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Dear Dr Ecommerce,

What effect do you think e-commerce will have on the riskiness of trade? Do you believe some economic sectors will be able to participate more freely than others?

How will e-commerce influence or be influenced by traditional sources of risk in international trade? Finally, what are your feelings about the effect of e-commerce on the financial arrangements associated with trade?

Thanks,

Pascal

Dear Pascal:

I think the net effect of e-commerce on trade risk will be close to zero. On one hand, fraud may become easier as anyone with a little technical knowhow can use the web to give the appearance of being a big established organisation. Hence, increased risk. An additional problem that international traders are seeing now is that the Internet makes it so easy to do international trade, that people with no understanding of trade are trying to trade on the Internet. Although these novices may not intend to cheat their customers/suppliers, their lack of knowledge in the field can result in problems for all parties to the transaction.

On the other hand, the Internet makes it much easier to research information on potential buyers, sellers and products as well as to track down the best deal. And increased information means reduced risk. Moreover, online communities, such as the Association of International Business (AIB) allow traders to network to help each other out, share information and provide support in all sorts of ways.

To my understanding, e-commerce has not yet made much of a change in the financial side of international trade. "Letters of credit" provide insurance that if the product is delivered according to the terms of the sale, payment will be made. Documentation that has to go with each shipment is still ultimately printed out. And when delivery is finally made, payment is usually via bank transfer (which, I admit, is generally electronic). Doubtless, this will change and much of the documentation will become electronic. But the content of the documents and what the documents represent will probably remain unchanged.

I would suggest you start with AIB for information, links to resources and more. And, if you really want to know what people in trade are thinking, join the discussion group.

Dr. Ecommerce