A Good Day for Trade as ITA Expansion Rolls On

by John Neuffer, President and CEO

Following a tense, last-minute dust up, an agreement on the product list to expand the scope of the Information Technology Agreement (ITA) won final approval today by all but a handful of the 54 countries involved in the talks during a meeting of ambassadors in Geneva. This is a decisive step forward in the hard-fought, three-year effort to advance this initiative, representing a tremendous win for the World Trade Organization (WTO), the global economy, and the United States. An expanded ITA would also be a major boon for the semiconductor industry, boosting trade in next-generation semiconductors and the myriad products bristling with semiconductors that will be covered by the agreement.

To be sure, there were some stragglers among the parties to the negotiation who were, for various reasons, unable to give final approval to the product list and the accompanying declaration by today’s noon deadline in Geneva. Mauritius, Colombia, Thailand, and Turkey did not put their final stamp of approval on the deal. During the meeting today, however, all of them said they were working hard in their capitals to get approvals, citing mostly procedural issues they indicated should be promptly ironed out.

Taiwan, which continues to try to complete its “domestic consultations,” emerged as the most significant player that missed today’s deadline — a development that precipitated the dust up that delayed in the ambassadors’ meeting. We anticipate this tech powerhouse will make the right decision and come on board expeditiously, given the huge benefits Taiwan stands to reap from ITA expansion and the damage it would do to its reputation as a free trader if it fails to quickly join the consensus.

Assuming Taiwan comes around promptly, today’s progress sets in motion a flurry of technical work to be completed before the WTO Ministerial Conference in Nairobi December 15-18 and pretty much assures this agreement will go into force on July 1, 2016, when tariffs on the 201 agreed lines begin to march to zero. And with this, the negotiating parties will have made history by concluding at the WTO the biggest tariff-elimination trade deal in 19 years.

For the global economy, ITA expansion is estimated to add an additional $190 billion annually to the global GDP through expanded trade in tech products. Final approval of the list was also a significant win for the semiconductor industry. That list is estimated to eliminate tariffs on roughly $1 trillion in global yearly sales of tech products that includes next-generation semiconductors known as MCOs and a wide assortment of finished goods that incorporate semiconductors, such as MRI machines, GPS devices, solid state drives, video game consoles, loud speakers, video cameras, and sophisticated testing equipment. Global tariff savings from MCOs alone are projected to be $150-$300 million annually, and that figure is expected to grow significantly in the coming years.

As for the WTO, ITA expansion represents the emerging, new template for opening markets in a multilateral setting. The days of sweeping trade initiatives ala the Doha Development Agenda are over, giving way now to sectoral agreements among like-minded WTO members. Today’s success demonstrates this approach can work and can lead to significant market liberalization. Most importantly, it paves the ways for similar success down the road for other sectoral undertakings currently being negotiated in the areas of services and environment goods.

Hard on the heels of President Obama’s victory to get Trade Promotion Authority through Congress, ITA expansion gives greater momentum to his overall trade agenda. It was the U.S. government under his watch that became the first to champion ITA expansion on the international stage. The estimated 60,000 new jobs for American workers generated by ITA expansion will go in the plus column for the administration and the President’s crack team at the Office of the U.S. Trade Representative that led this effort.

Notwithstanding a few hiccups, this has been a good day for free trade. It is likely now that when WTO Director-General Roberto Azevedo, who played an enormous leadership role in getting the product list approved today, heads to Nairobi later this year, he will have a nice feather in his cap demonstrating the WTO is really back in the business of opening markets around the world.