China Key to Restart ITA, APEC may Break Logjam

Four months after talks were suspended, efforts to update the list of products covered in the WTO’s Information Technology Agreement remain stalled. However, some participants - including the US - are now calling for a breakthrough in time for a May meeting of Asia-Pacific trade ministers.

The ITA eliminates tariffs on a series of information and communication technology (ICT) products, and was agreed in 1996. Unlike the majority of the WTO Agreements, the ITA is a plurilateral pact, and therefore only requires concessions from its participants. The benefits, however, are extended to all WTO members.

Advocates for an updated agreement say that it could serve as a major confidence-booster for the global trade body, given its struggles in advancing the Doha Round talks, which are separate from the ITA negotiations and involve all of the WTO’s members.

Furthermore, proponents say, the existing ITA does not reflect the realities of today’s ICT trade, with many of the items on the 1996 list having become obsolete due to the advent of new technologies. Some estimates have indicated that an updated ITA could provide an US$800 billion boost to bilateral trade and US$190 billion to global GDP.

Focus on China

This latest series of efforts to build upon the existing product list kicked off in 2012, with many hoping that an expanded ITA could be ready in time for last December’s WTO ministerial conference in Bali, Indonesia.

However, the ITA expansion talks were suspended last November, after China asked for a series of products - reportedly around 140 tariff lines - to either be excluded from the planned list or be subjected to long tariff phase-outs, out of the total 250 under consideration.

China is currently the world’s top exporter of ICT goods, and serves as a manufacturing and assembly base for many of the products covered under the current version of the ITA.  The number and types of products China asked to be excluded from the new list, various participants have said, were too extensive to render any final agreement commercially meaningful.

“An outcome where one participant stands to reap the majority of the benefits of a deal, while the rest are left to wait for the next ITA expansion, will not bring us closer to conclusion,” US Ambassador Michael Punke said in Geneva earlier this week at a WTO committee meeting on the ITA talks.

Others in the group have similarly pressed Beijing to show more flexibility. At the same meeting, the EU also called on China “to do more to join the emerging consensus,” according to sources familiar with the discussions. Similar sentiments were reportedly expressed by Australia, Canada, Japan, Hong Kong, Korea, Norway, and Switzerland.

China, in turn, has maintained that slashing tariffs on these products would have massive revenue implications, particularly as it is still a developing country. Beijing has also countered claims that it would be one of the largest beneficiaries of increased ICT trade, given that the Asian economy is on the lower end of the value chain in this sector.

The group negotiating the ITA expansion includes 27 of the ITA’s current participants, when counting the EU as one. The ITA’s full membership includes 50 participants.

China will be serving as this year’s host of the annual Asia-Pacific Economic Cooperation (APEC) leaders’ summit, as well as all related meetings. Trade ministers from the 21-country regional group are set to meet in Qingdao in mid-May.

US business leaders have been pushing for trade ministers to use the APEC meeting to make a breakthrough in the ITA talks, a suggestion that US government officials have openly backed. The successful conclusion of the information technology deal by the May meeting is a “doable goal,” Punke said last week.

However, WTO Director-General Roberto Azevêdo told US business leaders last week that it would be difficult to predict right now “how quickly and how far we can arrive” to an ITA deal, adding that it would “not be wise for me to try and point to arrival points.”

The WTO chief did acknowledge that the ITA could feature in the two-day APEC discussions, given that many of the main players would be present.