Dance on ITA “Staging” Begins
Friday, Oct 02, 2015, 12:30pm
by John Neuffer, President and CEO
GENEVA – Negotiators working to expand product coverage of the Information Technology Agreement (ITA) held a series of meetings this week here that amounted to an initial “show-and-tell” on how far they are willing to go when it comes to assigning specific timeframes for tariff elimination for the myriad tech products covered by the agreement.
The standard phase-out (or staging) period leading to tariff elimination under ITA expansion is three years. Negotiators can waive this baseline three-year staging period and eliminate tariffs on some or all of the 201 covered lines when the agreement goes into force in July next year. They can indicate they want to stick with the default three-year staging period. Or they can opt for “extended staging” of five years or seven years to provide a bigger buffer for domestic producers to adapt to a tariff-free business environment.
The technical talks this week were bookended by meetings among the ambassadors of the countries involved in the negotiations. From what we understand, they all said things that demonstrated a strong commitment to getting the staging negotiations finished and a deal wrapped up by the next World Trade Organization (WTO) Ministerial Conference in Nairobi in mid-December.
Good news also came in the form of commitments by many to take all or most of their lines to zero tariff immediately.
But there were some troubling elements. First, a handful of countries asked for staging periods that exceed the agreed top-end limit of seven years, even though there was a clear understanding among the parties that no staging would be allowed beyond seven years.
Second, some parties introduced new “sensitivities” on lines they had previously indicated would get the standard three-year staging treatment – in spite of a clear understanding that when the product list was agreed in July, such moves to add new sensitivities would cease.
Third, and quite troubling, was the choice by some economies to load up their extended staging requests. To no one’s surprise, China, even though it’s an extremely competitive tech products exporter, pretty much led the charge here. But several other countries disappointed with heavily loaded extended staging requests as well.
The real-life problem with so much extended staging is that the innovation life cycles of tech products are often shorter than seven or even five years. So when the tariff relief finally comes, it has largely lost its relevance.
U.S. industry was out here in force this week. SIA was joined by the Advanced Medical Technology Association (AdvaMed), the Consumer Electronics Association (CEA), the Information Technology Industry Council (ITI), and the Semiconductor Equipment and Materials International (SEMI).
Another round of staging talks is scheduled to take place in Geneva the week November 9. We’ll be out here again, making the case that countries wanting to be stronger competitors in the tech space need to fully embrace the benefits of the ITA expansion agreement, throwing off the shackles of tariffs as quickly as possible. Failure to do so will prevent consumers from obtaining affordable tech products, dampen growth, slow innovation, and signal to foreign companies that maybe they should take their investments elsewhere.
More broadly, larding up this agreement with lots of extended staging would mean a little less to celebrate in Nairobi in December. That WTO Ministerial Conference is not shaping up to have an abundance of deliverables beyond ITA expansion. It would be a shame for the WTO, and world trade, if these staging requests are not kept in check. We have come too far and fought too hard for this agreement to let it limp across the finish line.