US Announces Breakthrough with China on ITA Talks

13 November 2014

Washington and Beijing have reached a “breakthrough” in their prolonged stalemate over which products to add to the scope of the WTO’s Information Technology Agreement (ITA), the US confirmed on Monday. Officials say that this new development could allow for the broader negotiations on the tech trade deal to resume back in Geneva.

The announcement came amidst the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Week, hosted this year by China. The now 21-country regional grouping has been credited with being the impetus for the original 1996 ITA, a deal which eliminates tariffs across various information and communication technology (ICT) products.

“APEC has been the incubator of ambitious trade agreements at the centre of our agenda,” US President Barack Obama said on Tuesday in his remarks to fellow leaders at an APEC plenary session. “So it’s fitting that we’re here with our APEC colleagues to share the news that the United States and China have reached an understanding on the ITA that we hope will contribute to a rapid conclusion of the broader negotiations in Geneva.”

The move came after a prolonged stalemate over which products to include in an expanded ITA list, with the talks breaking down last November after Beijing asked for various sensitive items to either be excluded from the list or be subject to long tariff phase-out periods.

China is the world’s top exporter of ICT products, and is also a manufacturing and assembly base for many of the products that are addressed in the original trade pact.

According to a White House factsheet released this week, products that the US and China have ultimately agreed to include in the expanded ITA, once the whole group’s membership agrees, include next generation semi-conductors – which currently face tariffs of up to 25 percent – along with various high-tech medical devices, software media and video game consoles, and global positioning system (GPS) devices.

Overall, the details on what this new understanding entails were limited. For instance, the two sides have not made public any details as to what tariff phase-out periods China was willing to accept for some goods.

Still, the overall move has been welcomed as a sign of better economic relations between Washington and Beijing, who have a long history of butting heads in trade-related areas.

“This is encouraging news not just for the US-China trade relationship, it shows that the US and China work together to both advance our bilateral economic agenda, but also to support the multilateral trading system,” said US Trade Representative Michael Froman in a statement.

Obama-Xi discussions

Whether the APEC meeting would lead to any developments in the stalled efforts to expand the ITA’s product coverage has been a key question on trade observers’ minds in recent weeks.

Just a few days prior to the announcement, APEC ministers had issued a statement which made no reference to any new advances in the ITA talks, instead stressing “the importance of the negotiations” themselves and calling for an outcome that is commercially significant, balanced, and in line with recent developments to information technology trade.

The wording had prompted speculation that the talks could be moving up to leaders’ level, specifically between Obama and his Chinese counterpart, President Xi Jinping.

The effort to update the scope of the list began in 2012, in an effort to reflect the significant changes that the information technology landscape has seen in the 17 years since the original ITA entered into force.

Many of the products featured in the original pact have since fallen out of use, 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.

Industry estimates cited by the White House suggest that a successful ITA expansion could liberalise trade on US$1 trillion worth of global sales of ICT goods per year, and add an additional US$190 billion to global GDP.

Next steps

While the disagreement between the US and China had been the main focus of the ITA stalemate, the negotiations across the entire ITA membership are not yet over.

Not only will the final consolidated list of products need to be approved by all the members currently participating in the ITA expansion talks – which are a subset of the full ITA membership – but eventually those members not involved in the expansion effort will need to be on board in order for the new products to be incorporated into the existing pact.

Some Geneva-based sources noted that, while the Washington-Beijing development was significant, particularly given the role that China plays in ICT trade, there may still be some hurdles to overcome with the sensitivities that some other ITA signatories have.

The group of countries that has been negotiating an expansion of the ITA’s product coverage include 25 WTO members, counting the EU as one, out of the deal’s 52 signatories, which includes 80 members. The benefits of the accord are multilateralised across the WTO membership, both for ITA signatories and non-signatories, though only the former are required to make concessions.

“We are going to take what has been achieved here in Beijing back to Geneva and work with our WTO partners, and while we don’t take anything for granted, we are hopeful that we’ll be able to work quickly to bring ITA to a successful conclusion,” Froman said.

The news has already drawn praise from WTO Director-General Roberto Azevêdo, who welcomed the announcement as a “significant step forward,” calling for the negotiations among all ITA participants to be finalised soon.

“An expanded ITA would be great news for the WTO and the multilateral trading system. It would show that it is possible to deliver negotiated outcomes in the WTO that benefit everyone,” the global trade chief said, noting that an expanded ITA would be the organisation’s first successful tariff-cutting negotiation in over a decade and a half.

ICTSD reporting.

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