The ITA Expansion Deal on the Table Benefits Korea

Stephen Ezell April 20, 2015
April 20, 2015
Expanding the Information Technology Agreement can bring significant benefits to Korea's economy.

The Information Technology Agreement (ITA)—which eliminates tariffs on trade for hundreds of information and communications technology (ICT) products—has been one of the most successful plurilateral trade agreements ever undertaken, playing a catalytic role in expanding global two-way trade in ICT products to over $5 trillion annually. But the list of ICT products covered by the ITA has not been updated since the agreement's chartering in 1996, meaning that the vast range of innovative ICT products created since then do not receive the benefits of duty-free trade.

Negotiators from 54 countries have labored over the past several years to conclude an expansion of the ITA that would bring approximately 200 more ICT product tariff lines under ICT coverage. By the end of 2014, it appeared negotiating nations were on the verge of reaching agreement on a final list of ICT products to be included as part of an ITA expansion. Yet a final deal was left on the table in December 2014 because certain negotiating parties, including Korea (and Taiwan), felt there was not quite enough on the table for them to close the deal.

But the reality is that for the vast majority of ICT products that Korean industry exports, Korea will benefit far more by paving the way for ITA expansion than it would in the absence of ITA expansion, particularly in the Chinese market. Indeed, for many of the most significant ICT products Korean industry exports to Chinese markets, they will realize far more significant tariff reduction and eventually elimination if Korea signs onto the ITA deal on the table instead of relying on tariff reductions negotiated in the recent China-Korea free trade agreement.

While the ITA expansion package on the table is not a perfect deal, it is a very good deal. Holding out for a better deal carries the very real risk that global ICT exporters will not see any deal at all. Negotiators have worked extremely hard to identify roughly 200 ICT products for inclusion in ITA expansion. This has the potential to result in roughly $50 billion in tariff savings on ICT sales each year globally and add approximately $190 billion to global GDP through increased trade. Korea is a powerhouse in the design, manufacture, and sale of ICT products. It will be a huge winner with the ITA deal currently on the table. Put simply, just as Korea has benefitted tremendously from the initial ITA agreement, so too does it stand poised to benefit significantly from the ITA’s expansion.

Accordingly, Korean negotiators should join their peers in working toward a swift conclusion of an ITA expansion deal. In fact, Seoul has a unique leadership opportunity here, wherein it can seize the moment to make the endgame moves necessary to propel the negotiations across the finish line to the betterment of the global economy and to the World Trade Organization as an institution back in the business of opening markets.