Mann, Institute for International Economics 1 Networked Readiness and Trade Competitiveness: Lessons From Global Electronic Commerce Catherine L. Mann Institute for International Economics Chapter 9

Mann, Institute for International Economics 2 On what does E-Commerce Depend? Access to global market – strongly affected by private ownership of the network in an environment of competition and independent regulation. Services infrastructure – require a supportive fundamental policy environment (including openness to trade and cross-border investment ) Flexible Market-oriented environment – rule of law (the belief that laws will be equally enforced for all) and the overall balance of competition and regulation (rather than e-commerce specific regulation)

Mann, Institute for International Economics 3 E-Commerce: Innovation, Application, Transformation OLD BUSINESS Old Business Process : Doing old things (inventory, accounting) better GEOGRAPHY TIME DATA Markets : Information rich, global, networked New Business New Consumers, & Government NEW BUSINESSES Product : New products & services contingent on Internet; bundles

Mann, Institute for International Economics 4 An Indicator of E-Commerce Intensity Cost savings Industry readiness, product fit Internal, External Use Stages of use No consistent method or measurement! Higher figure is more intense use of e-commerce

Mann, Institute for International Economics 5 Implications for GDP Growth Growth of ICT sector ICTs Alone Productivity growth from ICT-assisted transformation throughout economy Structural Policies, Networked ICTs, Human Resources Change in productivity (potential growth of GDP)

Mann, Institute for International Economics 6 E-commerce and Trade Exposure

Mann, Institute for International Economics 7 E-commerce and Trade Competitiveness

Mann, Institute for International Economics 8

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10  Exposed and Ready. Consider an economy where the trade cones are tall and the readiness cylinder is tall (e.g., the U.S. or Singapore). Such an economy is exposed to e-commerce through trade, and its ability to use e-commerce (because the environment is facilitating) also is great. Such an economy is likely already enjoying productivity gains and faster growth.  Less exposed, but Ready. Consider an economy where the trade cones are relatively short, but the readiness cylinder is tall (e.g., Australia). Here is an economy that is using e-commerce in the domestic market to enhance resource usage and gains in productivity and welfare. The tallish import cone indicates that imports are in e-commerce intensive sectors, which, when combined with a tall readiness cylinder, implies that domestic businesses will be able to obtain cost efficiencies from those imports. On the export side, the cone is not so tall now because the country’s Networked Readiness is high, but the domestic environment is good, so exporters will be able to find new opportunities in new trade sectors.  Exposed and less Ready. Consider an economy where the trade cones are tall and the readiness cylinder is short (e.g., Philippines or Mexico). Such an economy is exposed to e-commerce through trade, but firms will find it hard to take advantage of the opportunities because the Networked Readiness of the economy is lagging. Firms in this economy might lose international market share, particularly in sectors that use e-commerce intensively, because their exporters cannot use e-commerce effectively. Moreover, gains from the efficient use of e-commerce by importers and domestic firms will be reduced.  Less exposed and less Ready. Consider an economy where the trade cones are short and the readiness cylinder is short as well (e.g., Russia). This economy is unlikely to receive much of a boost from e-commerce technologies because the domestic policy environment is not particularly facilitating. Moreover, the trade channel is unlikely to be the factor forcing policy reforms.

Mann, Institute for International Economics 11 Electronic Commerce Flat Rate Access Bandwidth International Real Time Secure Services Infrastructure is Key The “e” in e-commerce to catalyze reforms that support the “c” in e- commerce. Private-public virtuous circle to promote reform. Finance Telecom Distribution Competitive Multi-modal Customs

Mann, Institute for International Economics 12 Build awareness at the local level Access and incubators within communities serve community interests and build on community strengths Grow Internet entrepreneurs from existing community leaders and entrepreneurs. Government intervention: Preserve incentives to innovate; Beware permanent cost projects Promote diffusion out of parks Beyond Infrastructure to Business