Landmark deal struck to scrap tariffs on IT products

Legislation | | MIC Customs Solutions |

A landmark deal to eliminate tariffs on 201 IT products valued at more than $1.3 trillion per year has been agreed by members of the World Trade Organization.

The reduction and elimination of trade tariffs is recognised as one of the most important objectives for ensuring healthier and more robust international trade performance worldwide.

At the forefront of this effort is the World Trade Organization (WTO), which called for governments and decision-makers worldwide to accelerate their progress on the proactive elimination of global trade restrictions as recently as the meeting of its Trade Policy Review Body on December 9th.

As such, the announcement of a potentially groundbreaking new deal to eliminate tariffs on a range of IT products in the coming months will be widely welcomed by the international trade community, and may potentially lead to significant financial gain for a wide variety of stakeholders.

Details of the agreement

The agreement is an expansion of the 1996 Information Technology Agreement (ITA), which involved 82 WTO members, and follows on from negotiations that commenced in 2012 in response to concerns that rapid market evolution meant that many newer categories of IT products were no longer covered by the existing accords.

The updated deal, negotiated between 53 WTO members, was unveiled at the tenth WTO ministerial conference in Nairobi and will encompass a total of 201 product types, including next-generation semiconductors, GPS navigation systems, medical products such as magnetic resonance imaging machines, machine tools for manufacturing printed circuits, telecommunications satellites and touchscreens. In total, they are valued at more than $1.3 trillion (£877.21 billion) per year.

ITA participants have negotiated the level of reductions and helped to determine how many years it will take to fully eliminate the tariffs, with approximately 65 per cent of tariff lines set to be fully eliminated by July 1st 2016. Most of the remainder will then be scrapped in four stages over three years, meaning almost all imports of the products in question will be duty-free by 2019.

WTO director general Roberto Azevedo said: "This agreement is the first major tariff-cutting deal at the WTO since 1996 - and it comes fast on the heels of the historic Bali Package. We now have two deals in two years which deliver real, economically significant results. I hope that this success will serve to inspire progress elsewhere in our work."

The potential benefits

Both developed and developing countries, accounting for approximately 90 per cent of world trade in these products, were involved in these discussions. However, it is expected that all 162 WTO members will benefit from the agreement.

This breakthrough comes after months of intensive negotiations among the ITA participants and ensures that the current system of trade legislation better reflects the realities of the market and the ever-growing importance of IT products in all aspects of modern society.

The agreement also contains a commitment for the members involved to continue to work to tackle non-tariff barriers in the IT sector, and to keep the list of products covered under review to determine whether further expansion may be needed to reflect future technological developments. In this way, the global trade environment will be better equipped to deal with the continued evolution of the market than was previously the case under the 1996 version of the ITA.

Mr Azevedo said: "This is a very significant achievement. Annual trade in these 201 products is valued at $1.3 trillion per year and accounts for approximately ten per cent of total global trade. Eliminating tariffs on trade of this magnitude will have a huge impact. It will support lower prices - including in many other sectors that use IT products as inputs - it will create jobs, and it will help to boost GDP growth around the world."