1. Thoughts on the e-commerce chapter By Marshall Reinsdorf for presentation at the UNECE Group of Experts on National Accounts April 28, 2010 Agenda item 9

2. bea.gov Definition Question  Definition of e-commerce is unsettled:  Delivered to customer’s computer over a wire, or just ordered using a computer or customized ordering software over a wire?  What about just delivered over a wire, e.g. online advertising?  Just over internet, or over any kind of network?  Can be classified into B-to-B, B-to-C, and C-to-C.  Estimates vary a lot depending on definition chosen by researcher.

3. bea.gov Economic Rationale  Lower transactions cost.  Increased competition (all the gains may go to consumers).  Allows reorganization/rationalization of the production process.

4. bea.gov Data Challenges  Underestimation of trade flows likely worsened by growth of small-valued transactions and by appearance of new kinds of trade in services.  We may not be surveying the right firms or asking the right questions of those we do survey (or of surveyed households).  Measures of retail expenditures may include exports or miss imports. (Note that unmeasured consumption and imports of online music do NOT distort measurement of GDP.)  Scope of CPI price surveys and outlet substitution bias.  How to measure/handle C-to-C commerce.

5. bea.gov Observations about Definition Question  What types of questions are various definitions best suited for?  Advantages/disadvantages of broad and narrow approaches?  More explicit discussion of international vs domestic e-commerce would be helpful: hard to know when the topic is just trade.  Greatest interest is in e-delivery definition and newly tradable services.  Include advice about survey design (e.g. respondents may report communications service as trade in deliverables, or vice versa.)  Reminders of applicable general principles of measurement of trade in services need more prominence.

6. bea.gov Observation about Economic Rationale  Increased range of varieties available for final (or intermediate) consumption is another critical benefit.  Reorganization of production often takes a long time to fully play out. Includes growth of within-firm specialization or centralization, increased outsourcing/offshoring of some kinds of activities, better supply chain/inventory management, and fragmentation of the production process.  What are implications of this for measuring economic growth or productivity growth?  Possible effects of new kinds of trade in services on employment: how many jobs are offshorable?

7. bea.gov Observations about Measurement Challenges  Need to consider how to change surveys, questions and data collection methods to capture small value transactions and new kinds of transactions.  Are our classification systems flexible enough and completeenough to keep up with new kinds of trade made possible by e-commerce?  Do profits on C-to-C commerce belong in GDP/GDI?  Inclusion of C-to-C imports in consumption, and C-to-C exports in change-in-inventories.