IUST: Countries Reach ITA Expansion Deal After Compromise On 'Critical Mass'

NAIROBI, Kenya -- The 24 economies negotiating an expanded Information Technology Agreement (ITA) here on Wednesday (Dec. 16) reached a final deal after trading partners approved China's final tariff schedule and agreed to non-binding compromise language addressing China's worries over the “critical mass” issue.

The final ITA declaration -- which on Wednesday evening here had not yet been released -- would commit members to hold discussions in the future if the membership of the plurilateral agreement no longer represents a critical mass, which members have generally defined as 90 percent of trade in the covered goods.

"Members discussed the potential for future shifts in trade in the context of the critical mass," the declaration states. "It was agreed that an appropriate opportunity shall be found to discuss the issue in the future, if such circumstances arise, without prejudice to any outcome of the discussion."

China had earlier demanded language that would cancel the tariff concessions countries had agreed to if the ITA's membership ever fell below a critical mass. The current membership of the expanded ITA reflects a critical mass, but this could change in theory if either patterns of trade significantly change or some members decide to drop out.

The negotiations on the ITA expansion deal were pushed down to the wire here as China withheld submission of its final tariff schedule, the original version of which contained a number of technical errors that would have cut tariffs on the incorrect items. European Union Trade Commissioner Cecilia Malmstrom announced that China had submitted is final schedule on Wednesday afternoon.

Each of the participating countries has negotiated different phaseout periods for the 201 products covered by the expanded ITA, which builds on the original agreement reached in 1996. China has some of the longest phaseout periods for roughly 40 percent of the items covered by the deal.

World Trade Organization Director-General Roberto Azevedo said in a statement that under the final deal, overall the participating members will cut 65 percent of their tariff lines down to zero duty upon the July 2016 entry into force, representing about 88 percent of imports of the covered products.

Three years after entry-into-force, about 89 percent of tariff lines will go to zero duty. All tariffs covered by the deal will be at zero after seven years after entry into force. In total, the deal covers roughly $1.3 trillion in global goods trade.

At a press conference, South Korea's representative acknowledged the deal was not perfect or fully satisfactory, but said it was the best deal that members could agree on. Korea and Taiwan had pushed to include flat-panel displays in the scope of the agreement, but that demand was successfully rebuffed by China.

Several ministers including Froman expressed hope that the ITA deal would inspire momentum in the broader negotiations at the Dec. 15-18 WTO ministerial to reach a multilateral trade package.

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