Nairobi Delivers ITA Expansion!

by John Neuffer, President and CEO

NAIROBI — At long last, the effort to expand the Information Technology Agreement (ITA) is now irreversibly bound for implementation July 1, 2016 after negotiators attending the 10th WTO Ministerial Conference in this capital city of Kenya reached final agreement on the phase-out periods for the 201 tariff lines covered by this landmark trade pact. The hard-fought outcome was announced this evening at a press conference at the Kenyatta International Conference Center, the venue for the ministerial event, and attended by WTO Director-General Roberto Azevedo and several trade ministers.

Today’s $1.3 trillion deal represents a huge step forward for innovation and economic growth the world over. By eliminating tariffs on trade in tech products, it will spur global GDP growth an estimated $190 billion annually. Products covered by the agreement include MRI machines, GPS devices, solid state drives, video game consoles, loud speakers, video cameras, and sophisticated testing equipment. It also includes next-generation semiconductors known as MCOs and a wide assortment of other products that incorporate semiconductors. For the MCOs alone, tariff savings will amount to hundreds of millions of dollars annually.

The week has been a bit of rollercoaster ride as the negotiators waited for China to submit its revised tariff schedule for formal approval by all the other parties to the negotiations. Beijing finally made that submission this afternoon. To no one’s surprise, that revised schedule only reflected technical fixes and not any improvements to its tariff phase-outs (or staging). As in past rounds, China has usually not made concessions once it gets on the ground.

Then at a subsequent meeting this afternoon, the other negotiating parties all approved China’s schedule, and the ever-so-critical “critical mass” threshold was achieved. The agreement can only go into force if it captures approximately 90 percent of trade in the high-tech goods included in the agreement, and with China squared away, critical mass was achieved.

The final stumbling block was a last-minute demand by China to include some additional text in the ministers’ declaration announcing the agreement on staging and the achievement of the critical mass necessary for the agreement to enter into force. The short of it is the Chinese needed assurances that should trade in products covered by the agreement dip below critical mass, there would be an opportunity to discuss how to handle the problem of potential free-riders. When the negotiating parties agreed this afternoon to insert text in the declaration to capture this idea, the deal was done.

This whole effort kicked off with a major conference at the WTO in May 2012 celebrating the 15th anniversary of the ITA. It’s been a winding road that has involved countless negotiating rounds in Geneva, myriad statements of support by the Asia-Pacific Economic Cooperation economies, significant backing from a global coalition of over 80 trade associations, and a lots of miles on planes by lots of people. The effort was well worth it.

While the negotiations have experienced their share of suspensions and false peaks, today’s outcome locks in the deal for good. It also means the WTO has made trade history by successfully concluding its first tariff-elimination agreement in nearly two decades.

In addition, this win for the WTO stands to give greater momentum to the Environmental Goods Agreement (another tariff-elimination negotiation) and the ongoing Trade in Services Agreement talks. All these sectorals represent an important new template for the WTO to win back its relevance in the game of opening markets around the world. These smaller bites at the apple are more achievable and realistic than the all-encompassing and fraught Doha Round.

This result is a tribute to the determination of the many the parties to the negotiation. It’s a tribute to the great work of WTO Director-General Roberto Azevedo, who deftly intervened at critical junctures to facilitate a final deal. And, it’s a tribute to the unrelenting drive and vision of Ambassador Michael Froman and his superb team at the Office of the U.S. Trade Representative.