Sure... if he, as a publisher/retailer actually puts it into his contracts that he holds the international rights.
However, if a specific publisher doesn't have those rights, and the author does not agree to amend the existing contracts, the retailer can't just haul off and start selling internationally. For starters, that would be stomping all over the existing contracts.
Why, exactly, is it OK for a publisher to disrespect the agreement they've got with the author?
-- Sorry, that is all completely irrelevant. Neil said he did have those rights. Not to mention the fact that UK publishers do rely on Australian sales for a reasonable percentage, for example. So throw all those away then?
Let's say I run an ebook store online. I'd like to keep my books simple, deal only in one currency, keep VAT / sales tax payments simple, avoid customer service issues due to language issues, cut down on fraud, minimize payments to my credit card processor, not run afoul of a nation's laws to which I am oblivious (do you
really think you can sell
Naked Lunch in Saudi Arabia and not get noticed?), and have reasonable marketing and advertising costs.
-- Right. So stopping Canadians buying books in the UK is equivalent to selling Saudi Arabians Naked Lunch. That's ridiculous. Media business people are arrested by Saudi Arabians all the time, see hundreds of stories a day about that, don't we? If you wanted to cut down on fraud, you wouldn't sell in the USA, would you?

If you only want to sell in Lithuania, advertising would be cheap, sure. But these website thingies...apparently people all over the world can see them. Even podunkbooksonline.com like the above.
Merely because you
can do something does not mean it's a smart business move. I can sell kitty litter at my online bookstore, does that mean I should?
-- You'd only sell stuff for shitty cats in one country, presumably?
Completely aside from international rights issues, there are tons of intelligent reasons to stick to one market.
First, the biggest step forward in this mess was taken by a retailer, namely Amazon. I'm not sure how people have missed it, but the $2 fee is generally based on the cell phone service, not some "screw unAmericans" fee.
-- Yes, you see the word 'telco' I used? If you were not aware, that means telecommunications company. Purveyors of mobile-phoniness etc.
Second, if publishers are going to set up their own ebook stores -- which Penguin, Baen, Harlequin and others have already done by the way -- they're going to do it no matter how the international rights issues shake out.
Third, lots of publishers fully understand that 99% of customers don't give a rat's tuchas about the identity of the publisher. Most of them are either too diverse to put together a meaningful brand identity; others are too small to possibly benefit by pushing their own stores too hard. As such, publishers can't massively undercut retailers without repercussions that hurt their sales.