Developing countries that accede to the World Trade Organization’s Information Technology Agreement stand to gain billions of dollars in their economies, according to recent report from the Information Technology and Innovation Foundation (ITIF).
A recent report from the Information Technology and Innovation Foundation (ITIF), a Washington, D.C.-based think tank, found that if developing countries accede to the World Trade Organization’s Information Technology Agreement, they stand to gain billions of dollars in their economies.
“If developing nations join the Information Technology Agreement, their businesses and consumers will use more technology products because of lower prices, while also becoming more deeply integrated in global value chains for ICT production,” said ITIF Vice President Stephen Ezell, co-author of the report along with J. John Wu. “This will spur significant economic growth for the countries while generating new tax revenues that substantially offset tariff losses.”
At the end of 2015, the WTO agreed to phase out more than 200 tariffs on information technology exports, including products and components, worldwide under the ITA.
The ITA expansion was considered the first significant WTO deal in 18 years. The United States joined more than 50 other countries at the WTO ministerial meeting in Nairobi, Kenya, to approve the agreement.
The WTO estimates that ITA expansion will eliminate tariffs on about $1.3 trillion in annual global exports of information and communications technology (ICT) products, which industry analysts estimate will increase annual global GDP by $190 billion. Under ITA expansion, more than $180 billion a year in U.S. technology exports alone will become tariff-free in key many markets around the globe.
Despite the economic benefits, some developing countries have not yet joined the ITA, fearing the revenue losses due to lost import tariffs.
“Countries that haven’t joined the ITA are missing a significant opportunity for economic growth, innovation, and prosperity,” Ezell said. “Joining the ITA makes countries more attractive locations for ICT goods and services producers and exporters, and sends a strong signal that these countries are open for business.”
The 60-page report, How Joining the Information Technology Agreement Spurs Growth in Developing Nations, reviewed the potential economic benefits to Argentina, Cambodia, Chile, Kenya, Pakistan, and South Africa by participating in the ITA.
Imported ICT products are so expensive in Argentina, for example, that the Economist reported in December 2016 that Argentineans the year before paid 123 percent more for these items than consumers in Europe.
“It can be cheaper [for Argentineans] to fly to New York and buy a phone than to get the same device in Argentina,” the publication said.
By joining the ITA, the ITIF said Argentina would increase its economic growth by 1.52 percent, or $12.7 billion in additional output, in the 10th year. Similarly, Cambodia would reach 0.98 percent or $320 million in additional economic growth over the same 10-year period, with Chile at 0.23 percent ($920 million); Kenya at 1.29 percent ($1.4 billion); Pakistan at 1.30 percent ($4.6 billion); and South Africa at 0.17 percent ($770 million).
“In the 10th year after joining the ITA, new tax revenues would allow Argentina to recover 133 percent of forgone tariff revenues ($1.3 billion); Cambodia 23 percent ($24 million); Chile 67 percent ($94 million), Kenya 109 percent ($139 million); Pakistan 75 percent ($231 million); and South Africa 92 percent ($152 million),” the ITIF said.
ITIF: Developing countries to benefit from ITA
