Trade in Transition: The Importance of Re-Establishing U.S. Trade Leadership

Tuesday, Feb 16, 2021, 11:00am

by Semiconductor Industry Association

The first two months of 2021 saw leadership transitions with major repercussions for global semiconductor trade. In the United States, the new Biden administration is now in charge of leading a post-pandemic economic recovery defined by calls for supply chain resilience in critical technologies. Meanwhile, members of the World Trade Organization, which celebrated its 25th anniversary last year, yesterday approved the appointment of a new Director General, former Nigerian Finance Minister Ngozi Okonjo-Iweala. This is an important moment in time for U.S. policymakers to remember the essential role global trade has played in facilitating semiconductor growth and innovation, and to re-assert U.S. leadership on trade policy.

A recent SIA paper, “Semiconductors & the WTO: How Global Trade Rules Have Spurred Semiconductor Growth & Innovation” examines in depth how the steady opening of markets and leveling of the global playing field spearheaded by the WTO over the past 25 years have been critical to the success of the global semiconductor industry and the broader global economy. Landmark agreements like the 1996 Information Technology Agreement (ITA) and its 2015 expansion have drastically reduced the cost of trade, lowered consumer prices, boosted exports, and dramatically increased access to innovative, life-changing ICT products. The Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) has helped semiconductor companies to expand their business across borders while protecting their hard-won innovations. The Trade Facilitation Agreement (TFA) has been an unsung hero in facilitating supply chains of essential goods by cutting bureaucratic red tape and making border processes more efficient. The Agreement on Subsidies and Countervailing Measures (ASCM) was a strong step toward fairer competition among companies, not governments. The Agreement on Technical Barriers to Trade (TBT) has promoted global standards and interoperability, a necessity for the global adoption and market share leadership of U.S. technology products, including semiconductors.

It is clear, however, that global trade rules need to continue to evolve. U.S.-China trade tensions over the past several years, for example, put into sharp relief the reality that we need stronger disciplines to tackle challenges related to state subsidies and state-owned enterprises. Other areas in great need of attention at the WTO and elsewhere include cybersecurity barriers to trade, forced technology transfer, and intellectual property theft.

Additionally, policymakers in Washington have the opportunity to leverage trade policy to tackle large-scale global challenges like the COVID-19 pandemic, climate change, and bridging the digital divide. While there are many takeaways from the pandemic, one thing is clear: it has accentuated the importance of technology products to our societies. Computers, telecommunications equipment, and medical devices have kept people healthy, employed, and connected during this crisis. And, of course, semiconductor innovation is the foundational technology for all these transformational products.

There are myriad avenues the U.S. can go down to re-assert its leadership role in the trade arena. One very concrete way to accomplish this important task would be for the U.S. to once again lead the charge to expand the WTO’s Information Technology Agreement. In the wake of the successful effort to expand the ITA five years ago, there were many tech products left on the negotiating table then, and more have emerged in the last half decade that should be considered for zero-tariff treatment under this landmark agreement.

By expanding product coverage of the ITA again and getting innovative tech products into the hands of more people, the world will be better equipped to respond to future crises such as the current grinding pandemic, to deal with climate change, to expand much needed infrastructure, and to bridge the digital divide. Tech products, and the semiconductors that power them, will be central to finding solutions to all these daunting challenges.

Another expansion of the ITA, or ITA-3, is a sequel that will pay high returns in our pursuit of solutions to our many problems and in America’s drive to win back the leadership mantle of free trade.