Introduction

Introduction

Electronic commerce is burgeoning as a means of doing business and shows every sign of continuing to expand at a rapid rate. The rise of this new medium is attracting increasing attention in policy circles. Nevertheless, a lack of adequate data on the magnitude and relevance of electronic supply has made policy-making decisions all the more difficult. This paper attempts to shed further light on e-commerce and its role in trade and economic activity more generally. Electronic commerce can be divided into three stages: first, the pre-purchase stage including advertising and information-seeking; second, the purchase stage, including purchase and payment; and third, the delivery stage. In principle, all types of products can be advertised and purchased over electronic networks. The potential for electronic delivery, however, is more limited. It requires that a final product can be presented as digitalized information and transmitted electronically, typically over the Internet. Many services can be supplied as digitalized information, including financial transactions or legal advice. Some information and entertainment products typically characterized as goods, such as books, software, music and videos embody digitilized information that can also be supplied electronically over the Internet. Although all three aspects or stages of electronic commerce defined here may have certain trade policy implications, our focus is primarily upon the electronic supply of final products, or in other words, on the third stage.

The paper is divided into six sections. In the first section, we evaluate the potential importance of electronic commerce in economic activity. Secondly, current trade in digitizable media products and its evolution is analyzed. With these results, we estimate, in a third section, what the fiscal implications would be if all products susceptible to supply through electronic means which are currently supplied on physical carrier media and traded as goods –predominantly but not exclusively entertainment products such as videos and music products, as well as packaged software –were indeed traded electronically. The fourth section looks at the rôle of e-commerce in services trade. This is followed in the fifth section by an examination of the amount of trade that takes place in service sectors that may rely on e-commerce. The sixth section considers the growth prospects of e-commerce related services trade. This is followed by conclusions to the paper.