The 18-year-old Information Technology Agreement (ITA) of the World Trade Organisation (WTO) is finally up for delivering something that most observers believe would spur significant expansion of the information technology (IT) industry to the benefit of global masses. The deal struck at the WTO on July 24 to cut tariffs on $1.0 trillion worth of IT products as a boost for producers of goods ranging from video games to medical equipment has been hailed by most quarters as the most remarkable tariff-reduction move by the WTO in two decades. The move is also viewed as potentially capable of generating hope in the faltering multilateral trading system. Interestingly, none other than the WTO Director General Roberto Azevêdo has also expressed similar optimism, "…it shows that the multilateral trading system can deliver".
The United States, China, European Union (EU) and more than 50 other members of the WTO have sealed the agreement to reduce tariffs on IT products in a move that should lead to increased IT trade and lower prices for consumers. The deal which is said to add more than 200 categories of IT products to those covered by the 1997 Information Technology Agreement is expected to reduce tariffs to zero on products that now account for $1.3 trillion of the more than $4.0 trillion global IT trade. Removing the tariffs is estimated to give a $190 billion boost to world economy.
The duty-free products include computer software and software media, video game consoles, printer ink cartridges, GPS devices, medical devices such as MRI machines and next generation semi-conductors. It may be mentioned that items that have become part of everyday living such as GPS, video game consoles and solid-state hard drives face tariffs of up to 30 per cent in some parts of the world.
The deal, reportedly, had to overcome a deadlock last November over the coverage of products among the major players - The USA, China, EU and South Korea. Although some important categories of products such as LED displays and lithium ion batteries have not been included, observers are hopeful that the negotiating process will eventually draw more such products in the near future.
At a time when information technology is recognisably the best aid to most human endeavours at individual and collective levels, this move will mainly facilitate manufacturers in the developing world who are largely dependent on high duty imports for procurements of a host of tools, devices, accessories and so on. In this context, one startling revelation that must be kept in mind is the space that IT has already occupied in world trade almost unnoticed. Currently, IT products account for around 7.0 per cent of global trade and has overtaken the share of automotive vehicles as well as that of textiles, clothing, iron and steel combined. WTO Director General Azevêdo has thus reasons to be elated, especially because of the instrumental role of his organisation in having the deal struck. "Eliminating tariffs on trade of this magnitude will have a huge impact. It will support lower prices - including in many other sectors that use IT products as inputs - it will create jobs and it will help to boost GDP growth around the world," said Mr Azevêdo.
Most advanced countries are also contemplating on the benefits that the deal is likely to bring to their economies and employment situation. As for the US, more than $100 billion of its exports alone would be covered by the agreement. Industry estimates forecast that the removal of tariffs could support up to 60,000 additional jobs. Praising the deal, US Trade Representative Michael Froman said that it is "great news for the American workers and businesses that design, manufacture, and export state-of-the-art technology and information products, ranging from MRI machines to semi-conductors to video game consoles." Technology manufacturers like General Electric Co, Intel Corporation, Texas Instruments Inc, Microsoft Corp and Nintendo Co are among the companies expected to benefit from the deal.
No doubt a game changer in the technology sector, the landmark event could not be foreseen by most global giants like, among others, Intel.
"That definitely impacts Intel and that's important but also as important are the other technologies that it covers that were not even dreamt of when the original ITA was negotiated," says Intel's Communications Director Lisa Malloy to Reuters.
New entrants like the most in the developing world are yet to respond in categorical terms except that none misses the affordability part. From a general perspective, it is commonly believed that people who love technology as well as those who are in need to improve their operations in varying aspects of their living, as individuals and as collective lot, will find a huge horizon open to them. Manufactures of IT products in countries like Bangladesh will have to consider the situation both an opportunity and a challenge to live up to the expectations. Rising competition from the duty-cut is a likely phenomenon. One hopes the deal gets operationalised soon.
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