sector the most important question to ask is how do you get paid and you find out a lot? That's all you need to know What this is going to pose for governments is how do you tax? Our companies here are so successful because in our wisdom we didn't tax them to death now That's causing some problems. Okay that we're dealing with now Whether it's the Europeans going after Google and other companies In the tech space. I think what's at the heart of it for? Countries is how do they tax and until countries deal with that and get some alignment? We're gonna have friction Fantastic wise, I hope panelists will stay around a little bit if there's some questions But we'll take but let me begin by thanking the generous support of eBay and again Usman Ahmed, thank you so much for being an important partner cutty Fantastic job a great report and for those data nerds out there very rich To our panelists Alan Marion Jim. Thank you so much. We've appreciated your your engagement in this process And thank you to our audience for being very attentive and engaged We look forward to more conversations about how we fuel this online revolution. Have a great day and a great weekend Thank you