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EU Moves On ITA Spark Concern
by Winter Casey
U.S. industry and lawmakers are concerned by the European Union's moves to remove some products from an agreement that requires participants to completely eliminate duties on information technology products covered by the accord.
The Information Technology Agreement, which entered into force in 1997, was created as a tariff-cutting mechanism and is viewed as one of the most beneficial agreements to the tech sector worldwide, according to Brian Peters, the Information Technology Industry Council's director of government relations.
But there is growing concern that the EU's actions could result in having fewer products covered under the ITA if it is renegotiated as part of the World Trade Organization's Doha round of trade talks. The Doha round aims to lower trade barriers around the world. The talks began in November 2001 but stalled in the fall of 2006.
Among the U.S. lawmakers trying to rally support on Capitol Hill to push the Bush administration to address the EU's moves is Rep. Joseph Crowley, D-N.Y, who sits on the House Ways and Means Committee, which has jurisdiction over trade issues.
He has been circulating a draft letter among his colleagues addressed to U.S. Trade Representative Susan Schwab urging the administration "to use all tools at its disposal to address the European Commission's actions designed to undermine" the agreement. A staffer in Crowley's office said the letter is gathering support.
"Significant action on [expanding] the ITA has yet to be seen, and the European Commission [the EU's policy making body] continues subjecting products covered by the ITA to duties," according to Crowley's letter.
Still, as U.S. industry representatives push to get more products covered under the ITA, they and their supporters on Capitol Hill argue that the EU's efforts to get some items out from ITA coverage go against the initial spirit of an agreement that has been successful.
The commission's "actions are contrary to the spirit and letter of the ITA and contravenes the European Commission's international trade obligations," the letter said. "Temporary duty suspensions, even if provided by the European Commission, do not cure these infirmities."
The commission claims that technological advances in covered products justify its moves to apply duties on them, according to Crowley. He said such rationale "is particularly troubling as it would, by definition, subject almost any IT product to dutiable treatment and inevitably lead to the total erosion of the ITA."
WTO Director-General Pascal Lamy, a former EU trade official, said in March that the ITA has been a "major success" and is an important tool for economic development. Lamy said 70 WTO members, representing 97 percent of world trade in IT products, are participants of the ITA. He added that the world exports of ITA products over the past 10 years have more than doubled in dollar terms.
Gaining Traction On Capitol Hill
Crowley is not the first U.S. lawmaker to raise concerns about the EU's moves. In March, several House members including House Ways and Means Committee Chairman Charles Rangel, D-N.Y., and the panel's Trade Subcommittee Chairman Sander Levin, D-Mich., urged the Bush administration to act against trade barriers that hurt U.S. interests such as the European Union's moves related to the ITA.
"If the European Union begins to reclassify products out of the ITA as producers improve those products' capability, then UTSR should immediately initiate consultations under the WTO dispute resolution system," the lawmakers wrote USTR in its March letter. "If these consultations do not yield a satisfactory outcome in the consultation period, USTR should immediately file a complaint in the WTO."
A European Commission source, however, said that "we are willing to discuss product coverage, but this is not the only issue."
The source said that over time as convergence has occurred as a result of technology, "we are looking today at products that were not necessarily on the market when the agreement was concluded." The European Union is currently discussing the ITA with the World Customs Organization, within the Doha trade talks and as part of the ITA discussions.
The topic is complex because it is not just about product coverage but also concerns geographical coverage, the EU official added. The EU is willing to discuss how to deal with non-tariff barriers that affect market access of the products, and differences over classification of products are being clarified, according to the EU source.
"Our priority is to reach an agreement in Doha on a general tariff formula for all products," the source said.
U.S. Tech Industry Groups Wary of EU's Moves
Despite such assurances, industry groups such as the Electronic Industries Alliance, Information Technology Association of America, Information Technology Industry Council and the Computing Technology Industry Association remain concerned about the future of the agreement.
Monisha Primlani, EIA's director of government relations, trade and international policy, questioned whether the European Union is becoming more protectionist and may be undermining the aim of the agreement.
And Ann Rollins, the Information Technology Industry Council's vice president for trade and technology, said the commission is not living up to its ITA commitments.
Sources say the EU has subjected certain products -- such as LCD monitors, multi-function printers and set-top-boxes-- to duties that were supposed to be eliminated as part of the agreement. The EU also is considering allowing duties on digital video cameras, the sources said.
Joe Tasker, general counsel with the Information Technology Association of America and former chairman of the Coalition for an Information Technology Agreement, said the technology industry's aim is to keep the products in the agreement that were originally included.
On page 17 of the agreement it states that "flat panel displays (including LCD, electro luminescence, plasma and other technologies) for products" fall under the accord. The tech industry is concerned the European Union will move to exempt more products, sources said.
While trying to protect what is already covered under the agreement, industry representatives say they would like to see more products added to the agreement. Though the agreement provides that participants will periodically review the product coverage and possibly include new products, no agreement has been reached among delegations on whether to expand the deal to include more items.
Technology products deemed to not be covered under the ITA can be subject to tariffs. If tariffs are imposed on these products by EU countries, "the costs to the consumer for that item are bound to rise as the cost of foreign imports rises," said Roger Cochetti, director of public policy for the Computing Technology Industry Association.
"In the end, as the costs to European consumers of the affected items rises, demand and sales will decline," he added.
Given the stakes, industry officials say they are pleased that their concerns are being heard on Capitol Hill.
Tasker said it is important for Congress to be aware of the issue and for the USTR "to have evidence of congressional interest when they are talking to other countries" about the ITA.
Primlani added that the USTR has raised U.S. industry concerns to the European Union and at WTO meetings. "When Congress gets involved it adds political pressure so the EU can see that this is an important issue to the United States," she said.
What the European Union is doing "sets a bad precedent," she said. "If the EU can't stick to the spirit of the agreement then what is to say other countries won't follow suit."
"We need to see some action on this as soon as possible," said Peters, of the Information Technology Industry Council.
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