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WTO NEWS: 1997 PRESS RELEASES

PRESS/70
27 March 1997

Launching of free trade in computer products to benefit everyday life of consumers and companies, says Ruggiero

Forty governments agreed, on 26 March, to implement the WTO Ministerial Declaration on Trade in Information Technology Products (ITA) that will cut customs duties on computer and telecommunications products beginning on 1 July 1997 and eliminate them altogether by the year 2000.


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These tariff reductions will apply to all WTO members.

The WTO Director-General, Mr Renato Ruggiero hailed the ITA as "representing another very important success for the multilateral trading system". He said:

"This accord, which covers nearly $600 billion in world trade, means lower prices for consumers and fewer barriers to the spread of technology that is so critical to the development of all our members.

"The 40 governments have agreed to phase out all tariffs on computers, software, telecoms products and semiconductors. They account for 92.5% of world trade in IT products, but the benefits of this agreement extend well beyond the 40 and will indeed reach practically every country on earth.

"Taken together with the historic deal reached last month on trade in telecommunications services, the ITA provides a springboard for economic growth and development in the 21st century. WTO agreements to liberalize trade in these two sectors, which collectively are the lifeblood of the world economy, amounts in quantitative terms to a new trade round.

"In statistical terms, these two accords cover international business worth over a trillion U.S. dollars, which is roughly the equivalent of world trade in agriculture ($444 billion in 1995), automobiles ($456 billion) and textiles ($153 billion) put together. This is indeed an impressive achievement.

"But the importance of the agreement goes well beyond statistics. The impact of these agreements on improved living standards for the world's citizens should not be underestimated. The computers, semiconductors, telecoms hardware and computer software that are included in the ITA are the conduit for the delivery of information. By making such products more affordable, we move one step closer to the vision of a telephone in every village of the world. The ramifications of such an achievement to the health and education of those in the poorest countries are obvious.

"We must now turn our attention to the third leg of the three big negotiations we have scheduled for 1997: financial services. But given the spirit of good will and compromise our members have shown so far this year, I am confident we can have a successful outcome."

NOTE TO EDITORS:

The WTO Ministerial Declaration on Trade in Information Technology Products (ITA) was agreed at the close of the first WTO Ministerial Conference on 13 December 1996 in Singapore. The ITA provides for participants to eliminate customs duties and other duties and charges on information technology products (contained in the annexes) by the year 2000, on an m.f.n. basis (applied to all WTO members).

The Declaration, however, provides that implementation is contingent on expanding ITA participation to cover approximately 90 per cent of world trade in IT products by 1 April 1997.

The ITA participants, on 26 March, agreed that this criterion had been met. They also established a Committee on the Expansion of Trade in Information Technology Products, which will monitor the implementation of the ITA, discuss and approve expansion of product coverage and deal with requests from other countries to join in.

Participants

40 - The 29 participants in Singapore (Australia, Canada, the 15 members of the European Communities, Hong Kong, Iceland, Indonesia, Japan, Korea, Liechtenstein, Norway, Chinese Taipei, Singapore, Switzerland, Turkey and United States) plus 11 other countries that have come on board since then (Costa Rica, the Czech Republic, Estonia, Israel, India, Macau, Malaysia, New Zealand, Romania, the Slovak Republic and Thailand). The 29 participants in Singapore accounted for about 83% of world trade in IT products; the current 40 participants represent 92.5% of world trade in this sector. The ITA tariff schedules of these governments have been approved by consensus. Approval for Panama and Poland has been delayed because it has not been possible to conclude the negotiations with trading partners. Two more WTO members, the Philippines and El Salvador, have indicated their intention to join in the near future.

Tariff-reduction timetable

The ITA provides for the "staging" of tariff reductions in four equal rate reductions (25% each time):

1st    1 July 1997

2nd    1 January 1998

3rd    1 January 1999

4th    Complete elimination of duties no later than 1 January 2000

In addition to regular customs duties, the ITA Declaration also provides for the elimination of other duties and charges (ODCs) by 1 July 1997 (except if otherwise specified in a participants schedule).

Costa Rica, Indonesia, India, Korea, Malaysia, Chinese Taipei and Thailand have been granted flexibility in cutting their tariffs on a few products to zero after the year 2000 but not beyond 2005.

IT tariffs in the "Quad" countries are generally low but some duties reach as high as 17%. Relatively high tariffs are concentrated in the telecom sector in the United States and Canada, and on semiconductors in the European Communities. Many developing country participants apply high tariffs on IT products, including more than 50 per cent in some cases.

Product coverage

World trade in IT products is significant -- about $600 billion annually, or about 10.2 per cent of world merchandise trade. There are six main categories of products covered by the agreement:

1.     Computers (including complete computer systems and laptops as well as the components such as CPUs, keyboards, printers, display units (monitors), scanners, hard disk drives, power supplies, etc... )

2.    Telecom equipment (including telephone sets, videophones, fax machines, switching apparatus, modems, and parts thereof, telephone handsets, answering machines, radio-broadcasting and television transmission and reception apparatus, and pagers.)

3.    Semiconductors (include chips, wafers, etc... of various sizes and capacities)

4.    Semiconductor manufacturing equipment (include a wide variety of equipment and testing apparatus used to produce semiconductors such as vapor deposition apparatus, spin dryers, etching and stripping apparatus, lasercutters, sawing and dicing machines, deposition machines, spinners, encapsulation machines, furnaces and heaters, ion implanters, microscopes, handling and transport apparatus, measuring and checking instruments, and parts and accessories.)

5.    Software (contained in diskettes, magnetic tapes, CD-ROMs, etc...)

6.    Scientific instruments (include measuring and checking devices, chromatographs, spectrometers, optical radiation devices, and electrophoresis equipment.)

Additionally, other main products of interest covered by the ITA include word processors, calculators, cash registers, ATM machines, certain static converters, indicator panels, capacitors, resistors, printed circuits, certain electronic switches, certain connection devices, certain electric conductors, optical fibre cables, certain photocopiers, computer network equipment (LAN & WAN equipment), flat panel displays, plotters, and multimedia upgrade kits. The ITA does not cover consumer electronic goods.

The participants, after finalizing technical discussions on product coverage on 31 January 1997, agreed that the first set of consultations on additional product coverage would begin on 1 October 1997. These consultations will be completed during 1998 with a view to the entry into force of the revised schedules (incorporating the enlarged product coverage resulting from the initial review) no later than 1 January 1999.

Leading exporters of IT products in 1995

1. Japan $106.6 billion

2. United States 97.99

3. European Union 15 (extra-EU exports) 57.07

4. Singapore (domestic exports) 41.27

5. Korea 33.22

6. Malaysia 32.84

7. Chinese Taipei 28.71

8. China1 4.51

9. Mexico 11.67

10. Canada 11.55

Total of above: $435.43 billion

Leading importers of IT products in 1995

1. United States $139.93 billion

2. European Union (extra-EU imports) 104.84

3. Japan 37.68

4. Singapore (retained imports) 24.72

5. Malaysia 22.22

6. Canada 19.81

7. Chinese Taipei 16.53

8. Korea 16.47

9. China1 4.35

10. Hong Kong (retained imports) 12.1

Total of above: $408.65 billion