6:24 AM Mar 27, 1997

IT ACCORD TARIFF CUTS TO BEGIN 1 JULY

Geneva 26 Mar (Chakravarthi Raghavan) -- Thirty-nine countries, accounting for 92.5% of the world trade in Information Technology (IT) products agreed Wednesday to put into effect agreement that will scrap all import tariffs and other duties and charges on these products by year 2000, with a few developing countries having time till 2005 to achieve this.

Two countries -- Panama and Poland -- who had announced they would join, and had tabled their schedules, could not complete their negotiations with trading partners, and thus could not join.

Two more, the Philippines and El Salvador, have indicated their intention to join in the near future.

After careful line-by-line scrutiny of the schedules of these countries, participants in the Information Technology Agreement, which was concluded at Singapore in December 1996, agreed that the minimum participation requirements have been satisfied and the phased tariff-cutting formula should begin on 1 July.

The participants also established a Committee on Expansion of Trade in Information Technology Products, which will monitor the implementation of the ITA, discuss and approve expansion of product coverage and approve requests from other countries to participate.

There were will be tariff reductions in four stages, with 25% cut each time, on 1 July 1997, 1 January 1998, 1 January 1999 and complete elimination of all tariffs on 1 January 2000.

Costa Rica, India, Indonesia, Korea, Malaysia, Chinese Taipei and Thailand have been granted some flexibility, on a few products, in cutting their tariffs to zero after year 2000, but not beyond 2005.

According to WTO, the IT accord covers trade of about $600 billion of products or ten percent of world trade.

The conclusion of the plurilateral accord was greeted with some hyperboles by the head of the World Trade Organization, Mr. Renato Ruggiero who said that quantitatively the ITA and last month's accord on basic telecommunications services liberalized trade worth over a trillion dollars and amounted to a new trade round.

The ITA and the telecommunications services accord, provide a springboard for economic growth and development in the 21st century and collectively liberalizes the lifeblood of the world economy.

But while WTO officials and the majors point to these as proof of the success of the WTO and its ability to deliver, others have cautioned that this may in fact imply that trade liberalization will be possible only in sectors where the industrialized world has comparative advantage and dominance.

To put the IT accord for zero tariffs in perspective, it does not apply to any consumer electronic product (where many developing countries have significant production and export, importing parts and using labour-intensive assembly).

And while developing country consumers, and their industries and services using IT products, may benefit by the cutting their own tariffs, this is an agreement that was virtually conceived and negotiated plurilaterally outside the WTO, at the initiative of the four Quad members prior to and during the Singapore Ministerial Conference of the WTO, and came to occupy the center stage (along with new themes and issues) at Singapore, to the neglect of the myriads of implementation problems that the meeting was supposed to address.

Other major sectors of trade are agriculture worth $450 billion (where no zero tariffs are envisaged even as a long-term goal), automobiles $456 billion, a tightly organized oligopolistic sector, and textiles and clothing of $153 billion where discriminatory quotas against the developing world will disappear only in 2005, and even then will have some relatively very high tariffs in the industrial world.

While tariffs in the industrial countries, and particularly the Quad (Canada, EU, Japan and the USA) which are both major exporters and importers of IT products carry low tariffs generally, the duties are as high as 17% on some of the products.

In the US and Canada, relatively high tariffs are concentrated on telecom sector, in the EU on semi-conductors.

The tariffs are generally high in developing countries - around 50%.

Six main categories of products are covered under the accord:

* Computers - including complete computer systems and laptops, as well as components like CPUs (central processing unit), keyboards, printers, monitors, scanners, hard disk drives, power supplies etc;

* Telecom equipment -- including telephone sets, videophones, fax machines, switching apparatus, modems, and parts thereof, telephone handsets, answering machines, radio-broadcasting and TV transmission and reception apparatus, pagers etc;

* semiconductors including chips, wafers etc of various capacities and sizes;

* semiconductor manufacturing equipment -- wide variety of equipment and testing apparatus to produce semiconductors such as vapor deposition apparatus, spin dryers, etching and stripping apparatus, laser cutters, sewing and dicing machines, deposition machines, spinners,encapsulation machines, furnaces and heaters, ion implanters, microscopes, handling and transport apparatus, measuring and checking instruments and parts and accessories;

* software contained in diskettes, magnetic tapes, CD-Roms etc;

* scientific instruments including measuring and checking devices, chromatographs, spectrometers, optical radiation devices, and electrophoresis equipment.

Word processors, calculators, cash registers, ATM machines, some static converters, indicator panels, capacitors, resistors, printed circuits, certain electronic switches, certain connection devices, certain electric conductors, optical fibre cables, certain photocopiers, computer network equipment (LAN and WAN equipment), flat panel displays, plotters and multimedia upgrade kits are also covered.