Commerce and Philosophy
In the last report, I commented on China's deep economic and commercial inroads into the region in the context of the APEC summit that culminated yesterday in Peru. Another Chinese “invasion” being watched with suspicion in Latin America is that of e-commerce companies such as Temu and Shein, due to the disruption they are already generating for regional and local market actors. In the United States and Europe, both are being discussed from the point of view of customs regulations—to curb their advance—and also about their supply chain, with emphasis—in the latter case—on issues such as human rights. This cable published this week by AFP presents us with concrete experiences on the boom that Temu, Shein, and Aliexpress are having in countries like Chile, where young people like Isidora Olave have already eliminated visits to local supermarkets. Now they buy where prices are either very cheap or at least cheaper than those at home. Hence the growing discussion to apply some protectionist measures also in Latin America.
At the heart of this debate, I think there is an interesting connection between philosophy and commerce, to discuss the ultimate goals of the market, the priorities between the producer and the consumer, subsidies to certain productive sectors, international “free” trade, and the inequalities that vitiate the meaning of this alleged free trade. If we take the case of the young Chilean Isidora Olave, fully involved in the “ultra-fast fashion” phenomenon, we have the fact that she has found offers in Temu, Shein, or Aliexpress where it is more affordable for her to buy, even with all the logistical costs involved. It happens to me in Cuba, where, by the way, people are also buying massively in the referred online platforms appealing to different ways, in many cases using cryptocurrencies as a bridge to buy virtual cards. Particularly I have also bought in Temu after having acquired these virtual cards with Lightning bitcoins, previously obtained using the formidable bridge tool developed by @brianoflondon (sometimes I also buy Brazilian pork or beans harvested in Portugal and Spain that I find either cheaper than local offers or with a much more efficient quality/price ratio).
SourceOlave bought in Shein a T-shirt, a skirt, and a set of adhesive glitter for half the value that the same offer would have in her country. More than 80,000 packages a day are being cleared through customs in the Chilean capital, which in good measure would be associated with Asia-originated shipments. “It has been a major challenge to address all the risks and the operational implications of this significant influx of shipments”, a customs official told AFP. Brazil and Chile, notes the French news agency, eliminated this year the exemptions that allowed duty-free purchases abroad when values were below US$50 and US$41, respectively. Although experts do not foresee these measures slowing down the momentum of Temu or Shein, what assessment would we make if, as a consequence of them, Olave—i.e. the end consumer—loses purchasing power? And I'm going to say yes, all players matter in the marketplace. But let's read how an author in the Washington Post reviews the discussion on the social impact of the bargain products offered by Temu/Shein/Aliexpress on poor U.S. citizens (the Biden administration proposed changes in September that, if enacted, would impact their operations).
A recent research paper by economists Pablo Fajgelbaum and Amit Khandelwal estimated that a $100 tariff-free shopping order would go up to $124 on average if the tariff-free shipping rule disappeared.
Poor Americans would be hurt most by the higher prices, the pair found, because lower-income households spend relatively more than richer people on cheap products from China that skip tariffs and fees under the current law. Their paper called the tax-free shipping rule a “pro-poor trade policy.”
Garment production workers in a sewing factory in Guangzhou (China), a Shein supplier (source).And this is all for our report today. I have referenced the sources dynamically in the text, and remember you can learn how and where to follow the LATAM trail news by reading my work here. Have a nice day.
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