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History of a Sectoral Initiative: Information Technology Agreement (ITA)
Major exporters of information technology convened at the Singapore Ministerial in 1996, with an aim to build on the success of the zero-for-zero sectoral initiatives agreed to as part of the market access negotiations during the Uruguay Round.
As a result of these discussions, 29 Uruguay Round Members signed the Singapore Ministerial Declaration, which committed the signatories to eliminating tariffs and all other duties and charges on a negotiated list of information technology products. Signatories also agreed to the following principles:
- Incorporate all tariff commitments covered by the Agreement into national tariff schedules.
- Meet periodically under the auspices of the Council on Trade in Goods to consult on non-tariff barriers and review the product coverage of the Agreement with a view to agreeing by consensus whether the product coverage should be modified in any way due to technological developments or changes to the HS nomenclature.
- Reach a negotiated target of 90 percent of global trade (representing total imports and exports of signatory countries) at which time the Agreement will enter into force.
- Strive to achieve a common classification for covered products within existing HS nomenclature.
- Consult with other Participants as requested.
- Promote the Agreement and encourage other Members and acceding countries to participate.
At the time the Agreement was signed in 1996, the level of global information technology (IT) trade represented by the 29 participants only reached 83 percent. In the months following the Singapore Ministerial, eleven additional Members pledged to sign the Agreement, bringing the number of signatories to 40 and the level of covered global trade to 90 percent, thus activating the ITA.
Since that time, an additional 32 participants have signed on to the ITA, bringing total participation to 73 nations and territories, representing over 97 percent of global IT trade. ITA membership has grown to include members of different levels of economic development, such that a majority of current ITA signatories consider themselves to be developing economies.
The ITA has had a significant impact on global trade in this important sector, as trading partners increasingly transfer technology and globalize supply chains. Since its inception in 1996 through 2008, global trade (imports and exports) in products covered by the ITA has grown on average by 10.1 percent annually, from $1.2 trillion to $4.0 trillion.
The ITA represents the first time the concept of “critical mass” was utilized in constructing a sectoral initiative. Other “zero-for-zero” agreements in the Uruguay Round consisted of interested Members agreeing on a list of covered products without first setting a target level of participation at the outset of negotiations. The use of the critical mass approach better ensures that the benefits of trade liberalization accrue to key traders in the sector and helps to minimize the “free rider” issue.
Participants agreed to the following implementation schedule for all ITA products not already bound at zero.
1st cut: 1 July 1997
2nd cut: 1 January 1998
3rd cut: 1 January 1999
4th cut: Complete elimination of duties no later than 1 January 2000
Due to the fact that both developed and developing countries chose to participate in the ITA, participants agreed to allow longer implementation periods for developing countries implementing tariff cuts.
The Singapore Declaration provides that "unless otherwise agreed by the participants" each subsequently joining participant would follow a staged reduction of tariffs as listed above. Since the implementation of the ITA, other WTO Members have chosen to participate in the ITA and developing country Members have requested and been granted extended staging by the ITA Committee. For example, Peru joined the ITA officially in late 2008, and will gradually phase out tariffs on all ITA products in stages by 2013.
The ITA is a model for a successful sectoral agreement benefiting a large and diverse group of countries and territories, a majority of which are developing economies, and a prime example of successful incorporation of the concept of critical mass as a means for implementation.