What is in this article?:
- American Manufacturing Needs an Updated High Tech Trade Agreement
- Expanded Agreement Benefits IT Products
While the The Information Technology Agreement played a critical role in promoting IT trade and investment, which in turn has driven innovation, boosted productivity, increased employment, and accelerated U.S. industrial growth, the product scope needs to be expanded.
The Information Technology Agreement (ITA), which eliminates tariffs on trade across a wide range of information technology (IT) products, has been one of the most commercially successful trade agreements ever undertaken—for the global economy and for American industry.
From 1996 to 2008, total global trade in IT products increased by more than 10% annually, from $1.2 trillion to $4.0 trillion, which is at least partially due to the liberalization of IT trade.
Moreover, the ITA has empowered the formation of efficient, global supply chains which have enabled a shift from a closed, linear innovation model to an open innovation model that relies on close collaboration among suppliers, network partners, and customers to bring breakthrough, next-generation IT products to market.
In short, the ITA has played a critical role in promoting IT trade and investment, which in turn has driven innovation, boosted productivity, increased employment, and accelerated U.S. industrial growth.
Yet despite these positive results and the fact that significant IT transformation has occurred since the ITA first took effect in 1996, the product scope of the agreement has not been expanded.
Over the past 18 years, technology developments have spawned the creation of hundreds of innovative new products, from GPS systems and flat panel displays to an entirely new class of semiconductor chips—multi-component semiconductors or MCOs—that have become ever-more significant components of the global IT trade. In addition, the initial ITA agreement did not cover many products, including dynamic random access memory chips (DRAMs), audio speakers, and DVD players, which also need to be brought under IT coverage.
To enable the ITA to catch up with the rapid pace of technological development, the United States has taken the lead in attempting to craft an expanded ITA agreement that would increase the product coverage of the ITA, expanding the overall “tariff-free” global market for trade in IT products.
Despite the claims made by some isolationists (both in the United States and other nations), to the contrary the expansion would in fact produce many specific positive impacts for U.S manufacturers.
As ITIF argues in Boosting Exports, Jobs, and Economic Growth by Expanding the ITA ITA expansion would provide three primary and a variety of ancillary benefits for the United States.
First, foreign tariff removal on an expanded set of IT products will boost U.S. exports of IT goods and create U.S. jobs. In fact, ITIF estimates an expanded agreement could increase U.S. exports of IT products by $2.8 billion and support the creation of approximately 60,000 U.S. jobs.
Second, as central players in the global IT supply chain that collectively account for one-quarter of the global IT industry, leading U.S. IT goods companies, IT services companies, and the component manufacturers that supply these firms could see revenue increases of approximately $10 billion thanks to an expanded ITA.
Third, expansion would reduce costs and increase productivity for a range of industries, from automotive manufacturing to medical devices, which depend on IT components and inputs, some of which are imported. Finally, U.S. leadership in promoting ITA product expansion will further bolster the United States’ position as a leading advocate of greater global multilateral trade liberalization at a time when some actors around the world are implementing protectionist policies at an alarming rate.