From physical to digital delivery: definition, scope and tariff revenue implications of electronic goods trading

With the advent of cross-border electronic commerce, an increasing number of products that have been traded physically in the past are now imported digitally. This raises a number of issues, which are currently debated at the international level: should these products be defined as goods or services; which multilateral trade rules should govern them; and, should they remain tariff and tax exempted? The paper addresses these questions by discussing definitional, regulatory and fiscal aspects of electronic goods trading and demonstrates the links among them. In particular, it analyzes data on trade, tariffs and other import duties for "digitizable products" and calculates potential revenue losses, should physical delivery of products be replaced by digital delivery. Findings show that, while for most countries overall shares in trade are still small and thus fiscal losses negligible, some developing countries would be affected considerably by tariff revenue cuts.