ECIPE PRESENTATION » 27. 06. 2011

REMODELLING THE ITA FOR THE DIGITAL ECONOMY »

PRESENTATION OF THE ECIPE WORKING PAPER

Future-Proofing Technology Trade – Turning the WTO IT Agreement (ITA) into International Digital Economy Agreement (IDEA)

Hosuk Lee-Makiyama Director, European Centre for International Political Economy (ECIPE)

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»The narrative of ITA in 2011?

ITA – an open zero-for-zero plurilateral » Most significant trade liberalisation in the WTO » Critical mass approach» 29 to 46 participants; Failure of ITA2

1. Configuration» Rise of China-centric global production network (GPN)» Intra-Quad to South-South; the concept of net importer/exporter

2. Composition» Fragmentation of the manufacturing process» IT to telecommunication

3. The digital economy» Internet and digital content» Mobile networks & network convergence

4. Trade policy challenges» 97% of IT trade – true product coverage?» NTBs» Servification» EC — Tariff Treatment of Certain Information Technology

Products, DS375, 376, 377

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»Product coverage

Current definitions» Inherent weaknesses in the approach» Minimum commitments in Annex A & B» ”Professional use”?

Negotiation approach to new products» OECD: intended to fulfil the function of information processing and communication by

electronic means, including transmission and display, OR use, electronic processing to detect, measure and/or record physical phenomena, or to control a physical process‣ Register, store, process, communicate or render information‣ Digitally

» Category level committments – vis a vis Product or Chapter‣ All electric office equipment, including copiers, printers, calculators, computers (laptops, stationary and

mainframes): 8443, 8469, 8470, 8471, 8472, 8473‣ Inputs (materials and chemicals), tools, machinery for semiconductors manufacturing: 3818, 8486, 8514‣ Semiconductors and circuits: 8534, 8540, 8541, 8542‣ Electrical parts (converters, transformers, fuses etc.): 8473, 8504, 8532, 8533, 8536, 8544‣ Telephony equipment, mobile and fixed line; network and terminals: 8517‣ Digital cameras, video recorders, monitors, televisions and displays: 8521, 8528‣ All other audio visual products and parts, including transmission or broadcasting equipment, radar

equipment (remote controls, peripherals such as Bluetooth), 8518, 8519, 8522, 8525, 8526, 8527‣ All storage media and devices, recorded media and software: 8523, 8524‣ Optical fibres: 9001 ‣ Scientific instruments, including GPS: 9011, 9012, 9017, 9026, 9027, 9029, 9030‣ Other electric equipment with singular functions: 8543

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»New signatories adding up to 89 bn

9.02% (0.28bn)

1.11%(0.07bn)

3.71%(0.53bn)

8.12%(1.15 bn)

2.07%(0.75bn)

3.00%(0.07bn)

Trade costs: 2.85 bn

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»Non-tariff barriersImportance in achieving market access and market-deep integration

» Ad valorem equivalent of NTBs ~ 250 bn» Potential benefits, trade cost reduction of 6-7%: $80-90 bn

Alternatives» Prospects of MRAs?» EU proposal in NAMA sectors (TN/MA/W/119)

» Harmonisation on electromagnetic compability and interference (EMC, EMI) » Approach from EU-Korea FTA: Self-declaration of conformity (SDoC)

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»Critical mass on services?

Developments» VHS was market standard, DVDs were not yet invented; today world’s largest vendor of music is online» ICT services are the fastest growing category of services ($1 trillion in US)» 75% of software distribution online» India China is the world’s largest internet population (420 mn users)» Servification

New and old barriers?» Licensing» Next generation standards» Geopolitical considerations, joint-venture requirements, ownership restrictions

Multilateral agreements» GATS annex – open access on reasonable and non-discriminatory terms» Reference Paper – universal service, interconnection, regulatory and licensing procedures

Definitions» Computer and related services (CRS) – ITA members 96% of trade

‣ Understanding on the scope of coverage of CPC84 » Telecommunication – 85%

‣ Network access services, managed services» Certain consulting services

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»Mode 4 / Temporary movement of physical persons

ICT sector – more likely to be offered than others » Role of multinational corporations» Market driven certficiation with non-existing domestic regulation issues» Likely part of bilateral offers – EU-India, EU-Euromed» Not only North-South, but also North-North issue» Less concerns about migration» Mode 3 without Mode 4?

Progression» Intra corporate transfers» Abolishment of ENTs and similar requirements» Numerical quotas

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»The International Digital Economy Agreement (IDEA)?

Cluster agreement » Comprehensive market access – goods hinged on services and vice versa» Benefits/commitments and supply-chain participation» Definition issues

Not a clear cut net importer/exporter but key five players have positive net balances

Adding up to 40% of volumes» 27% from existing members only» Not including mode 3/4

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CURRENT ITA TRADE VOLUMES $1310 bn

3.5

bn31

bn

91 bn

ADDITION FROM ACCESSION BYARGENTINA, BRAZIL, CHILE, MEXICO, RUSSIA, SOUTH AFRICA

INCL. VOLUMES BETWEEN ALL ACCEDING COUNTRIES

INCL.EXPANDED PRODUCT COVERAGE

EXPANDINGPRODUCTCOVERAGEAMONGSTEXISTINGITA MEMBERS

AD

DIT

ION

OF

CO

MP

UTE

R A

ND

IN

FOR

MA

TIO

N S

ER

VIC

ES

AD

DIT

ION

OF

CO

MM

UN

ICA

TIO

N S

ER

VIC

ES

217 bn

3.4 bn

INC

L C

OM

PU

TER

&

INFO

RM

ATI

ON

SE

RV

ICE

S

45 bn

INC

L C

OM

MU

NIC

ATI

ON

SE

RV

ICE

S

MODE 3 +MODE 4

EXPANDING MEMBERSHIP

EXPANDINGSCOPE

89 bn

39 bn

CURRENT SCOPE

NEW MEMBERS + EXPANDED SCOPE(+4%)

NEW MEMBERS

(+10%)

EXPANDED SCOPE( > +26%)*

* excl. mode 3 & 4