Global industry sent a strong message this week to China’s senior-most leadership: return to the negotiating table to expand product coverage of the Information Technology Agreement (ITA) with “a more forward-leaning, ambitious approach.” Communicated in a December 4 letter to Premier Li Keqiang, the heads over 40 associations from the around the world called on China to “actively help steer the negotiations…to a successful conclusion as soon as possible.”
The letter was signed by the leadership of trade associations based in Canada, Colombia, Costa Rica, Europe, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, the United States, and Vietnam.
The original objective was to wrap up the ITA talks by the World Trade Organization (WTO) Ministerial underway in Bali this week. That was, unfortunately, not to be. Recall that on November 21 the negotiations broke down during what was supposed to be the final round of talks in Geneva when it became clear to everyone involved that China had little or no mandate to make the compromises and contributions necessary to conclude the talks.
In their letter to Premier Li, the global industry leaders pointed out that China has benefited enormously from the tariff elimination achieved by the original ITA, underscoring that China’s proportion of global tech exports has grown from 2.2% in 1996 to 27.5% in 2010.
Indeed, China would likely end up being the biggest beneficiary of ITA expansion. Yet, though the global trade value of products currently on the negotiating table is roughly $1 trillion annually, China surprisingly wants far fewer products to be included in the final deal. Bottom line, China’s limited aspirations for ITA expansion would cut that number in half and significantly slash the tariff savings to consumers. These awkward numbers for China are spelled out neatly in a separate letter from several European associations last week to Chinese Vice Premier Ma Kai.
While we were all disappointed we could not point to a successfully concluded ITA expansion deal as a win for global trade at the WTO Ministerial this week, we are hopeful an agreement can be reached in the near term. We noted with interest that China’s Minister of Commerce Gao Hucheng, himself, referenced ITA expansion in its on-going commitment to the multilateral trading system during his three-minute speech at the WTO Ministerial in Bali on Wednesday.
We know China wants a deal, primarily because the people of China and Chinese industry would benefit from it. The trick now will be to convince Beijing that a deal can be had, but it needs to be ambitious and spread the benefits, more or less evenly, to all parties at the negotiating table.