World IT deal in limbo - Taiwan, South Korea dig in on product demands

A GLOBAL Information Technology Agreement (ITA) is being blocked by demands from Taiwan and South Korea that additional products be added to an exemption list. But there has been a breakthrough in the bid for a worldwide Trade Facilitation Agreement (TFA) following talks between the US and India, who have agreed on WTO provisions for food security – an issue that has troubled India . . . 

HOPES that the lethargic global economy will get a twin boost from implementation of a global Trade Facilitation Agreement (TFA) and an Information Technology Agreement (ITA) in 2015 have been partially dashed.
While the TFA got off the ground through the World Trade Organisation (WTO) after India came to the party at the behest of Washington, the ITA has foundered after marathon negotiations in Geneva because South Korea and
Taiwan simply would not budge from demands to have their products added to a list of 200 new items to be exempt from tariffs worldwide.
Fifty-four countries were involved in the ITA negotiations, held under the auspices of the WTO in Geneva, but China and South Korea could not see eye-to-eye on products to be included in the new list.
WTO officials estimate the trade coverage of the ITA to be worth between US$800 billion and US1.4 trillion.  It is bigger than automotive or agriculture trade, and twice as much as combined global trade in textiles and clothing.
The original ITA was drawn up in 1996, initially involving a small number of countries.
Negotiations began in 2008 to broaden the agreement, but it ran into a stalemate for 18 months before being revived by President Barack Obama and his Chinese counterpart, Xi Jinping, during the APEC meeting in Beijing in November.
 What was agreed between the US and China did not please Korea, a world leader in IT products. Says one source: “The Koreans are unhappy because LCDs are the big moneymaker for Samsung and LG. These products are not on the list.”
The Koreans are thought to have wanted to add more products to the list, but the Chinese are believed to be unwilling to negotiate on additional products — some suggest that they were perhaps put off by what was said to be Korea’s “initial aggressive response”.
Similarly, the Taiwanese, who make the same sorts of products, are concerned with what is currently on the list and want their inclusions. Taiwan would have benefitted from savings of US$823 million, according to Taiwanese media reports, on exports of products covered in the agreement — to China, Hong Kong, South Korea, Malaysia, Japan and the Philippines.
In a press release following the deal with China, the White House provided a sample of some of the products that would benefit from the agreement, and the size of the tariff reduction for these products.
They include next-generation semiconductors (tariffs up to 25 per cent reduced to zero), magnetic resonance imaging (MRI) machines (tariffs up to 8.0 per cent reduced to zero), computer tomography (CT) scanners  (tariffs up to 8.0 per cent reduced to zero), global positioning system (GPS) devices (tariffs up to 8.0 per cent reduced to zero), printed matter/cards to download software and games  (tariffs up to 10 per cent reduced to zero), printer ink cartridges  (tariffs up to 25 per cent reduced to zero) and loudspeakers (tariffs up to 30 per cent reduced to zero).
The White House said an expanded ITA would also eliminate import duties on a range of additional technology products, including high-tech medical devices, video cameras, and an array of high-tech ICT testing instruments.
It said the US-China breakthrough is the key to completing expansion of the ITA. These talks have been stalemated since disagreement among the parties  resulted in suspension of negotiations in November 2013. Since that time, China and the US have been working to narrow their differences, but without a breakthrough sufficient to resume talks among all WTO members involved. 
The White House said in a fact sheet that the deal would support up to 60,000 additional US jobs, “eliminate tariffs on roughly US$1 trillion in annual global sales of information and communications technology products, of which more than US$100 billion now come from the United States”, and “increase annual global GDP by an estimated US$190 billion”.
The US President has directly made ITA expansion a top economic priority since meeting with President Xi at a Summit in Sunnylands, California, in June 2013, and has regularly reiterated the importance of a mutually beneficial agreement.
It is thought that, while China’s Ministry of Commerce (MOFCOM) was supportive, other departments, including the Ministry of Telecommunications, were “sensitive”, with the Finance Ministry concerned about loss of tax revenue from certain imports.
Sources suggest that the Chinese, who had been blamed for the breakdown in talks since the Bali WTO meeting, have been working hard to “put things back together”, and the Sino-US understanding would not have come about without some compromise.
The US has also played a critical role in bringing India to the negotiating table on the Trade Facilitation Agreement, which is expected to deliver benefits worth worth up to US$1 trillion to the global trading system.
President Obama worked out a deal with his Indian host, Narendra Modi, during his visit to New Delhi in November. Essentially, the deal was cut when the US and India agreed on provisions for food security – an issue that has troubled India.
“There is now 100 per cent clarity on the duration of the ’peace’ clause, says Keith Rockwell, spokesman for the WTO.
“No-one can bring a dispute settlement case against India for breaching the subsidy ceiling on this particular programme, provided they adhere to the disciplines of this particular programme — that is, that they aren’t distorting trade and they aren’t threatening  any other country’s food security programme,” he says.
When the WTO General Counsel failed to
endorse amendments to the TFA by its July 31 deadline, a number of countries began to discuss using the plurilateral approach to get things done within the WTO (see ATI July/August, 2014).
This meant that individual countries could have unilaterally adopted the TFA.
Hong Kong has become the first WTO member to rectify the TFA, and with the TFA in the bag, the WTO is cautiously optimistic of a restart to the stalled Doha Round. The so-called Bali issues, including the TFA, are a subset of the Doha Round.
Rockwell says one of the most important things agreed by WTO members in Bali was a pledge to try to complete a detailed work programme by the end of 2014. This would have facilitated a conclusion to the rest of the Bali issues and the Doha Round as quickly as possible, but could not be achieved due to differences among WTO members on the implementation of TFA and food stockholding agreements.
But as part of the November General Council decisions implementing the TFA and stockholding decisions, members also agreed to a new timetable for the work programme, which now mandates July 31, 2015 as the deadline for negotiating a road map for conclusion of the Doha round.
Rockwell says all negotiating  groups are back in action. “Everything was completely paralysed after the failure to amend the TFA at the end of July,” he told ATI. “A large number of countries made clear that if there were no Bali, there would be no post-Bali. Now, everyone is back on track and, hopefully, the negotiation mood has improved.”
Rockwell says WTO Director-General, Roberto Azevedo, is using the approach that he took to secure an agreement in Bali — which was heralded as the most significant breakthrough in more than a decade (since the Doha Round was launched in 2001).
Azevedo intends to work the room, so to speak, when Trade Ministers meet at Davos, Switzerland, for their annual meeting in January to extract the political commitments needed to give the Geneva negotiations much-needed impetus.
Members are more realistic with their expectations today, compared to 2011, and more accepting of what are called the “red lines” —whether they be the US farm subsidies or the Japanese rice subsidies.  There is again hope that, within the parameters set by various members, a deal can be cut that will save the Doha Round.