China and the United States reached an understanding to reduce tariff on information technology based on an IT trade agreement that was suspended November of last year.
According to a White House statement, U.S. President Barack Obama told leaders at the Asia-Pacific Economic Cooperation (APEC) Summit in Beijing that Washington hopes the understanding between the U.S. and China would help conclude the negotiations in Geneva.
If the understanding between the two countries pushes through, it will be the first major deal to cut tariff under the World Trade Organization in 17 years.
In 1997, the Information Technology Agreement (ITA) was set in place, but talks to expand its coverage was suspended November of last year. The suspension was attributed to the differences between China and the U.S. This time, Washington sees the understanding as a major step to move the agreement forward.
During the the summit, Obama commended APEC for being the venue that led to the ITA. He told his fellow world leaders that they are about to expand the agreement to rapidly conclude the broader negotiations in Geneva, Switzerland.
According to Michael Froman, a trade representative from the U.S., the ITA understanding between the U.S. and China reached on Monday is a breakthrough that would lead to tariff cuts on high-tech goods.
“[The] last time the WTO agreed to eliminate tariffs on IT products was in 1996 when most of the GPS technology, much of the medical equipment, software, and high-tech gadgetry that we rely on in our daily lives didn’t even exist,” Froman told reporters.
Froman added that since 1996, global trade in high-tech goods reached $4 trillion annually. However, and despite the boom in trade for these goods, he said that the coverage of ITA-related products were never expanded.
The WTO is the trade institution responsible for setting the rules among its member states to ensure all country signatories are given a level playing field. It attempts to spur and encourage growth through open markets without barriers to trade such as tariff, national regulations and exorbitant taxation.