By Manoj Gupta
we saw how two bilateral agreements made the existence of WTO seem more
relevant, by infusing more energy in the apex trade body. While agreement
between India and USA on India’s food security programme and subsidies relating
thereto allowed the WTO to move forward on the Trade Facilitation Agreement
(TFA), an agreement between USA and China on the other hand brought the
Information Technology Agreement (ITA) back to the negotiating table and under
the media glare once again. Though the expanded part of the latter agreement
could not see the light of the day due to some last minute issues raised by South
Korea, it is nevertheless important for discussion because according to the WTO
sources, this liberalization would be three times bigger than present world
trade in clothing.
Technology Agreement is one of the earliest plurilateral agreements which
started with just 29 countries in 1997 after drafting of IT Agreement during
the WTO Ministerial meeting in December 1996 in Singapore and conclusion of the
negotiations in March 1997. Unlike other Agreements, the coverage of the
products is fixed in the IT Agreement. Every Member country signing this
Agreement is required to eliminate tariffs on the IT products listed in Annex A
and Annex B to the IT Agreement. Pursuant to this agreement, India eliminated
customs duties on 217 tariff lines over a period and the last tranche of
reduction/elimination was completed by 2005. The number of participant
countries has grown to 80 today.
or the original agreement which was concluded in 1997 covered computers,
semiconductors and their manufacturing equipments, data storage media,
telecommunication equipment and parts and accessories. This agreement is now
proposed to be expanded to cover around 200 additional products. ITA-II, seen
as the first major tariff cutting deal at the WTO since its inception, would
now include next generation semiconductors, medical devices covering equipments
like MRI machines and CT scanners, GPS technology devices, printed matter/cards
to download software and games, printer ink cartridges, software media such as
solid state drives, video game consoles and certain consumer electronic goods.
Here, it may be noted that issue of inclusion of electronic consumer goods was
raised initially by Hong Kong, Malaysia and Singapore way back in 1998 but was
opposed by India along with EU and others.
a country binds itself and eliminates or reduces its customs duties on the
products covered under this agreement, the commitments have to be implemented
on Most Favored Nation (MFN) basis and hence the benefit of reduced tariff and
market access would be available to all the countries. This is so, because the
tariff reductions are bound in the WTO schedules of the participants. Further,
since the commitments are part of the schedules annexed in GATT, individual ITA
concessions of each participant are enforceable under WTO DSU also.
India welcome the ITA-II also with open hands as ITA-I or is there something
which it should be cautious of? There are views, both in favour of as well as
against this proposed expansion.
the 1990s, India accorded priority to growth of IT sector and there was a need
for access to economical world class technology to low income sectors, etc. The
reduced Customs duties on goods like computers as implemented gradually through
the years can be said to be one of the reasons which played its role in India
becoming a major software export hub. Here, it would not be out of context to
mention that gains in productivity certainly reduces prices, reduced prices
raise income saved which in turn stimulates demand leading eventually to
largest exporters are also the largest importers placing their reliance on the
global supply chains, according to one school of thought, it helps any country
to allow access to its markets in order to promote its exports. There are of
course other options available in India, like taking the route of various
export promotion schemes as promulgated under Foreign Trade Policy, but
out-right exemption is better than claiming any conditional exemption which
involves unnecessary locking up of money in various guarantees and
securities/sureties. Such complicated procedures also increase compliance and
transaction costs. Unconditional exemption on the other hand gives a clear
picture to the foreign company planning to invest in India. Mere opening up of
more sectors for Foreign Direct Investment (FDI), would not automatically bring
investment unless backed by policy concessions and tax breaks.
according to another school of thought, India’s domestic information technology
industry also needs to be encouraged and protected till they are competitive
enough to withstand any challenge from the developed world, multi-national
corporates or from our Asian neighbors. In case, there is a need to reduce the
Customs duties, in order to promote exports, the same can very well be done
without binding India before the WTO. Further, it should also be noted that
foreign markets will not automatically become accessible, for additional
products, as soon as the ITA-II is signed. There are number of other hindrances
and non-tariff barriers (NTBs) like patents, national/local standards and
certifications, which block India’s exports and hence such issues have to be
taken up with the concerned countries. Loss of revenue due to elimination of
Customs duties is also a point of concern for the developing world.
of this agreement also comes under question when we see that, according to some
sources, USA’s trade deficit in computers and parts has only increased after
provision of tariff-free access to other countries, particularly China.
Further, India’s share in the world’s export of IT products was 0.3% in 2010
while that of Mexico, who is a not a participant in Information Technology
Agreement, is 2.7%. Likewise, during the same year, in case of imports of IT
products, India’s share was 1.1% while Mexico accounted for 3.5% of the world’s
import of such products [see end note 1].
It clearly shows that being a part of the agreement has not helped India on the
expected lines. It may be noted that tariffs are already very low in some
jurisdictions and some of the bigger consumer economies like Brazil have not
joined this agreement and LDCs have always evaded the question of such
how important is this expansion of ITA for a country like India? Question
relevant for India is how the agreement will help its industry and allow more
market access. ITA-I did not significantly increase hardware manufacturing
capabilities of India though it became a software major. India is a growing
market and in case of consumer electronics, it is a major player as far as
consumption is concerned. India needs technology and import of critical parts
and not fully deliverable consumer goods should be its priority to take forward
the campaign of ‘Make in India’. It is another matter that India’s certain
preferences to domestically manufactured telecommunication products have been
questioned number of times by EU and others – latest being on 16-9-2014 at WTO.
It would be better for India to wait and watch how things take shape in 2015.
[The author is an Assistant Manager, Knowledge Management
Team, Lakshmikumaran & Sridharan, New Delhi
- WTO Secretariat. Based on UN Comtrade.