China, US agree to expand free trade in technology

President Obama has announced that the United States and China have reached an understanding on a bilateral agreement on expanding the scope of goods covered by the Information Technology Agreement (ITA).

Background

This agreement paves the way for the “resumption and swift conclusion of the first major tariff-cutting deal at the World Trade Organization (WTO) in 17 years, and promises a major boost to U.S. technology exports and the jobs that support them.

An ITA agreement will unlock global economic opportunity worldwide. A successful expansion of the agreement would eliminate tariffs on roughly $1 trillion in annual global sales of information and communications technology (ICT) products and increase annual global GDP by an estimated $190 billion, according to industry estimates. The U.S. is a global leader in high-tech manufacturing and production, industry estimates also suggest that an expanded agreement will support up to 60,000 additional U.S. jobs. In addition, an agreement will lower costs for downstream manufacturing and services industries that rely on ICT parts and components as inputs, increasing their competitiveness.

The US-China agreement is key to completing to completing this expansion. ITA expansion talks have stalemated since disagreements among the parties resulted in the suspension of negotiations in November 2013. Since that time, China and the United States have been working to narrow their differences, but without a breakthrough sufficient enough to resume talks among all WTO members involved. A U.S.-China understanding has been widely viewed as a critical step toward the agreement’s completion, with full talks now targeted this month in Geneva.

This breakthrough is the culmination of efforts coordinated across the Obama administration. Obama has made the ITA expansion a top economic priority since meeting with Chinese President Zi Jinping in June 2013 and regularly reiterated the importance of a mutually beneficial agreement. The Office of the United States Trade Representative led efforts on negotiating an agreement with assistance from the Departments of the Treasury and Commerce, as well as the White House. Negotiations took place in Beijing and Geneva.

Expanding ITA supports US manufacturing and technology industries. Many of the products that would see tariff elimination under an expanded agreement are in key U.S. industries like manufacturing and technology. Here are a sample of some impacted products and the tariff reduction they would benefit from:

 

  • Next generation Semiconductors: Tariffs up to 25 percent reduced to zero
  • MRI machines: Tariffs up to eight percent reduced to zero
  • CT scanners: Tariffs up to eight percent reduced to zero
  • GPS devices: Tariffs up to eight percent reduced to zero
  • Printed matter/cards to download software, games: Tariffs up to 10 percent reduced to zero
  • Printer ink cartridges: Tariffs up to 25 percent reduced to zero
  • Static converters, inductors: Tariffs up to 25 percent reduced to zero
  • Loudspeakers: Tariffs up to 30 percent reduced to zero
  • Software media like solid state drives: Tariffs up to 30 percent reduced to zero
  • Video game consoles: Tariffs up to 30 percent reduced to zero

 

An expanded ITA would also eliminate import duties on a range of additional products like high-tech medical devices, video cameras and an array of high-tech ICT testing instruments.

Obama at the APEC session:

“It was APEC’s work that led to the Information Technology Agreement, which we are now negotiating to share the news that the United States and China have reached an understanding that we hope will contribute to a rapid conclusion of the broader negotiations in Geneva.”

A successful ITA expansion would allow substantial expansion of “Made in America” ITA exports to growing markets without the imposition of burdensome tariffs, and support tens of thousands of well-paying U.S. manufacturing and technology jobs.

The breakthrough came at a time when leaders and ministers have repeatedly called for the “swift conclusion” of an ITA expansion agreement that is commercially significant, balanced and “reflective of the dynamic technological developments in the information technology sector.” Since their launch in 2012, negotiators to expand the ITA’s product scope grew to 54 participants, which account for roughly 90 percent of global trade in products under negotiation.

Eliminating Barriers to High-Tech Trade

Since the ITA went into force in 1997, global trade covered by the agreement has more than tripled, rising to over $4 trillion in annual trade. Despite extensive technological advancements, the product scope of the agreement hasn’t been expanded.

More than 200 tariff lines will be reduced to zero under the expanded agreement.

Medical equipment, GPS devices, video game consoles, computer software and next-generation semiconductors are among that will see tariff elimination.

Economic Boon

A successful ITA expansion would:

  • Support up to 60,000 additional U.S. jobs
  • Eliminate tariffs on roughly $1 trillion in annual global sales of information and communications technology products of which more than $100 billion come from the United States
  • Boost productivity and growth across the global economy, particularly in developing countries

Source: Engadget

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