The World Trade Organization (WTO) is on the verge of agreeing to the first significant tariff-cutting deal in 18 years. For those of you who haven’t taken Econ 101, tariffs are BAD. They raise prices and make our economy inefficient, which leads to a dead weight loss.
The agreement eliminates tariffs on many new technologies. It is an update to the Information Technology Agreement (ITA), first implemented in 1997. This is great news for anyone who buys, sells, manufactures, imports, or exports technology. In other words, virtually everyone will benefit from this agreement.
The new agreement is an important update from the previous ITA. Technology has grown far more rapidly than any other area of industry. Consider how much technology has changed since 1997. The previous ITA was implemented before MP3s, Google, smartphones and cloud computing; the first iPod didn’t come out until 2001!
Suffice to say, the ITA was in dire need of an expansion for new products. The new ITA will eliminate tariffs on about 200 products valued at roughly $1 trillion. The agreement will make the already hyper-competitive technology industry even more competitive. It will drive down prices and lead to even greater efforts towards technological innovation.
That’s great news for Arizona, which has a booming tech industry. Technology produced in Arizona was valued at just under $12.7 billion in 2012, the last year for which numbers are available; one can assume that number has only grown. Arizona is ranked second in the country for space and defense systems manufacturing, and Arizona’s largest merchandise exports are computer and electronic products, which accounted for $5 billion last year.
According to WTO Director General Roberto Azevedo, “The trade covered in this agreement is comparable to annual global trade in iron, steel, textiles and clothing combined.” The tariff elimination will support 60,000 American jobs and add $190 billion to the Global Domestic Product.
Member countries of the WTO have until tomorrow to give their final approval. It is widely believed that the agreement will be reached without any hitches. Afterwards, the ambassadors will determine a timetable to implement the tariff eliminations. The U.S. Technology Ambassador is optimistic the agreement will be implemented as soon as July 2016.
Cheers to the World Trade Organization and its member nations for promoting free trade. This is a much needed, great new agreement that benefits corporations, small businesses and consumers alike.
