As many as 53 members of the World Trade Organisation (WTO) have agreed in Nairobi to a seven-year time frame to scrap all tariffs on 201 IT products that account for an annual trade of $1.3 trillion...
As many as 53 members of the World Trade Organisation (WTO) have agreed in Nairobi to a seven-year time frame to scrap all tariffs on 201 IT products that account for an annual trade of $1.3 trillion, in the biggest deal to remove barriers to such trade in close to two decades.
The expansion of the 1996 Information Technology Agreement is projected to raise global gross domestic product by $190 billion a year, as most of the industries that use such products as inputs will get a boost and prices of items ranging from video cameras to semi-conductors are expected to fall.
Although a WTO statement said the negotiations were concluded by its members — both developed and developing countries — making up for roughly 90% of world trade in such products, it wasn’t immediately clear if India had also endorsed the deal. Even the list of participants in the ITA expansion, provided by the WTO, didn’t feature India, which had been opposing the talks to extend the ITA on fears that the deal would benefit only those countries (notably the US, China, Japan and South Korea) that have a robust manufacturing base in these products, and not a country like India. Government officials attending the Nairobi ministerial couldn’t be reached for a response. An email query to the commerce ministry in this regard remained unanswered.
However, analysts have warned that even if India isn’t part of the deal yet, conclusion of the pact at the WTO would put immense pressure on the country to endorse it sooner or later. Moreover, it would have to boost local local manufacturing of electronics to such a level where domestic companies withstand the likely cheaper inflows from overseas.
India’s electronics imports in the first half of the fiscal beat those of bullion to become the country’s second-largest product category of imports. Electronic product imports are expected to touch as high as $40 billion in 2015-16, rising sharply from roughly $28 billion just five years ago. However, even though India is a fast-growing consumer of electronics, its local production of such items was only $31 billion in the last fiscal, accounting for just 1.5% of global output. Its domestic market size in these items is estimated at $70 billion.
The WTO statement, however, said all 162 WTO members will benefit from the agreement as they will all enjoy duty-free market access to the markets of the members eliminating tariffs on these products, it added. The list of 201 products, which was originally agreed to by the ITA participants in July this year, include a new generation of semi-conductors, GPS navigation systems, tools for manufacturing printed circuits, telecommunications satellites touch screens and some state-of-the-art medical products.
“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,” said WTO director general Roberto Azevedo.
Such items account for roughly 10% of the total global trade and is larger than trade in automotive products or even the global trade in textiles, clothing, iron and steel combined.
As per the plan, around 65% of tariffs lines, accounting for 88% of imports, will be eliminated in 2016. By 2019, this will increase to 89% of the tariff lines (and 95% of imports) and 100% in over seven years, Azevedo said.
Some of these products currently face much higher tariff than the global average tariff of 9%, he added. For example, in some markets, the import tariff for video cameras is as high as 35% and for magnetic cards, it is 30%.