Boosting Exports, Jobs, and Economic Growth Through the ITA

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It is time to seize a fertile opportunity to simultaneously expand global trade and boost the U.S. economy with export opportunities and job creation—by expanding the product coverage of the Information Technology Agreement (ITA).

As the Information Technology and Innovation Foundation shows in a new report, an expanded ITA could remove tariffs on at least an additional $800 billion in global two-way trade in information and communications technology (ICT) products, a 20-percent increase over the $4 trillion now covered annually. This represents a tremendous opportunity for the United States.  ITIF estimates that ITA expansion would bring an additional $40.6 billion worth of U.S. exports of ICT products under ITA coverage, while also increasing U.S. exports of ICT products by $2.8 billion, boosting revenues of U.S. ICT firms by $10 billion, and supporting the creation of approximately 60,000 new U.S. jobs throughout the economy.

Negotiated in 1996, the ITA eliminated tariffs on eight major categories of ICT products such as semiconductors, computers, and telecommunications equipment. However, as visionary as it was, the initial ITA agreement still did not cover a number of core ICT products such as DRAMs (dynamic random access memory chips) nor dozens of every-day consumer electronic products, including many types of audio-visual equipment such as audio speakers, DVD players, and video cameras.

Now think of how much information technology has evolved since 1996—GPS systems, flat panel displays, video game consoles, and remote home and patient monitoring devices (just to name a few!) have become part of daily life. What’s more, an entirely new class of semiconductor chips called multi-component (MCO) semiconductors have facilitated a transformative 15 years. But incredibly, many of these products are not covered under the ITA’s tariff-eliminating regime, since the product coverage of the ITA has not been updated since the Agreement’s 1996 launch.

To be sure, even given its initial limitations and failure to update for a host of innovations, the ITA has worked. Today, 73 nations are ITA signatories, up from 29 in 1996. From 1996 to 2008, total global trade in ICT products increased more than 10 percent annually, from $1.2 trillion to $4.0 trillion. Behind these large numbers are the innovations in trade itself as the ITA has empowered the formation of efficient global ICT supply chains which enabled a shift from a closed, linear innovation model to an open innovation model that leverages close collaboration among suppliers, network partners, and customers to bring breakthrough new ICT products to market. But an ITA that covers an expanded suite of products will work even better, spurring greater global diffusion and adoption of ICT products by lowering their price (through tariff elimination) and inspiring still more innovations in ICT products and services.

With prospects for progress on the Doha round uncertain, ITA expansion presents the global trade community the best option to carry momentum for greater multilateral trade liberalization forward. Such momentum is clearly needed, for—as the move yesterday by the United States and some of its trade partners against China’s export restrictions on rare earth minerals makes clear—the free and fair flow of goods and services cannot be taken for granted. An expanded ITA provides both a vehicle—and a shining exemplar—for how to take continued multilateral trade liberalization in the right direction. With economic benefits so compelling—for developed and developing countries alike—now is the time for the United States to take a leading role in promoting expansion of ITA product coverage.

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About the author

Stephen Ezell is a Senior Analyst with the Information Technology and Innovation Foundation (ITIF), with a focus on innovation policy, international information technology competitiveness, trade, and manufacturing and services issues. He is the co-author with Dr. Atkinson of "Innovation Economics: The Race for Global Advantage" (Yale, 2012). Mr. Ezell comes to ITIF from Peer Insight, an innovation research and consulting firm he co-founded in 2003 to study the practice of innovation in service industries. At Peer Insight, Mr. Ezell co-founded the Global Service Innovation Consortium, published multiple research papers on service innovation, and researched national service innovation policies being implemented by governments worldwide.