The Expansion of the Global Information Technology Agreement

Part of my job running a Dallas computer consulting business, which offers awesome IT services is to stay on top of changes in technology that could affect my clients. Providing awesome IT services, as Dallas computer consulting company, means not only is it necessary to be aware of the newest technologies, but also it is important to follow changes in the global market.

The Global “Information Technology Agreement

The Information Technology Agreement (ITA) first came into being during 1997, when 29 participants, which included countries and customs territories (such as Free Trade Zones), signed it. Currently, the World Trade Organization (WTO) says there are 82 participants. The participants produce about 97% of the global trade in products used for IT.

The few countries in the world that did not yet join the ITA are Mexico and some in South America. The US is putting pressure on those countries to join.

Significance of the Information Technology Agreement

The goal of the ITA, when it started in 1997, was to eliminate tariffs between participants in the ITA on the IT products on a zero-for-zero basis. Even though the ITA had strong support from the US, Canada, the EU, and Japan this did not immediately happen, but the ITA continued to gain support since then. Trade associations in Europe, Japan, and the US also support ITA.

The ITA contains provisions that require members in the agreement to remove all tariffs on ITA listed products using a most-favored-nation (MFN) manner. MFN means duty-free treatment for all WTO members, even if the WTO member receiving the benefit is not an ITA member.

For a consumer, the importance is the price of IT products covered under the ITA, will be tariff free. These tariffs can be significant. For example, Mexico, which is not a member of the ITA, charges an import duty of 30% on IT equipment. A computer that costs $1,000 in the US that is exported to Mexico costs 30% more or $1,300.

An argument, easily made, is that Mexico stifled the growth of its IT sector simply because it refused to join the ITA and eliminate this extremely high tariff. This is why the Dallas News reported that for most Mexicans, the digital age is still just a dream. About 70% of the population does not have any access to the Internet or a computer. Only 35% of Mexican homes have a computer. The high cost of computers, in part due to the high import duties, is a significant part of the problem.

Products Covered Under the Information Technology Agreement

The products covered under the ITA are extensive and include computers, peripherals, and subassemblies, electronic components, semiconductors, software, office machines (calculators and photocopiers), ATMs, cash registers, analytical instruments, telecommunications equipment, semiconductor manufacturing equipment, and more.

Originally, the ITA covered products with an annual trade value of around $1 trillion. During 2015, there was a proposed expansion of the ITA provisions. In December 2015, at a conference held in Nairobi, there was support from over 50 members to include 201 more products under the ITA provisions. In total, the listed products under the ITA now have an estimated trade value of $1.3 trillion per year.

On July 1, 2016, both the EU and the US agreed to ratify the expansion of the agreement. They were some of the first members to achieve this and implement the expansion. Other members are working with their government procedures to ratify the extension of the ITA. The expectation is that most, if not all, of the ITA members will complete the ratification process by no later than January 1, 2107.

Summary

The benefit to businesses when countries eliminate tariffs (also called import duties) on IT products is that things like building data centers have substantially lower IT equipment costs. The benefits to consumers from this ITA expansion mean that in more than 50 countries, consumers will pay less for things like GPS equipment, video and audio equipment, software, video-games, smart phones, tablets, computers, and more.

 

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