TECHNOLOGY
W.T.O. Fails on High-Tech Tariff Deal
ByJONATHAN WEISMANandPAUL MOZUR DEC. 12, 2014
A television production line in China. China and South Korea faced off over LCD TV screens.CreditFeng Li/Getty Images
WASHINGTON — Last month, their faces beaming with self-congratulatory enthusiasm, President Obama andChina’s president, Xi Jinping, announced an agreement to drop tariffs on a range of high-technology products, an accord that was supposed to propel far more significant trade talks in the weeks to come.
On Friday in Geneva, those talks on technology trade collapsed in acrimony, a sign that China is still unwilling to open its markets to competition where it is most vulnerable.
“We came to Geneva this week and worked hard to build a consensus around the bilateral agreement we concluded with China,” Michael W. Punke, deputy United States trade representative and the United States ambassador to theWorld Trade Organization, said in a statement. “Like everyone in the room, we are disappointed not to be celebrating a deal this week. We missed a big opportunity.”
The Geneva talks aimed to reduce global tariffs on $1 trillion in high-tech goods, be it small-bore consumer electronics like video game consoles or big-ticket items like magnetic resonance imaging machines and advanced semiconductors.
Experts say a breakthrough could have saved as much as $15 billion a year in tariffs and generated hundreds of thousands of jobs across the globe. But the talks broke down in the middle of a face-off between China and South Korea over liquid-crystal display television screens, a market where China strongly wants to expand. After difficult negotiations, South Korea was willing to lower tariffs on LCDs. But the Korean delegation wanted China to offer at least a face-saving concession, most likely in advanced lithium batteries, a product in which China already has a billion-dollar trade surplus, according to an American official with knowledge of the talks. China rebuffed appeals from American and Korean negotiators, even from the head of theW.T.O.
“I think it says very profound things about China’s ability to negotiate,” the American official said. “The world’s most successful trader of information technology is incapable of having a negotiating conversation.”
For the Obama administration, the failure of the technology trade talks could bode ill for its broader trade agenda. Negotiators in Washington this week tried to work out the final bumps in the Trans-Pacific Partnership, a major trade accord that does not include China but does include many trade partners in Asia. The technology deal was supposed to be the lowest-hanging fruit on the international trade agenda.
The White House also badly wants Congress to grant Mr. Obama “trade promotion authority,” the ability to fast-track trade deals without lawmakers altering them before giving the deals an up-or-down vote. If trading partners are showing inflexibility, lawmakers are less likely to give United States negotiators such a blank check.
“There is no disguising that today was a major setback, but there is an emerging feeling that it’s not time to throw in the towel quite yet,” said John Neuffer, senior vice president for global policy at the Information Technology Industry Council, a high-tech trade group.
In a statement on Friday, Roberto Azevêdo, the W.T.O.’s director general, said: “It has not been possible to finalize the negotiations this week. I urge members to remain actively and constructively engaged as we try to bridge the gaps in these negotiations.”
Talks about updating the 1997 Information Technology Agreement to include new and more advanced products broke down last year after China objected to the scope of the products covered. Momentum for a new agreement was restored during Mr. Obama’s visit to Beijing in November, when the United States and China agreed to eliminate tariffs on more than 200 categories of products.
But the Chinese have been unwilling to expand the list beyond the items agreed upon with the United States, angering other countries. Mr. Punke was careful to praise some partners, but China was conspicuously absent.
“In our disappointment at not reaching a deal, we should not fail to recognize those who made great efforts this week towards a deal. In particular, I would note the flexibility shown by Costa Rica, Malaysia, Israel, Guatemala and Korea,” he said in a statement.
Though the United States still exports many high-technology goods, China is now the world’s dominant exporter of electronics and has much to gain from an elimination of tariffs, experts say. Even so, Chinese officials have argued in the state-run news media that Beijing needs to protect companies in important industries, like semiconductors and LCD displays, that are not as competitive internationally as many of China’s other products.
The Obama administration estimates that expanding the agreement would create up to 60,000 jobs in the United States by eliminating tariffs on goods that generate $1 trillion in sales a year globally. The 78 participants in the agreement account for 97 percent of the world’s technology products, according to the W.T.O.
“We are all aware of the importance of these negotiations,” AngelosPangratis, the European Union’s ambassador to the W.T.O., said in a statement before the trade deal collapsed on Friday. “We have in front of us the most far-reaching market access package made in the W.T.O. since 1996.”
Some analysts view the setback as a reflection on the organization itself, which has often been unable to seal trade agreements.
“The W.T.O.’s ability to create laws has been threatened into becoming irrelevant,” said Andrew Lang, a professor of international trade at the London School of Economics. “It has shifted from attempts to create broad agreements toward a smaller mandate in areas where something can be done.”
“Getting a deal done on the Information Technology Agreement,” he added, “would be an incremental but important step for the W.T.O.”
Jonathan Weisman reported from Washington and Paul Mozur from Hong Kong. Mark Scott contributed reporting from London.
A version of this article appears in print on December 13, 2014, on page B1 of theNew York editionwith the headline: W.T.O. Fails on High-Tech Tariff Deal.