Summary and conclusions

Summary and conclusions

 

E-commerce already plays an important part in economic activity and its relevance will continue to grow. According to our estimates, the share of value added that potentially lends itself to electronic trade represents around 30% of GDP in services sectors. Three quarters of this is attributed to distribution, finance and business services. Although electronic provision will primarily affect service sectors, it will also play an important role in certain manufacturing sectors such as the pharmaceutical, telecom and clothing industries. Most probably, e-commerce will entail productivity gains and price reductions in these sectors.

As far as the delivery of products is concerned, the impact of electronic commerce will fall mainly on trade in services rather than trade in goods. Trade of potentially digitizable media goods currently represents less than 1 per cent of total world trade. Of this, 60 per cent corresponds to printed matter, recorded tapes, CDs and packaged software. Nevertheless, trade in such products is growing rapidly, at 1.5 times the growth of world trade. In the short term, this trend is likely to continue until electronic trade in these products takes off. As access to Internet becomes more available world-wide and band-with of phone lines expand, the cheaper prices of these products offered through the Web will cause a substitution effect between the physical and electronic trade of digitizable media products. The extent of this will depend on their eventual degree of substitutability. In the long term, one might expect a stagnation, and even a decline, in the physical trade of these products.

What fiscal implications could we expect if trade of digitizable media products shifts into "duty-free cyberspace"? According to our estimations, tariff revenue currently collected from these products represents on average less than 1 per cent of total tariff revenue and a meager 0.03 per cent of total fiscal revenue. Only China and Hungary seem to collect more than 10 per cent of their tariff revenue from this source. Moreover, these estimates are based on the implausible assumption that all trade in these products moved on-line. In other words, they are an upper bound estimation. It should be emphasized that while governments have little cause for concern about revenue losses arising from the substitution effect, this paper says nothing about the fiscal implications of "duty-free cyberspace" per se.

E-commerce will affect services trade more strongly than trade in goods. If we take the data available for cross-border supply of services, the mode of provision where electronic trade takes place, we observe that 30 per cent of world services trade currently takes place through this mode of supply. This represents 6 per cent of total world trade. However, trade in services is significantly less than trade in goods. Even if we include affiliate trade, that is, the production of foreign service suppliers in the territories of another Member, as we have done for the United States, trade openness in electronic commerce relevant sectors remains limited. This will gradually change with the adoption and development of e-commerce techniques by service suppliers world-wide.