Electronic Commerce

The convergence of computer and telecommunications technologies has revolutionized how we get, store, retrieve, and share information. Consumers now routinely use computer networks to identify sellers, evaluate products and services, compare prices, and exert market leverage. Electronic commerce (e-commerce) are business processes which shift transactions to the Internet. E-commerce is growing at a rapid rate. The value of e-commerce transactions, while still small relative to the size of the U.S. economy, continues to show strong growth despite a recent economic downturn. More significant than the dollar amount of these transactions, however, are the new business processes. Many new Internet-based companies and traditional producers of goods and services are working to transform their business processes into e-commerce processes in an effort to lower costs, improve customer service, and increase productivity, with varying degrees of success. These kinds of e-commerce transactions over the Internet - business-to-consumer (B2C) and business-to-business (B2B) - have grown so fast over the last five years that many experts continue to underestimate their growth and development.

The Census Bureau of the Department of Commerce announced in May 2003 that the estimate of U.S. retail e-commerce sales for the first quarter of 2003 was $11.921 billion, an increase of 25.9 percent from the first quarter of 2002. Total retail sales for the first quarter of 2003 were estimated at $772.2 billion, an increase of 4.4 percent from the same period a year ago. E-commerce sales in the first quarter of 2003 accounted for 1.5 percent of total sales, while in the first quarter of 2002 e-commerce sales were 1.3 percent of total sales.

There are a range of policy issues which will certainly affect the future of e-commerce activities. Internet use erases national boundaries, and the growth of e-commerce on the Internet and the complexity of these issues mean that domestic and global e-commerce policies will become increasingly intertwined. Issues currently under discussion include Internet taxation, encryption and electronic authentication (i.e., digital signatures), intellectual property protection (i.e., patent or copyright infringement), computer network security, privacy safeguards for individuals and organizations, and telecommunications infrastructure development. In the United States, legislation enacted as a result of the terrorist attacks of September 11, 2001(USA PATRIOT ACT of 2001, P.L. 107-56) gave U.S. lawmakers greater authority to gain access to electronic financial transactions (for example, to ferret out illegal money laundering).

- Abridged from State Dept. Publications and other U.S. government materials

Online Documents

Digital Economy 2003 US Department of Commerce
International Electronic Commerce: Definitions and Policy Implications

Internet Tax

Economic Issues in Taxing Internet and Mail-Order Sales