Jul 07, 2014 - 1:30pm

In Pursuit of a Tech Trade Breakthrough with China


Senior Vice President for International Policy

Bloomberg_China_US_Flags_800px.jpg

United States and Chinese flags.
Photographer: Tomohiro Ohsumi/Bloomberg.

 

As senior American officials travel to Beijing for bilateral discussions on strategic and economic issues on July 9-10, much of the global business community is hoping the annual meeting will yield a breakthrough in negotiations to eliminate tariffs on a host of technology products.

In an interview with the Financial Times [paywall], U.S. Trade Representative Michael Froman “said Washington was eager to use this week’s annual US-China Strategic and Economic Dialogue to break the deadlock over updating the 1996 Information Technology Agreement,” or ITA.

Negotiated under the umbrella of the World Trade Organization (WTO), the ITA has delivered a cornucopia of innovative technology products to the world over the past two decades. Today, 70 countries are members of the ITA, and they account for 97% of world trade in IT products, which has reached about $4 trillion annually — nearly one-fifth of global merchandise trade.

But the agreement has not kept pace with innovation as a host of new tech gadgets has been developed. Ubiquitous products such as GPS devices, Bluetooth technologies, and flat-panel displays are still outside the ITA’s reach.

Updating the ITA could multiply its benefits. By one estimate, a commercially significant expansion of the ITA’s coverage could add an estimated $190 billion to global GDP annually.

Despite progress over the past year, the ITA expansion talks were suspended in July 2013 and again in November. These actions were triggered by China’s insistence that dozens of tariff lines be dropped from consideration or subjected to extraordinarily long phase-outs.

No other country has adopted such a cautious stance, and many WTO Members have objected. The Chamber was one of 35 top business groups from dozens of developed and developing countries that in July sent a letter to Chinese Vice Premier Wang Yang to reconsider this position.

China’s stance is surprising because it is the largest exporter of IT products and even has a trade surplus in many of the product categories it seeks to exclude. Indeed, China would be a principal beneficiary of an expansion of the ITA’s coverage: An ambitious outcome could save China’s tech sector $8 billion in reduced tariffs on overseas sales each year, estimates the Information Technology & Innovation Foundation.

According to the Financial Times, Froman “has warned China that a proposed bilateral investment treaty and other global negotiations could be in jeopardy if the two sides fail to resolve a stand-off” over the ITA.

The success of the U.S.-China economic relationship is vital to global economic prospects. With economic growth and job creation expanding only gradually in the United States and many other markets, the Chamber is making every effort to push the ITA negotiations forward. We must keep our eyes on the prize of an ambitious, far-reaching accord. 

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.