The United States and China reached an agreement to move forward on discussions to eliminate tariffs on information technology products, which is expected to generate as much as $1 trillion in additional trade annually.
The first major cuts to tariffs at WTO
The two countries agreed to expand the scope of the Information technology Agreement (ITA) during the Asia-Pacific Economic Summit in Beijing. The ITA is a global trade agreement covering 70 countries. The World Trade Organization (WTO) said the pact already covers 97% of all trades in IT products worldwide. The agreement will serve as the first major cuts to tariffs at the WTO.
Today, U.S. Trade Representative Michael Froman said, “There’s still work to be done, but the end of these important negotiations is coming into focus.” He added, “The last time the WTO agreed to eliminate tariffs on IT products was in 1996 when most of the GPS technology, much of the medical equipment software, high-tech gadgetry that we rely on in our daily lives didn’t even exist.”
According to the United States government, the ITA covered more than $4 trillion in annual trade since its implementation in 1997. The disagreements between the United States and China halted efforts to further expand the scope of the agreement and prevented negotiations among all signatories.
New deal expected to boost global GDP
The United States government estimated that the new agreement would help boost the global GDP by approximately $190 billion annually. It would also help lower the costs for manufacturing industries that depends on IT components.
The WTO members are expected to conduct a full discussion to ratify the ITA in Geneva on December. More than 200 tariff categories are expected to be reduced to zero once the agreement is concluded. Tariffs on loudspeakers, semiconductors, and printer ink cartridges will be eliminated, according to the U.S. government.
“Eliminating those tariffs will obviously expand that trade significantly. It’s an area where we have a comparative advantage, and where we can support a lot of good well-paying American jobs,” said Froman.
The U.S. government believed that the agreement will create additional 60,000 new jobs in the country. It would eliminate almost $100 billion in tariffs on American-made products.
In an e-mailed statement to Bloomberg, Charlene Barshefsky, a former U.S. trade representative who negotiated the original Information Technology Agreement in 1996 commented, “The prospects for rapidly concluding the ITA II are excellent, given the breakthrough achieved at the APEC meetings.”