ITA Expansion Talks Hit Roadblock

18 December 2014

Efforts to finalise negotiations on expanding the product coverage of the WTO’s Information Technology Agreement (ITA) were unable to lead to an agreement last Friday, leaving the next steps for the tech trade talks uncertain.

Participants in the expansion initiative had originally hoped to be able to announce a deal on these new products, which would number approximately 200, at last week’s meeting of the WTO’s General Council from 10-11 December.

However, on the second day of that meeting, EU Ambassador Angelos Pangratis told fellow members that the talks would need to go on for another day, amid reports of a persistent disagreement among some participants over the final product list. (See Bridges Weekly, 11 December 2014)

“While the finalisation of the negotiations appears certainly within reach, there is still some distance – small, compared with the long way we have already gone – which needs to be bridged,” he explained at the time, according to a transcript of his remarks.

The EU was hosting the latest round of negotiations in Geneva, which aimed to build upon an understanding reached between China and the US back in November that was meant to resolve a year-long stalemate in the talks. (See Bridges Weekly, 13 November 2014)

WTO Director-General Roberto Azevêdo had also been called upon to help facilitate the negotiations last week, sources confirmed. ITA ambassadors reportedly held another meeting this week in which they asked the WTO chief to step in and conduct his own consultations in the New Year.

Flat-panel displays

At issue in the latest breakdown was a disagreement between South Korea and China over whether to include items such as flat-panel displays in the final deal, with Beijing insisting on their exclusion. Taiwan had also reportedly raised concerns over these products, sources said, as well as machine tools.

Such items were not part of the US-China deal reached last month, sources confirmed, and Chinese officials had reportedly told their counterparts in Geneva that they did not have a mandate to include them.

Some officials noted that these flat-panel displays were actually already included in a separate preliminary South Korea-China trade pact reached on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Leaders’ Week; however, in that bilateral deal Beijing had agreed to a staging period of ten years.

In evaluating potential alternative packages last week that could help resolve the impasse, accumulator batteries were an item reportedly raised as one possible concession Beijing could give in exchange for South Korea dropping its request to include flat-panel displays – a suggestion that China was unable to accept.

Officials familiar with the talks suggested that these flat-panel displays, also known as LCD displays, are now unlikely to return to the negotiating table, given that these are a clear red line for Beijing.

While those officials note that South Korea seems to have accepted this, Seoul will still require Beijing to make some concessions in return in order to move forward in the ITA expansion effort.

Fine-tuning US-China deal

Officials familiar with the talks concurred that while the US-China bilateral deal provided a useful starting point for resuming the negotiations, some adjustments were necessary to fully address the interests of the various other participants in the ITA expansion talks.

“Through the consultations over the last few weeks, it became clear that certain members had important interests that were not fully captured by the bilateral agreement,” said US Ambassador to the WTO Michael Punke on Friday following the breakdown in the talks.

“Those members came a long way toward accepting 99 percent of that agreement, but asked that small adjustments be made in order to be able to accept the deal,” he noted.

Costa Rica, Malaysia, Israel, Guatemala, and South Korea were among those that reportedly showed additional flexibility during last week’s discussions in an effort to reach a final deal, Punke said, in a claim that industry sources also confirmed.

“The inability to conclude boiled down to the fact that the Beijing breakthrough achieved on the margins of the Asia-Pacific Economic Cooperation leaders’ summit last month included a good package, but many economies felt it needed further tweaking,” said John Neuffer, a long-time follower of the ITA talks, in a blog post for the Information Technology Industry Council.

Sources familiar with the negotiations also noted that it was natural to expect some changes to the US-China bilateral deal, with some expressing surprise that Beijing was not able to grant any additional flexibility when the pact was brought to the other ITA participants involved in the expansion effort.

The recent US-India deal that helped resolve a separate impasse on the implementation of the WTO decisions reached at last December’s ministerial conference in Bali, Indonesia, had similarly required revisions in order to meet the needs of the broader membership, various sources noted.

Next steps unclear

Another push for wrapping up the tech trade talks is not planned this month, sources say, with 2015 providing a more likely opening.

While sources noted that the 10-11 December General Council was a self-imposed deadline, rather than a mandated one, officials had warned that missing that opportunity could mean losing some of the momentum gained in recent weeks, particularly following the US-China breakthrough in November.

“Later it will not be easier, rather the contrary. Now is the moment,” the EU’s Pangratis had said on Thursday prior to the breakdown in the negotiations.

His US counterpart echoed similar sentiments at a Friday night meeting of fellow ambassadors to discuss the state of play.

“Like everyone in the room, we are disappointed not to be celebrating a deal this week. We missed a big opportunity,” Punke said at the time.

WTO chief Azevêdo has, for his part, urged participants to continue their efforts toward reaching a deal, noting in a statement on Friday that they “have significantly reduced the gaps on expanding the coverage of the ITA in recent days.”

“I urge members to remain actively and constructively engaged as we try to bridge the gaps in these negotiations,” the Director-General said.

Sources expected the WTO chief to begin his consultations in mid-to-late January, while noting that there is “no precise timeline” for formally resuming the talks, given that political decisions are what is now needed to resolve the impasse rather than technical work.

Estimates say US$1 trillion in annual trade at stake

This latest effort among a group of the ITA’s participants to update the deal’s product coverage began over two years ago, with the goal of addressing the various changes that the information technology landscape has seen since the original ITA entered into force in 1997. These talks had already broken down twice before the current impasse.

Many of the products featured in the original pact have become obsolete in recent years, while new technologies have been developed that are not covered by the ITA’s scope – raising fears that leaving the deal in its current state would eventually lead to its losing commercial relevance. Estimates place the potential gains from an expanded ITA at between US$0.8 trillion and US$1.4 trillion in annual trade, according to figures cited by the WTO.

The ITA is one of the few WTO agreements that does not include the entire membership of the global trade body. Rather, only those participants that sign onto the pact are bound by its commitments, though the benefits are extended across all WTO members. The group negotiating the expansion is itself a subset of the ITA’s 52 participants, counting the EU and its 28 member states as one participant.

ICTSD reporting.

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