Why WTO hi-tech tariff deal is a sign of hope for deadlocked Doha Round

Unless something goes badly wrong, a subset of World Trade Organisation signatories will seal an important tariff reduction agreement on Friday.

The deal strips tariffs down to zero on some 200 hi-tech products, adding to and updating the 1997 Information Technology Agreement. This is only the second successful tariff-cutting outcome in the WTO’s 20-year history, the first being the original ITA.

The ITA-II result is an important institutional landmark, given the deadlock that has characterised the WTO’s negotiating efforts under the Doha Round for nearly a decade and a half – a deadlock broken only by the Trade Facilitation Agreement concluded late last year. This new deal should not be seen just as a plaudit for the WTO. It is also a demonstration of the possible in a rather bleak landscape.

As a single sectoral agreement, its coverage is large and its impact non-trivial. More than 10 per cent of global merchandise trade, or transactions worth over US$1 trillion, will come under ITA-II. Zero tariffs will replace some high rates of as much as 20 per cent to 30 per cent in some economies.

The agreement encompasses a broad range of new hi-tech products and modernises the 18-year-old ITA. These products represent fast-expanding, dynamic elements of modern economies, contributing disproportionately to growth.

Beyond its immediate success, though, ITA-II sends a message on the art of the possible to governments stuck in the Doha Round. If there is no movement in the Doha negotiations this year, even by way of agreement on a credible pathway out of the morass, some say the round will be dead and the future of the WTO uncertain.

Already, it is clear that a July 31 deadline set at the end of last year to establish a roadmap for completing the Doha Round will pass without incident. So the painfully obvious message to governments of a successful ITA-II is that if they want the WTO to remain relevant in the foreseeable future as a negotiating body, only one option exists. It is to get on with the job at hand.