15 Years Later, Prospects For WTO Information Technology Agreement Examined

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The World Trade Organization this week celebrated 15 years of a tariff-cutting agreement on information technology products, and issued a publication charting the history of the agreement. Industry representatives invited to a symposium joined voices asking that the agreement be expanded, while some called for strategies to incorporate development into technology trade promotion. And a link was made between the agreement and a rise in patents on technology.

The symposium on the Information Technology Agreement took place on 14-15 May and aimed at taking stock of the impact of the agreement since its inception, giving an overview of the latest developments in the information and communication technology (ICT) sector, and examining a further expansion of trade in ICT products.

A number of the panels of the symposium have been recorded and can be accessed on the WTO website here.

WTO Director General Pascal Lamy said at the opening of the session that ITA participants accounted for over 96 percent of world trade in IT products, and that the elimination of tariffs through the ITA “has substantially improved the affordable access to technology, in particular, for developing countries.”

In recent years, he said, a shift “from passive consumption of ICT towards active use and participation in the production of ICT goods and services,” had been observed in low-income and least-developed countries.

“It is my hope,” he said, “that through this outreach event, government representatives, policymakers, and trade negotiators can have an exchange of views and dialogue with the private sector, industry associations and also with academics on the latest developments in the ICT sector.”

Lamy also launched a new WTO publication: “15 Years of the Information Technology Agreement: Trade, Innovation and Global Production Networks” [pdf], retracing the history of the agreement and its effect on high tech global trade.

“Fifteen years ago a group of visionaries overcame what at the time appeared to be insurmountable obstacles and negotiated one of the most successful sectoral trade agreements ever. Today, their successors, as I see it, have the responsibility to further expand that legacy,” he concluded. Lamy’s speech has been recorded and may be accessed here.

The Ministerial Declaration on Trade in Information Technology Products (ITA) was concluded in 1996 and aimed at cutting tariffs on a list of information technology products covered by the agreement.

Main product categories covered by the ITA, according to the new publication, include: “computers, semiconductors, semiconductor manufacturing equipment, telecommunication apparatus, instruments and apparatus, data-storage media and software, and parts and accessories.”

As of March, the ITA included 47 participants, representing 74 WTO members (with the 27 EU member states counted as one), according to the publication. It states that “while some progress has been made, outstanding issues (such as a review of product coverage and classification in relation to the World Customs Organization Harmonised System) remain in narrowing down the divergences in classification of ‘Attachment B’ products.”

Attachment B contains items on the classification of which ITA participants could not agree. For example, in Attachment B computers are defined as “automatic data-processing machines” (ADPs) capable of performing certain specific functions.” Discussions to expand product coverage under the ITA are still ongoing.

Patents in ICTs on the Rise for ITA Countries

Wolf Meier-Ewert of the Intellectual Property Division of the WTO said at the event that IT as a general purpose technology facilitates innovation across downstream sectors. Developed countries as well as developing country members of the ITA have shown a rise in innovative activities.

Patent activity in three main sectors of the ITA – computer technology, telecommunications and semiconductors – reveals that since 1996, a significant increase has been observed, although he said a lot of innovation escapes recording. This trend has been significant in ITA members, such as the United States, France, Germany or Sweden, but not in non-ITA members such as Russia, Brazil and Mexico, he said.

“The patent system original function was to incentivise innovation by rewarding qualified technological inventions with a temporary exclusive right,” Meier-Ewert said. However, patents are increasingly used for strategic purposes, which can affect the system ability to deliver innovation, he said.

There is a rising number of patents covering complex technologies, and potentially overlapping in the area of IT, in “patent thickets.” There is also a trend of increased patent litigation brought by non-practising entities, sometimes called “patent trolls,” which “focus on the acquisition and enforcement of strategic patent portfolios without themselves producing related products,” according to the WTO publication. Meier-Ewert said that both trends may block competition and discourage innovation in certain areas.

Industry: Successful Agreement but Shows a Little Rust

At the symposium, private sector representatives hailed the ITA as a successful agreement while almost drumming their fingers on the table in an impatient wait for a further expansion of products coverage and participating countries. “15 years is a very long time in our industry,” said an industry speaker, voicing the private sector concern about the difficulty to use the ITA when it comes to new products, in particular ones which can be used in different contexts.

Robert O’Brian, director of market intelligence for US-based Corning Incorporated said, “the ITA should be proud of the crucial role played in the last 15 years.” But, he added, the ITA can be even more successful at it moves forward.

Chih-Kung Lee, president of the Institute for Information Industry in Taiwan, concurred and said the need to expand product coverage and draw more participants is “now apparent and urgent.”

For Akihiro Tanii, vice-chairman of the Trade Policy Committee of Japan Electronics and Information Technology Industries Association, the ITA help boost the penetration of IT products, fostered economic growth, provided higher standards of living for people around the world, and contributed to innovation. However, the ITA needs to be updated regularly to adjust to new products arising from innovation and to include ITC products that are not currently recognised as such in the ITA.

“With the WTO trade liberalization negotiations gridlocked, the WTO system has been unable to catch up with innovation by industry,” Tanii said, adding there is a need for “strong and tangible results [of ongoing discussions to expand or modify product coverage] to mark this 15th anniversary of the ITA.”

ICTs, Innovation, Need to be Demand Driven in Developing Countries

Paul Kukubo, chief executive officer of the state corporation Kenya Information, Communication and Technology Board, said social needs have “to be the basis for innovation.” He said the board felt the ITA was “extremely useful,” and that it could “certainly commit to be looking at the agreement from fresh eyes.”

Developing countries are sometimes worried, Kukubo said, that as net importers of technology, opening markets could drive increased competition “when we are not yet fully ready to compete.” But in Kenya “we feel that already some of our companies which are doing quite well in the rest of Africa, and some indeed in the world … are ready for prime time.”

“Remember that when this agreement was signed … a combination of people with technology and people with trade” was needed “to be able to understand this kind of agreements,” he said, before adding that at the time those competencies were probably lacking but “now we have a very nice pool of people who can straddle both,” he said.

For Torbjörn Fredriksson, chief of the ICT Analysis Section, Division on Technology and Logistics for the UN Conference on Trade and Development, it takes more than infrastructure to optimise the ICT sector and proper legislation and regulation should be established to promote innovation but also to protect the users. There is a need for comprehensive strategies to reap the full development benefits from ICTs, he said.

Partnerships between the private sector, civil society and governments are crucial, as it is very difficult for any one stakeholder to master the process to ensure maximum development benefits, he said. The innovation needs to move from supply to demand driven, and development objectives need to be put at the centre, he added, “and not just go for the latest technology and push it out.”

A particular concern for UNCTAD, he said, is to promote the development of better data. “We still know far too little … and policy makers in developing countries have a hard time actually making policies and monitoring their policies” because they are lacking information about their ICT sector and “how they can make better policies to promote better use of ICTs.”

Catherine Saez may be reached at info@ip-watch.ch.

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