Trade, Innovation Get Major Boost with ITA Expansion

By eliminating tariffs on trade in tech products, ITA expansion will spur an estimated $190 billion in annual GDP growth globally.

Last week, as many Americans were busy finalizing plans for Independence Day weekend, a new trade agreement took effect that eliminates tariffs on a vast array of tech products, including next-generation semiconductors. The Information Technology Agreement (ITA), first agreed to 20 years ago, on July 1 began expanding to cover a whopping $1.3 trillion in tech products, including myriad new devices that have sprung to life over the last two decades. The expanded ITA is a hard-fought victory for free trade, innovation, the semiconductor industry, and America’s economic strength and global competitiveness.

By eliminating tariffs on trade in tech products, ITA expansion will spur an estimated $190 billion in annual GDP growth globally. The agreement covers a long list of products such as MRI machines, GPS devices, solid state drives, video game consoles, loud speakers, video cameras, and sophisticated testing equipment. It also includes advanced semiconductors known as MCOs and a wide range of other products that depend on semiconductors. For the MCOs alone, the ITA will eliminate hundreds of millions of dollars in tariffs annually, and that number is expected to rise considerably as use of MCOs becomes more widespread.
Tariffs on some products will disappear immediately, while other tariffs will be eliminated over the next several years in a process known as “staging.” While the vast majority of ITA countries completed the necessary domestic procedures to begin implementing tariff elimination on these products immediately, there are a few notable slowpokes. China, Korea, and Japan, for example, did not yet complete the technical customs work they needed to do to start tariff cuts on July 1. While disappointing, we are hopeful they will get this work done in the coming months.
These hiccups aside, the free flow of tech products across international borders made possible by the ITA is great news for consumers. By eliminating tariffs on a vast array of tech products, more businesses will be able to ship their goods to customers the world over, allowing for the spread of technology and greater economic opportunities in disadvantaged areas of the world. Eliminating tariffs on these products also helps keep costs down for consumers here in the U.S.
The story of ITA expansion is a reminder of what can be accomplished through hard work and international collaboration. The effort kicked off with a major conference at the World Trade Organization (WTO) in Geneva in May 2012. It has been a long and sometimes bumpy road since that time, involving countless negotiating rounds in Geneva, myriad statements of support by the Asia-Pacific Economic Cooperation economies, significant backing from a global coalition of over 80 trade associations, and substantial work by international negotiators and industry stakeholders. The discussions experienced their share of fits and starts, but on July 1 the effort proved to be well worth the wait.
In addition, ITA expansion marks a meaningful win for the WTO and stands to give greater momentum to other tariff-elimination agreements, including the Environmental Goods Agreement and the ongoing Trade in Services Agreement talks. All these negotiations represent an important new template for the WTO to make needed progress in opening markets around the world.
The expanded ITA will strengthen the semiconductor industry, the tech sector, and the U.S. economy. In the midst of heated anti-trade rhetoric in the U.S. presidential campaign and the reverberations felt around the world as a result of Brexit, July 1 was a good and much-needed day for trade and innovation the world over.

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