WTO Members Agree to Expand Scope of Information Technology Agreement

King & Spalding

[author: Joshua M. Snead]

On July 24, the World Trade Organization (WTO) announced that 54 WTO members had reached a tentative agreement to expand the scope of the Information Technology Agreement (ITA) by adding 201 products, including new-generation semi-conductors, GPS navigation systems, medical products, machine tools for manufacturing printed circuits, telecommunications satellites, and touch screens.

The ITA is a tariff-cutting mechanism applicable to technology-related products. It was completed in 1996 and entered into force in 1997. The ITA currently involves 81 WTO members, and tariffs that participants eliminate under the ITA are applied on a most-favored nation basis to all 161 WTO members.

Although the ITA calls for periodic review of its product coverage, no additions to the list of covered products have occurred since the ITA entered into force 18 years ago. Many WTO members and industry participants believe that significant updates are appropriate to reflect technological developments and new product categories that have been developed since 1996. In 2012, a group of WTO members began negotiations intended to expand the product scope of the ITA. As reported in the December 2014 edition of King & Spalding's Trade & Manufacturing Alert, the ITA negotiations largely stalled for a period of time until China and the United States reached a mutual understanding, which set the stage for final negotiations with other participants. Those negotiations are now largely complete.

Both the WTO and the Office of the United States Trade Representative praised the deal, characterizing it as the "first major tariff-eliminating deal at the WTO in 18 years." The WTO noted that current global trade in the 201 products covered by this agreement "is valued at over $1.3 trillion per year, and accounts for approximately 7% of total global trade today." USTR cited an industry estimate that the elimination of tariff barriers under the expanded ITA "could support up to 60,000 additional American jobs."

The participating WTO members will now turn to preparing draft schedules for phasing out each tariff line covered by the agreement. These tariff elimination schedules will be subject to negotiation over the coming months. The WTO stated that the majority of tariffs on covered products will be eliminated within three years, with tariff reductions beginning in 2016. Participants indicate that they hope to finalize the agreement at the upcoming December 2015 WTO ministerial meeting in Nairobi, Kenya.

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