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Deal reached on cuts to global IT tariffs

A chip factory in Indonesia
Getty Images
A chip factory in Indonesia

The U.S., China and the EU are expected to sign up this week to what would be the biggest tariff agreement struck at the World Trade Organisation in almost two decades, after a weekend breakthrough that clears the way for barriers to be dropped globally on more than 200 types of high-tech products.

Negotiations over the 1996 Information Technology Agreement have been stalled since last November when US President Barack Obama announced a breakthrough in negotiations with China.

That U.S.-China agreement, however, prompted fresh standoffs between China and South Korea and China and the EU that until this weekend have prevented what the global tech industry sees as a badly needed and long-delayed update to the rules governing the trade in everything from video game consoles to semiconductors.

In a deal hashed out on Saturday, the U.S. agreed to grant further small concessions to China in order to help both South Korea and the EU secure their own deals with Beijing.

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The new compromise brokered by the U.S. and WTO director-general Roberto Azevedo is due to be brought to the capitals of the 80 governments involved in the ITA discussions for approval before a Friday deadline. With all of the remaining major players involved in the weekend breakthrough, people close to the negotiations said that deadline was now largely procedural.

"We are confident that all parties will now give formal approval to their participation in what would be the first tariff-elimination deal at the WTO in 18 years," US Trade Representative Michael Froman said.

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In a statement, the EU said it also expected all of the parties to sign on before the Friday deadline.

The global trade in IT products is worth about $4 trillion annually and the ITA update would see the tariffs lifted for goods that make up about $1 trillion of that total.

South Korea had objected to the deal struck by the U.S. and China because it did not remove tariffs on important products such as LCD display panels and lithium ion batteries, according to people close to the negotiations. The EU and China had also been in a standoff over a number of categories including analog car radios, the global trade in which is worth some $20 million annually.

The weekend breakthrough was welcomed by the U.S. tech industry.

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John Neuffer, president and chief executive officer of the Semiconductor Industry Association, said negotiations in Geneva had in recent days gained an air of desperation. "It was pretty clear to everyone that it was now or never," he said.

While some important products such as OLED televisions and other displays that the South Koreans had sought to have included would not be part of the agreement, it still would do much to remove trade barriers to the global trade in IT products, he said.

"It's not a perfect agreement. But it's a very good agreement," Mr Neuffer said.