TWN Info Service on WTO and Trade Issues (Jul15/21)
28 July 2015
Third World Network

ITA-II tentative accord not commercially meaningful
Published in SUNS #8066 dated 21 July 2015

Geneva, 20 Jul (D. Ravi Kanth) -- A tentative agreement reached among a core group of developed and developing countries on July 18 to expand the existing Information Technology Agreement (ITA) by adding 201 new tariff lines will not be commercially meaningful, trade envoys told the SUNS.

The agreement on an ITA-II, adding 201 new tariff lines, excludes from the final list several big ticket items such as liquid crystal display (LCD) monitors and various other hardware items used in mobile telephones, the envoys added.

Contrary to the astronomical claims made by the World Trade Organization (WTO) director-general Roberto Azevedo and the United States Trade Representative Ambassador Michael Froman that the ITA-II agreement will generate a trade turnover of US$1 trillion, the actual gains will only be a couple of billion dollars, said a trade envoy familiar with the negotiations.

The ITA agreement with nil duty treatment was concluded at the WTO's first ministerial conference in Singapore in 1996.

But the ITA-II agreement, which was wrapped-up at the official level last week due to pressure from a major developed country and the WTO director-general, omitted what would otherwise constitute core ITA products such as LCD terminals and other state-of-the-art IT products.

Moreover, the agreement was largely based on the bilateral agreement reached between the US and China last year, and some major countries refused to add new items that were not there in the US-China agreement.

Consequently, Korea had to prune its list of products down, leaving out a number of products such as LCD terminals and other items for the sake of a compromise in which Seoul was able to get zero-duty-treatment only for lenses used in complex electronics products in the Chinese market.

In a give-and-take compromise, Korea gave up its demand for LCD terminals which is close to over US$10 billion for securing access for an item such as lenses with low turnover of about half-billion dollars. Seoul also secured a concession to place some defensive items such as two medical devices in the ex-out category.

The ex-outs refer to a sub-category for a main harmonized tariff line with the specific description of the ITA products.

Consequently, low-end medical devises exported by China to Korea will get reduced market access into the Korean market, while the high-end medical devices from the United States companies are already covered in the Korea-US bilateral free trade agreement.

The core group of countries engaged in the ITA-II negotiations need their capitals to approve the final list of 201 tariff lines by July 24.

Members of the group include the EU, the United States, Japan, China, Korea, Australia, Switzerland, Norway, New Zealand, Singapore, South Korea, Turkey, Taipei, Malaysia, Thailand, the Philippines, Hong Kong, Costa Rica, Israel, Croatia, Bahrain, Montenegro, Iceland, Guatemala, Colombia, and Albania.

After sustained negotiations between negotiators from Korea and China at the EU mission last week, the EU offered a compromise to settle an agreement to include only lenses under the HS-6 classification.

The final deal involved give-and-take as between Korea and China, said a trade envoy familiar with the negotiations.

Nevertheless, the ITA-II agreement will have a systemic effect because of proposed changes, said another participant in the ITA-II negotiations.

At a meeting of ITA-II trade envoys on Saturday, the EU ambassador Angelos Pangratis circulated the final list of 201 tariff lines based on the HS-6 classification that includes several ex-outs.

"During the last few days all sides have demonstrated the necessary leadership and flexibility that allowed for this important outcome," Ambassador Pangratis said in a press statement.

"We expect confirmation from all participants on the result reached today on the final list of products by Friday July 24," the EU envoy emphasized.

Taipei expressed sharp concern over the final list of products suggesting that their products of interest have not been taken on board.

But China and Korea, the two main parties who were unable come to an agreement on some dozen core ITA tariff lines for the past nine months, expressed satisfaction on the final list of products, said a participant familiar with the meeting.

The US-China bilateral agreement became the backbone of the ITA-II agreement, with other countries merely securing inconsequential gains here and there. From an initial list of some 350-odd items, the final list is pruned down to 201, because of China's demand to remove many items. +