WTO Members strike a $1.3 trillion IT trade deal

By Sarthak Malhotra

 According to  a press release by WTO, 54 WTO Members reached a tentative accord at the WTO headquarters in Geneva to eliminate tariffs on more than 200 Information Technology Products (IT Products).

“This is the first major tariff-cutting deal at the WTO in 18 years. Coming so soon on the heels of the historic Bali Package which members agreed in 2013, it 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.”

– WTO Director-General Roberto Azevêdo

This agreement could lead to lower prices for consumers and generation of many jobs, giving boost to the economies around the world. 

Picture Credits: The Diplomat
Picture Credits: The Diplomat

Even though only 54 countries were involved in these negotiations, the agreement would benefit all 161 members of WTO as they will all enjoy duty-free market access in the markets of those members who are eliminating tariffs on these products. This is because the participating members will remove the duties on imports of these products regardless of which WTO member has produced them. This is in consonance with the most favoured nation principle which is fundamentally enshrined in the WTO Jurisprudence. These 54 countries control 90 percent of world trade in IT products. The terms of the agreement will be formally circulated to the full membership at a meeting of the WTO General Council on 28 July.

The reductions will begin in 2016 and the countries have agreed to remove majority of the tariff barriers within next three years. The participating members will now submit to other participants a schedule contemplating how the terms of the agreement would be met. The members are aiming to complete this work in time for the Nairobi Ministerial Conference in December. This removal of barriers is expected to give a $190 billion boost to the world economy.

Source: 15 Years of the Information  Technology Agreement-  Trade, innovation and global production networks, A WTO Publication
Source: 15 Years of the Information Technology Agreement- Trade, innovation and global production networks (A WTO Publication)

The agreement will add roughly 200 products to the list under the Information Technology Agreement. Among others, the agreement covers products such as new-generation semi-conductors, GPS navigation systems, medical products which include magnetic resonance imaging machines, machine tools for manufacturing printed circuits, telecommunications satellites, touch screens, and ultra-sonic scanning apparatus.

Information Technology Agreement, or the Ministerial Declaration on Trade in Information Technology Products (ITA) was concluded at the Singapore Ministerial Conference in 1996. ITA is a tariff removal mechanism which obligates the ITA Participants to reduce the tariffs to a zero tariff level on all the products listed in the Declaration. The Declaration does provide for non-tariff mechanism, albeit, without any binding commitments. The current list of participants can be found here.

The efforts to review the product list started in 2012 and have finally yielded results in the form of this agreement.

Reuters has reported that five of the 54 WTO members, namely Taiwan, Turkey, Thailand, Colombia and Mauritius have not signed up yet. This means that the agreement cannot be brought in force for all the other WTO Members. In absence of these countries’ signatures, the quorum of 90 percent of  total world trade cannot be achieved.  However, these countries are expected to sign up soon because the reasons of delay include reasons such as unavailability of key officials, need for more time to consult with respective governments, etc.

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