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EU Council Concludes Agreement on Expansion of Trade in IT Products: Opportunities Set to Abound for Hong Kong Traders

On 1 July 2016, the EU expanded its duty-free treatment to new information technology (IT) products covered by a revised Information Technology Agreement. Elimination of tariffs in other participating countries is likewise being said to occur, although procedural delays are taking place in Japan, Korea and the Chinese mainland. The countries which are said to have participated last in the revised agreement will implement the agreement as of 1 January next year: these are Australia, Iceland, the Philippines and Switzerland. 

The Council of the EU concluded, on 17 June 2016, the agreement to expand trade in information technology (IT) products. The Decision of the Council comes after the adoption of a WTO Ministerial Declaration, dated 16 December 2015 at the 10th Ministerial Conference in Nairobi, to expand the Information Technology Agreement (ITA).

Negotiations were conducted by over 50 WTO members, but all 162 WTO members will benefit from the expanded ITA as they will all enjoy duty-free market access to the markets of the members eliminating tariffs on these products.

The ITA dates back to December 1996, when it was negotiated between 29 WTO Members at the Singapore Ministerial Conference. Since then, the number of participants in the agreement has expanded to 82. The ITA has consistently required participants to eliminate and bind their customs duties at zero for all IT products. This concession has been available on a Most Favoured Nation (MFN) basis, which has meant that all WTO Members enjoy duty-free access to the markets of those Members which eliminated tariffs on these products.

Due to rapid technological progress over the last 20 years, however, several WTO Members expressed a need to expand the scope of the products covered within the ITA in May 2012. The negotiations to expand the ITA did not always proceed smoothly; they were stalled for over a year after Beijing signalled that it wanted dozens of sensitive goods off the list of those to be added to the ITA. However, negotiators from the United States, the European Union, mainland China and South Korea made a number of concessions in order to reach a deal.

After several years of negotiations, on 24 July 2015, the 54 countries agreed upon the text of the Declaration expanding the ITA with the addition of 201 new IT products. The text was later adopted at the Nairobi Ministerial Conference in the same year. These 54 countries are said to represent 97% of the global trade in IT products.

On 8 June 2016, the European Parliament voted 529-110, thereby overwhelmingly favouring the expansion agreement, with just 37 abstentions. Subsequently, the Council of the EU, which had mandated the European Commission to negotiate the expansion agreement in the first place, passed its 17 June Decision to conclude the expansion agreement on behalf of the EU. 

Hong Kong traders may like to know that new products in the expanded ITA include next generation semiconductors, GPS navigation systems, magnetic resonance imaging machines, communication satellites, video game consoles, printer ink cartridges, video cameras, static converters and inductors, loudspeakers, software media (e.g., solid state drives), point-of-sale cards to download software and games, and various information and communications technology (ICT) testing instruments and touchscreens.

According to WTO Director-General Roberto Azevêdo, annual trade in these products is valued at over US$1.3 trillion and accounts for about 10% of global trade, an amount larger than global trade in automotive products or trade in textiles, apparel, iron and steel combined.

The parties have also agreed to intensify consultations concerning non-tariff barriers in the IT sector and keep the list of products covered under review, to determine whether further expansion may be needed to reflect future technological developments.

The implementation of the expanded ITA requires customs duty reductions in four stages, with the first stage of reductions beginning 1 July 2016 for nearly 65% of the products included in the deal. The complete elimination of customs duties is scheduled for no later than 1 July 2019. It further encourages countries to unilaterally accelerate the implementation prior to the prescribed dates.

The expansion of the ITA promises to be of great significance, not only to Hong Kong traders, but to the world at large. As the German Member of European Parliament (MEP), Godelieve Quisthoudt-Rowohl, stated in the European Parliament’s plenary session, “costs for consumers and for trade are considerably reduced, making it easier to get to the information technology market” as a result of an updated ITA.

Please click on the following links to view the Council Decision and the list of products as published in the EU’s Official Journal dated 18 June 2016:
Council Decision on the Expansion of Trade in IT Products
Declaration on Expansion of Trade in IT Products with List of New Products

Content provided by Picture: HKTDC Research
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