Page 1 of 16

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 06 Issue 05

May 2018

Available online: https://ejbss.org/ P a g e | 8

A Quantitative Assessment of Electronic Commerce

by

Rosa Pérez-Esteve and Ludger Schuknecht*

Abstract

This paper tries to assess quantitatively the role of electronic commerce in economic activity

and in trade and tariff revenue collection. The share of value added that potentially lends

itself to electronic trade represents around 30 percent of GDP, most importantly distribution,

finance and business services. Electronic commerce is also likely to boost trade in many

services sectors significantly. Despite the growing importance of electronic commerce for

economic activity and trade, tariff revenue loss from electronic commerce is likely to be

minimal. Trade in potentially digitizable media goods (such as music, software or books)

which currently faces a tariff in some countries represents less than one percent of total world

trade. The revenue collected on these products amounts to less than one percent of total tariff

revenue in most countries. Even if some of this trade moved “online”, tariff revenue loss

would be only a very small share of tariff revenue.

Keywords: Electronic commerce, international trade, services trade, tariffs, tariff revenue,

technological change

JEL Code: F1, O3

* The authors were employed by the WTO Secretariat when this work was undertaken. Any

views expressed here are those of the authors and should not be attributed to the WTO

Secretariat.

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European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 06 Issue 05

May 2018

Available online: https://ejbss.org/ P a g e | 9

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

Page 3 of 16

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 06 Issue 05

May 2018

Available online: https://ejbss.org/ P a g e | 10

trade. This is followed by conclusions to the paper.

I. The importance of electronic commerce for economic activity

How significant might electronic commerce become in terms of overall economic

activity, and which are the sectors in which the greatest impact is likely to be felt? We can

assess the potential importance of Internet-based electronic commerce from different angles.

We can analyse what share of value-added in an economy is likely to be directly or at least

strongly affected by growing electronic commerce, and especially the Internet. A similar

analysis is possible with respect to intermediate inputs and final demand. From this, we can

obtain a crude picture of the overall effect of electronic commerce on the economy, and which

sectors are going to be most strongly affected. It should be emphasized at the outset that an

analysis of this nature rests on a number of assumptions and must be treated as partly

speculative. The assumptions upon which the estimates reported below are based are

summarized in the Methodological Annex.

Table 1 looks at the share in GDP of services sectors which are likely to be strongly

affected by electronic commerce in a number of OECD countries. Communication services

will probably be affected most strongly through the emergence of Internet telephony and

other Internet services such as e-mail, video conferencing etc., as these complement or replace

traditional mail or telecommunication services. Nevertheless, these services have a smaller

impact on GDP than other services such as wholesale and retail trade and financial and

business services, as we can see from Table 1. Wholesale and retail trade will be affected by

both the Internet as a new medium of exchange and the use of the Internet to rationalize

logistics and other overhead expenses in these sectors. E-commerce will impinge upon some

of the functions of wholesalers and retailers by connecting producers and consumers directly.