A new tentative agreement was reached by 58 WTO members, including Canada, with respect to the WTO’s Information Technology Agreement (ITA). It will impact not only Canada’s export of items covered by the ITA, but will also have a positive effect on imports of these items into Canada.
On July 24, Minister Fast, Canada’s Minister of International Trade, announced the ITA’s expansion “breakthrough” noting that tariffs for an over 200 additional information and communications technology (ICT) and related products will be eliminated.
The WTO’s Information Technology Agreement was concluded in 1996, by 29 WTO members. To come into force, the agreement had to be accepted by states representing 90 percent of the world’s trade coverage of IT products. The original 29 countries represented only 83 percent of world’s trade coverage in IT products. Yet in the months following the conclusion of the agreement a number of other countries expressed interest, reaching 90 percent requirement so that the ITA entered into force on July 1, 1997.
Since 1996, the number of participants to the ITA agreement grew to 81, which now represents 97% of the world trade in IT products. The ITA is solely a tariff cutting mechanism binding member states to reduce all products listed in the Declaration to a zero-tariff. In addition, because any commitments undertaken under the ITA are on a most-favoured-nation basis, WTO members can equally benefit from duty-free trade of IT products.
While ITA’s own Ministerial Declaration and implementation document provides for periodic review of the list of products, until now there was no consensus among the Parties. As such, no additional items were added since the original list was released in 1997, when the ITA came into force.
Over the years, technological advances have contributed to renewed efforts in 2012 to negotiate and extend the ITA to cover more than 200 additional products. The tentative accord reached on July 18, 2015 aims to eliminate tariffs for an additional 200 ICT and related products. The WTO announced that this trade liberalization is valued at over $1.3 trillion per year.
Canada’s ICT industry, consisting mainly of small and medium-sized enterprises, spans over a variety of sectors in the economy, such as manufacturing telecommunication equipment, software development, digital media and microelectronics. The existing ITA covers a large number of high technology products, including computers, telecommunication equipment, semiconductors, software and scientific instruments.
Canada’s information and communication technology companies export approximately 60% of ICT products manufactured in Canada. The Canadian Government reports that Canada already exports a number of the items included in the additional 200 ICT products recently negotiated, such as flight simulators, audio-visual products and parts, semiconductors and electronic integrated circuits, telecommunications products, software, media storage devices, radar apparatus, video game consoles, medical devices and navigational equipment.
With expanded ICT sectors in Canada in the fields of software development, computer and communication services, data processing and communications equipment, Canada stands to benefit from the trade liberalization of ICT products both when exporting and importing such products. Canadians will be able to import duty-free IT products from countries like China and Japan, bolstering Canadian trade for IT products covered under the ITA.
An Initial Environmental Assessment on the expansion of products coverage reported that the Canadian imports of ICT products are expected to increase between C$30.7 and C$38 billion, depending on the finally agreed upon list of ICT products. It is anticipated that the largest increase of new imports into Canada would come from China, Japan and the EU.
To bring this tentative agreement into effect, each member state must ratify the agreement, by bringing the tariffs on individual products covered by the expanded list down to zero and provide revised tariff schedules to the WTO.
The WTO expects these measures will be implemented before December 2015, which marks the 10th Ministerial Conference to take place in Nairobi, Kenya, so that the ministers can approve the results. The expanded ITA will enter into force some time after that.