Policymakers Should Encourage E-Commerce and its Economic Benefits

The Internet has been an incredible force in facilitating commerce in the United States and around the world. Almost in every category, consumers have benefited. E-commerce is giving consumers access to things they could not get before, meaning more choice, and at much lower prices. 

A study, sponsored by eBay, shows that as trade moves to online sources, costs come down due to the efficiencies of conducting business online. The barriers to trading are much lower, meaning a whole new market open to both businesses and consumers. For example, according to the study, 94% of the smallest 10% of businesses on eBay export their products, with 99% of the largest 10% doing the same. Certainly online commerce leveled the playing field for small business, as well as giving both large and small businesses easier access to new markets in which to operate.

This level playing field has made a huge difference in the competitive retail world. According to the study, small and large sellers on eBay have nearly the same rates of survival, and are much higher than businesses that operate in the offline world. This gives consumers greater options, which ultimately translates to lower costs. By having a business climate that encourages and allows these smaller shops to compete with larger corporations, we’re creating an environment for sustained economic growth.

E-commerce makes up a huge part of our economy. According to one report released by Forrester, the size of the business-to-business (B2B) e-commerce economy will reach $559 billion by the end of 2013, with business-to-consumer (B2C) e-commerce reaching $252 billion. According to research by eMarketer, worldwide B2C e-commerce topped $1 trillion last year and is expected to reach $1.298 trillion this year. It’s only growing, with some estimates showing double-digit growth over the next few years. 

For consumers, more business competition and more choice means lower prices and increased consumer welfare.

As an added benefit, it just so happens that e-commerce is great for the environment. According to a study published by ACI a few years back, the widespread delivery and adoption of broadband services would achieve a net reduction of 1 billion tons of greenhouse gas emissions, constituting 11% of US annual oil imports. Adoption of broadband would help facilitate online trade and the transportation of its goods. This achieves multiple policy goals—first, reducing carbon admissions; second, relying less on foreign sources of energy; and third, achieving the goal of getting every American a broadband connection, which benefits education, telemedicine, telecommuting, e-materialization, and yes, e-commerce. The proliferation of technology and e-commerce is a benefit to consumers, businesses and the American economy.

Policymakers can help e-commerce thrive by staying out of the way and not imposing Internet sales taxes, a bill that’s currently winding its way through Congress, as well as ending discriminatory taxes on wireless services that are often triple the rate of state sales taxes.  In addition, policymakers should end the threat of pyramid taxation on digital goods.  This not about preventing a digital good from being taxed at the same rate as a physical good; this is about preventing the same online transaction from being taxed by multiple state and local governments at the same time.  That duplicative taxation would be just grossly unfair.

Finally, as we’ve written about at ACI in the past, Congress should also raise the tax-exempt threshold on low-valued goods coming into the U.S., of which a bill working its way through Congress would accomplish. This minimum value ($200) has not been raised for decades, and doing so would encourage e-commerce for small businesses at home – all to the benefit of American consumers.

Government should do whatever it can to see that e-commerce flourishes, as it has been a great engine for economic activity in our country and around the world. To do anything to hamper that activity would be a mistake.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.  For more information, visit www.theamericanconsumer.org.

 

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