TENTH WTO MINISTERIAL CONFERENCE, NAIROBI, 2015
Briefing note: Information Technology Agreement
In July 2015, 54 WTO members representing major exporters of information technology (IT) products agreed on a landmark deal to eliminate tariffs on 201 such products with an annual trade value of $1.3 trillion, accounting for approximately 7 per cent of total global trade today.
At the Nairobi Ministerial Conference, these members announced the conclusion of the agreement by striking a deal on the staging process under which tariffs will be phased out. For most products, tariffs would be scrapped immediately and the vast majority of duties would be eliminated after three years. But some countries have sought transition periods of five to seven years for some sensitive products. Since the July accord, the focus of the negotiations has been on reaching agreement on the tariff phase-out schedule.
The expansion of the Information Technology Agreement (ITA) is the first major tariff-cutting deal at the WTO in 18 years and, as is the case with the Trade Facilitation Agreement, one that delivers economically significant results and in a very dynamic and innovative sector of the world's economy.
The negotiations for the expansion of trade in IT products were launched in June 2012 on the occasion of the 15th anniversary of the ITA, when it was recognized that new categories of IT products had been developed since the implementation of the original Agreement.
The Ministerial Declaration on Trade in Information Technology Products was concluded at the Singapore Ministerial Conference in December 1996 and gave birth to what would become the plurilateral Information Technology Agreement.
On reaching this agreement, members considered the keyrole played by trade in IT products in the development of information industries and in the dynamic expansion of the world economy. They expressed their desire to achieve maximum freedom of world trade in IT products, to encourage the continued technological development of the IT industry on a worldwide basis, and to contribute to global economic growth and welfare given the positive role of IT products in this regard.
The ITA provides for participants to completely eliminate duties on IT products covered by the Agreement. Developing country participants have been granted extended periods for some products.
To become an ITA participant, there are three basic principles that must be respected: 1) all products listed in the Declaration must be covered, 2) all of these products must be reduced to a zero tariff level, and 3) all other duties and charges must be bound at zero.
There are no exceptions to product coverage. However, for sensitive items it is possible to have an extended implementation period. The commitments undertaken under the ITA in the WTO are on a most-favoured nation (MFN) basis, meaning benefits accrue to all other WTO members. This plurilateral agreement is not exclusive and WTO members can join the Agreement at any time.
Initially, 29 members (including the then 15 member states of the European Communities) signed the declaration. The number of participants has now grown to 82, accounting for about 97 per cent of world trade in IT products.
The Committee of Participants on the Expansion of Trade in Information Technology Products was also established by the Ministerial Declaration on Trade in Information Technology Products at the First WTO Ministerial Conference in Singapore in 1996. The aim of the Committee was to review the product coverage, with a view to agreeing to incorporate additional products in the light of technological developments, experience in applying the tariff concessions, or other factors. Another common objective was achieving, where appropriate, a common classification for these products.
The list of products covered by the Agreement had not been updated since 1996, hence the need for participants to consider a new list of products while taking into account the sensitivities that some participants have for the incorporation of items in the expanded coverage. The new expanded coverage reflects better the realities of today's trade. It includes new-generation semiconductors, GPS navigation systems, medical products such as magnetic resonance imaging machines, machine tools for manufacturing printed circuits, telecommunication satellites and touch screens.
Under the terms of the Agreement, the majority of tariffs will be eliminated on these products within three years, with reductions beginning in 2016 and concluding for most products in 2019. Members are currently examining the draft schedules which spell out how the terms of the Agreement would be met and the staging of the tariff phase-out (with flexible periods of implementation). The objective is to conclude the technical work to coincide with the Nairobi Ministerial Conference.
The Agreement also contains a commitment to work to tackle non-tariff barriers in the IT sector, and to keep the list of products covered under review to determine whether further expansion may be needed to reflect future technological developments.
When the expansion of the ITA was agreed, WTO Director-General Roberto Azevêdo said that the deal covered a scope of products larger than global trade in automotive products — or trade in textiles, clothing, iron and steel combined.
“Eliminating tariffs on trade of this magnitude will have a huge impact," said the Director-General. "It will support lower prices — including in many other sectors that use IT products as inputs — it will create jobs and it will help to boost GDP growth around the world."
He also said that the tariff-cutting deal "shows that the multilateral trading system can deliver. The WTO has now negotiated two deals in the space of two years which deliver real, economically significant results. I hope that this success will inspire members in other areas of our negotiations.”
The Director-General added that no other negotiating forum could include so many countries. He pointed out, as well, that all 161 WTO members will benefit from this WTO agreement as they will all enjoy duty-free market access in the markets of those members which are eliminating tariffs on these products.
Such an initiative is expected to not only benefit the world's IT industry, innovators and producers but to also help millions of people, in particular in poor countries, get IT-connected. The reductions and elimination of tariffs on these high-tech products will reduce costs for both producers and users, generate efficiency and effectiveness and in such a way contribute to an improvement in the quality of lives.
Over the last 20 years, developing countries' share in the IT trade has grown to almost 60 per cent compared with just 27 per cent in 1996. The most marked increase has been recorded by China, which is now the leading exporter followed by the United States and Singapore.