Billions in Growth Possible if Developing Countries Eliminate ICT Tariffs and Join the Information Technology Agreement, New ITIF Economic Analysis Finds

WASHINGTON—Joining the Information Technology Agreement (ITA)—an international pact eliminating tariffs on hundreds of information and communications technology (ICT) products—could boost the economies of developing countries by billions of dollars, according to a new economic analysis by the Information Technology and Innovation Foundation (ITIF). ITIF, a leading global tech-policy think tank, evaluated the economies of Indonesia, Sri Lanka, Vietnam, and Laos, finding that countries could also recover a significant portion of the tariff revenue they would forgo in the form of new tax revenue, making ITA accession a win-win economic policy. The report builds on an ITIF analysis from May which evaluated economic growth and tax revenue gained from joining the ITA and eliminating ICT tariffs in Argentina, Cambodia, Chile, Kenya, Pakistan, and South Africa.

“Increasing the use of technology across all sectors of the economy is one of the most important drivers of economic growth in developing countries because it enhances productivity, spurs innovation, and bolsters living standards,” said Stephen Ezell, ITIF’s vice president and the report’s lead author. “If developing nations join the Information Technology Agreement and its recent expansion (ITA2), their businesses and consumers will use more technology products because of lower prices, and their domestic ICT goods and services producers can become more deeply integrated in global value chains for ICT production. This will spur significant economic growth for these countries while generating new tax revenues that substantially offset tariff losses.”

Established in 1996, the Information Technology Agreement (ITA) eliminates tariffs on hundreds of ICT products for its 82 signatory countries. The agreement was expanded in 2015 to add 201 new ICT product lines, with 54 nations signatories to the expanded agreement (ITA2). Despite its economic benefits, some developing nations have yet to join, in part because their governments may be concerned about the loss of operating income from forgone tariffs.

Disproving this false narrative, ITIF analyzed how the increase in ICT imports and lower prices due to tariff elimination under the ITA would spur greater economic growth and tax revenue in four developing countries—Indonesia, Sri Lanka, Vietnam, and Laos.

Major findings include:

• Joining the ITA would bolster Indonesia’s economic growth by an estimated 0.35 percent, or $5.4 billion in additional output, in the 10th year; Sri Lanka’s by 0.96 percent or $1.4 billion; Vietnam’s by 0.29 percent or $947 million; and Laos’ by 1.88 percent or $476 million.

• In the 10th year after joining the ITA, new tax revenues would allow Indonesia to recover 151 percent of forgone tariff revenues ($1.6 billion); Sri Lanka 47 percent ($24 million); Vietnam 38 percent ($67 million); and Laos 24 percent ($14 million).

• ITA accession matters not just to companies in a country’s ICT goods- and services-producing sectors, but to all enterprises and industries that leverage ICTs and use them to digitalize their businesses and operations.

“Countries that haven’t joined the ITA are missing a significant opportunity for economic growth, innovation, and prosperity,” concluded Ezell. “Joining the ITA makes countries more attractive locations for ICT goods and services producers and exporters, and sends a strong signal that these countries are open for business.”

Read the report.