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ITC Survey Exposes the Impact of Digital Trade

Domestic commerce and international trade over the Internet continues to impact the U.S. economy and change business operations. The U.S. International Trade Commission released its “Digital Trade in the U.S. and Global Economies Part 2” earlier this month, revealing varying degrees of Internet usage in the sector, as well as its most substantial barriers.

In 2012, U.S.-based digitally intensive industries—including online retailing—sold $935.2 billion in products and services and purchased $471.4 billion via the Internet. The sector exported $222.9 billion in products and services online, and imported $106.2 billion. Retail trade, worth $ 17.7 billion, nabbed the largest share of digitally and physically delivered imports that had been ordered online in 2012.

However, the ITC suggests that foreign trade barriers are having discernible effects on U.S. digital trade. According to the Commission’s econometric estimates, removing these barriers would increase the U.S. real GDP by an estimated $16.7 billion to $41.4 billion.

Among the survey’s findings, localization requirements, market access limits, data privacy and protection requirements, intellectual property rights infringement, uncertain legal liability rules, censorship, and customer measures in other countries all present obstacles to international trade. The ITC said the removal of these foreign barriers would boost U.S. sales abroad, although not all sectors would benefit equally.

For example, large companies in retail would experience more sales from the removal, more so than firms in finance and manufacturing. Likewise, small and medium-sized enterprises, which accounted for a quarter of total online sales in 2012, would see less impact.

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The size of the company also determined its reliance on the Internet for internal operations. The survey found that internal communications and online ordering of products and services are the leading ways U.S. firms in digitally intensive sectors use the Internet. Most firms surveyed reported they use the Internet for internal communications, ordering physical products and services, and business-to-business communications. Companies also said they use the Internet for supply chain management and market research.

However, large firms were more likely to report these uses of the Internet than SMEs (organizations with at least 10 but less than 500 employees) possibly because large firms are more likely than SMEs to have large networks of suppliers and other service providers that can benefit from the use of the Internet for these functions, the report noted.

The ITC sent questionnaires to nearly 10,000 firms in digitally intensive industries in November 2013. More than 3,600 responded—80 percent being SMEs. The survey asked companies how they use the Internet in their domestic operations, how the Internet has changed their business operations and what their experiences have been with foreign a barriers to digital trade.