No ITA Deal Reached at SandED; U.S. and China Commit to Continued Discussions

Friday, Jul 11, 2014, 4:00pm

by Semiconductor Industry Association

Despite intense efforts and high hopes for China to show leadership and break the deadlock in talks to expand the scope of the Information Technology Agreement (ITA) at this week’s U.S.-China Strategic & Economic Dialogue (S&ED), no agreement was reached and negotiations will continue after an already lengthy 8-month delay. 

The good news coming from the S&ED is that the two sides were able to meet at very senior levels, and according to the U.S.-China Joint S&ED Fact Sheet, both sides committed to continuing the discussion within the next few weeks, to “create conditions to restart plurilateral negotiations.”

The pressure has been mounting on China to deliver a strong and ambitious outcome by the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting, which will be hosted by China in November. Earlier this week, House Ways and Means and Senate Finance Committee leaders sent a letter to Administration officials citing their disappointment that an ITA deal has not yet been reached and expressing concerns that China is standing in the way of an ambitious deal by seeking exclusions for significant products and demanding unnecessarily long phase-out tariffs. They emphasized that any final agreement must include important products that are priorities of U.S. information technology exporters.

One important product for the semiconductor industry, one of the United States’ largest export industries, is an advanced semiconductor known as a multi-component semiconductor (MCO). Among all ITA parties, the Chinese government stands alone in seeking to exclude MCOs from the ITA, ostensibly as part of China’s effort to develop its own domestic semiconductor industry. Last month, the State Council introduced the “Guidelines to Promote National IC Industry Development,” which sets out targets and long-term support for domestic designers, developers and manufacturers of integrated circuits.

The original ITA, signed in 1996, was intended to cover all semiconductors and integrated circuits due to the foundational role semiconductors play in the development and innovation of all information communication technology (ICT) products. According to a WTO study, semiconductors are the largest traded product category in the ITA, accounting for over one-third of global IT exports.  Semiconductor innovations like MCOs are what drives greater miniaturization, mobility, energy efficiency, higher performance, and cost savings in end-use technology products, from smart phones, to tablets, to medical devices. As the trend toward “smart products” continues, demand for advanced semiconductors like MCOs will only continue to grow.

Given the foundational nature of semiconductors to innovation and development across the ICT sector, an expanded ITA agreement MUST include MCOs to make it not only commercially meaningful, but to achieve the societal goals of reduced costs and greater access to technology products that benefit societies and economies around the globe.  SIA will continue to advocate strongly for such a resolution in the weeks ahead.