FUTURE-PROOFING WORLD TRADE IN TECHNOLOGY: Turning the WTO IT Agreement (ITA) into the International Digital Economy Agreement (IDEA)

ECIPE Working Paper No. 04/2011

FUTURE-PROOFING WORLD TRADE IN TECHNOLOGY: Turning the WTO IT Agreement (ITA) into the International Digital Economy Agreement (IDEA) cover

By Hosuk Lee-Makiyama

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Despite being an agreement designed for the fastest developing sectors, the signatories of the Information Technology Agreement (ITA) in the World Trade Organization (WTO) have so far failed to re-negotiate the coverage of the ITA (concluded in 1996) due to a longstanding dispute amongst its members. Since then, a new digital economy has been established and several products have been developed or merged with others, become obsolete, or turned into services. Supply chains in the ICT sector have become fragmented, and gains from increases in productivity and welfare benefits have benefitted the developing economies.

The WTO framework is struggling to keep up with these new challenges but the lack of progress risks turning the ITA into an obsolete agreement at the same time as the deadlock contributes to the proliferation of bilateral free trade agreements (FTAs). Nevertheless, FTAs cannot replace a ‘critical mass’ agreement with near-full participation under the auspices of the WTO – an agreement that would be very costly for WTO members to stand outside and also make the complex rules of origin obsolete for the complex ICT products. 

This working paper proposes a 'future-proofing' of the ITA by suggesting the creation of an International Digital Economy Agreement (IDEA) that could expand the current agreement by 40% compared to today's levels:

Finally, the membership of the Digital Economy Agreement could be expanded. There are six economies for membership — Argentina, Brazil, Chile, Mexico, Russian Federation and South Africa. These account for 6.7 % of ICT trade but they are also key players in the Doha round, suggesting that the plurilateral agreement could soon develop the same complications as multilateral negotiations.