WTO deal to cut tariffs on ICT goods

World Trade Organisation (WTO) members including the US and China Wednesday sealed a deal in Nairobi to remove tariffs on ICT products signalling reduced consumer prices.

This came hours after China staged a last-minute walkout on US negotiators early in the day, in what was feared to dampen prospects for a breakthrough.

The deal is a major win for consumers and manufacturers as the WTO ministerial conference in Kenya’s capital ends Thursday.

“I am delighted to mark this breakthrough here today at the Ministerial Conference”, WTO Director General Roberto Azevêdo said in a statement.

“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”.

The Information Technology Agreement (ITA) negotiations involved 53 WTO developed and developing countries, which account for about 90 per cent of world trade in the 201 products that will be duty free from July 2016.

However, all the 162 WTO members will benefit from the agreement, as they will all enjoy duty-free access to the markets of the members eliminating tariffs on these products. The list of 201 products was originally agreed by the ITA participants in July 2015.

“This is a very significant achievement. Annual trade in these 201 products is valued at $1.3 trillion (Sh132.8 trillion) per year, and accounts for approximately 10 per cent of total global trade,” said the WTO director-general.

Chinese Commerce minister Gao Hucheng had earlier failed to show up at Jomo Kenyatta International Airport’s VIP lounge where he was scheduled to join the arriving US Trade Representative Michael Froman in making the “big announcement”.

China’s and the US nod was crucial to the conclusion of the agreement, being the largest producers and importers of ICT products.

The deal means signatories will be required to eliminate custom taxes on goods such as computers, semiconductors, telecommunication instruments, data storage media and software.

List of products

The list of products includes medical equipment such as scanners, home hi-fi systems, headphones, DVR players, semi-conductors and GPS devices. Also covered are electronics such as TV-cameras, video recording, digital car radios and set-top boxes for digital TV reception.

“For every product on the list, ITA participants have negotiated the level of reductions and over how many years it will fully eliminate the tariffs. As a result of these negotiations, approximately 65 per cent of tariff lines will be fully eliminated by 1 July 2016,” the WTO said.

“Most of the remaining tariff lines will be completely phased out in four stages over three years. This means that by 2019 almost all imports of the relevant products will be duty free.”

“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,” said the WTO director-general.

READ: Its make or break for global trade as Nairobi talks begin

At least 20 new members signed up for ITA in anticipation of the Nairobi deal, bringing the number of signatories to 74. Asked whether Kenya will sign the pact before the end of the Nairobi forum, Foreign Affairs and International Trade secretary Amina Mohamed said “we are looking at it very closely but we haven’t decided yet”.

A number of civil society organisations have, however, criticised the pact, saying free flow of IT products will create another wave of unemployment in places such as Africa as machines take up human jobs.

A deal on the expanded ITA, an agreement on a list of environmental goods to be traded at lower taxes and a development package for the least developed countries, have been lined up as the likely deliverables from the Nairobi ministerial meet.

Longstanding standoff

China and the US have had a long standing market access standoff. A last-minute walkout by China —which had initially agreed to sign the ITA — offers a rare glimpse into the arm-twisting and shadow-boxing that is taking place among delegates behind the closed doors of the Kenyatta International Convention Centre.

Ms Mohamed is the chair of the Nairobi meeting — the first on the African continent — which she has said must deliver for developing nations.
She has frequently indicated that the African group will only consider as positive an outcome where ministers make “realistic and implementable” concessions in areas such as agriculture and development.

The US and the EU have been criticised for fencing off their agricultural markets with subsidies that keep expensive imports at bay.

“A lot of work is going on in many areas of global trade, including agriculture. The negotiations are challenging but we are all here to ensure that the Nairobi forum succeeds,” Mr Froman said. “Whatever comes out of Nairobi, development and Doha issues will remain as important as always.”

The surprise move by China comes as a second major setback to the WTO, which is under pressure to achieve a positive outcome for the Nairobi conference amid falling confidence in its negotiation role.

On Monday, 40 nations that have been negotiating Environmental Goods Agreement (EGA) also announced that the talks launched in July last year would not be concluded in Nairobi.

The conclusion of EGA is set to cut tariffs on products such as wind turbines, water treatment filters, and solar panels that currently attract duty at 35 per cent to enter some markets.

EGA also covers recycling equipment, composting systems, air and water quality monitors, water treatment equipment, soot removers and carbon dioxide scrubbers, which are currently attracting duty as high as 20 per cent.

The Wednesday agreement is an expansion of the 1996 Information Technology Agreement which involves 82 members. In 2012, members recognized that technological innovation had advanced to such an extent that many new categories of IT products were not covered by the existing agreement. Negotiations began in 2012 to expand the coverage of the accord.