It's virtually vive le globalisation

SOONER or later this was always going to happen. Eventually, those wedded to a simplistic "big is bad" mindset would be forced to choose between the good big guys and the bad big ones.

In the recent war for retail popularity, the cheaper big guys won out even though they are foreign, use the internet, dodge Australian taxes and no doubt employ non-union (maybe even the dreaded "sweatshop") labour rather than the expensive, unionised Australian kind.

And herein lies a rather lovely lesson about the benefits of globalisation. Indeed, those untidy, nay, feral-looking anti-globalisation protesters who travel on Contiki for Communists tours to coincide with G20 meetings, and before that G7 gatherings, ought to be raising hell over internet retailing.

Three cheers for globalisation, anyone? After all, you can be sure that those who wail most about globalisation are reaping its online benefits every day.

In between sips of chai tea and swapping news on the best websites to buy stuff, they might even add (just quietly, you understand) that the free market is a damn fine thing. Where else can you buy a Che Guevera T-shirt for less than 15 bucks (or $20 if you want one officially licensed by some socialist). With one mouse click, even the most leery left-winger will discover the marvels of the free market now operating in cyberspace, where every two-bit entrepreneur can get a business started without so much as the smell of an oily rag.

If Gerry Harvey and Australia's biggest retailers have achieved nothing else, they have at least reminded us about the benefits of free trade and good old-fashioned competition. In fact, a particular thank you to the young woman in a fancy Sydney shoe shop who told The Australian last week that women come into her store, try on a pair of sexy heels to check the fit, and then buy them online. Thanks for the tip! Whereas shoes were the one item I had always stopped short of buying online, now I know the trick on how to click for shoes.

Of course, if you start from first principles (and where else should you start if not there), then the retailers have a point. From a straight tax equity perspective, why should online purchases be GST-free? All the arguments about how online shopping is still only tiny as a proportion of total retail revenue and GST being only a marginal consideration in a shopper's overall decision-making are true but irrelevant.

Foreign e-tailers get a free pass on GST that Australian retailers don't get. There is no reason we should not do what most other advanced economies do and apply the same (or very similar) GST rules to onshore and offshore retailers alike.

Domestic retailers are entitled to point out this blatant tax inequity and demand fairness. They need to find a smarter way, find an articulate employee (remember the ACTU's whingeing Wendy advertisement during the 2007 election?) to make this about jobs, rather than the pockets of already rich retailers.

That said, it's interesting that the reaction to the retailers has been so different to that of the miners' campaign last year. Many Australians have reacted ungraciously to the retailers' campaign, attacking Harvey as "un-Australian" and other such nonsense.

Perhaps the reason is that the retailers seemed to be treating consumers like idiots. Consumers aren't stupid. They object to the domestic retailers ignoring all the benefits that drive online shopping and pretending this is all about GST.

So when they read that retail rent in Australia is much higher than in the US, consumers are entitled to point the finger at the Westfields of this world and ask: why? After all, when those inflated rents are passed on to consumers, online shopping looks even more alluring to the smart shopper. Ditto labour costs. Australian shoppers know their online purchases are not swollen with Australian labour costs imposed by rapacious unions and inflexible work practices.

In fact, shopping online is the ultimate form of free choice. If you don't want to visit a store, and thus pay for the rent, and you don't want service, and thus pay for wages, then the internet is for you. Internet retailers don't have to deal with greedy landlords and thuggish unions.

Internet shopping is the global free market at its best. Online retailers source goods, labour and services from the cheapest and most efficient suppliers across the world, strip out unwanted components like high rent and expensive labour, wrap it all up in magnificent packaging and ship it without so much as a peep from the Maritime Union of Australia.

And if we online shoppers are really honest about what drives us to click and buy, then let's admit there is something special about that knock at the door. Try taking delivery from a savvy e-tailer like Net-a-Porter. Your purchase comes in a big, beautiful, black box with a white ribbon. It's like Christmas in July or January or September. All it took was one woman, Natalie Massenet, with one idea: that busy women will buy high-end labels online. And zing! The business generated sales of pound stg. 120 million ($189m) in the year to January, attracts up to three million visitors a month, and the business she recently sold is now valued at more than $500m.

The last laugh goes to Massenet, who told a reporter recently that "there were a lot of unimaginative private-equity people who said that women would never shop online. I think about those people a lot. I'm sure their wives are having Net-a-Porter bags delivered to their homes every day."

A zillion sites are offering consumers everything under the sun. Internet shoppers know global competition drives innovation and produces classy but cheap goods. Somewhere Adam Smith is smiling at Amazon, Net-a-Porter, Expedia and co.

To be sure, the globalised online free market revolution will produce losers just as the invention of the typewriter put hundreds of civil servants with goose quill pens out of work. Those unwilling to re-train, recalibrate their thinking to a new world, will be left behind. And it is hard not to mourn for some of them, such as the charming and helpful chap who used to develop my photos before I discovered the wonders of Apple's magnificent iPhoto picture book service. Now, holiday snaps turn up a week later in a glossy, hardback book to rival a coffee-table collection of Ansel Adams. Now that's innovation.

Meanwhile, consumers are the winners. And they will remain the winners, even if the government introduces some tax equity for local retailers. In fact, any economically literate government ought to level the playing field. Alas, none of that will change the free choice of consumers in the new online age. Fixing the GST glitch is fair but may not make a jot of difference. Long live globalisation.