Now Hear This!

The United States was joined by Japan and Taiwan this week in asking the WTO (World Trade Organization) to step in and help the countries settle a dispute with the European Union over duty-free treatment on certain electronics devices.

In doing so, United States Trade Representative (USTR) Susan C Schwab on Monday requested the WTO establish a dispute settlement panel and review whether the EU has failed to accord duty-free treatment to certain products covered by the WTO’s Information Technology Agreement (ITA).  The 1996 agreement eliminates tariffs on electronic information products among the largest makers and consumers of those goods.

Schwab’s challenge involves three products introduced after 1996, namely cable boxes that can access the Internet, flat-panel computer monitors, and certain computer printers that can also scan, fax, and/or copy. In short, the EU is claiming that these products are not information technology products because of the advancements made to their original designs. The EU’s opinion is that flat-panel monitors that show videos are TVs, not PC components, and therefore should see 14% duties. Further, the EU believes cable converter boxes with Internet access also face that same duty and that printers with other capabilities, such as faxing, are copiers not printers, and face a 6% duty.

The ITA’s wording, as the wordings of most WTO agreements are, is a little tricky and leaves wiggle for those countries and unions signed on.

While ITA is clearly focused on only those technology goods that encourage the spread of information, it states that “each party's trade regime should evolve in a manner that enhances market access opportunities for information technology products.” ITA also encourages each participant to be “mindful of the positive contribution information technology makes to global economic growth and welfare” and “to achieve maximum freedom of world trade in information technology products.”

Tariffs don’t encourage “maximum freedom” and are rarely helpful when it comes to improving global welfare. And according to the US, the EU is not “evolving” its treatment of duties as technology has evolved.

“In effect, the EU is taxing innovation – a move that could impair continued technological development in the information technology industry and raise prices for millions of businesses and consumers,” a statement made Monday by the USTR reads.

The USTR estimates global exports of the three products at more than $70 billion in 2007.
This seems to boil down to where to draw the line on what is an information product and what isn’t. The ITA cites calculators amongst its covered technologies. Cleary, calculators that do nothing more than math are information products. But as consumer applications continue to edge there way into information electronics, extending the bridge between the office/classroom and the home, the line as to technologies like the three noted above becomes blurred.

Will agreements like the ITA become less and less applicable and more and more outdated to electronics trade as this trend continues? Do agreements like the ITA have a shelf life or is the EU within its rights imposing trade tariffs on such high-tech goods? Share your opinion below.

--Suzanne Deffree, Managing Editor, News