Last month, their faces beaming with self-congratulatory enthusiasm, US President Barack Obama and Chinese President Xi Jinping (習近平) 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 Punke, deputy US trade representative and the US ambassador to the WTO, 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 US$1 trillion of 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 US$15 billion a year in tariffs and generated hundreds of thousands of jobs across the globe.
However, the talks broke down in the middle of a faceoff between China and South Korea over LCD television screens, a market where China strongly wants to expand. After difficult negotiations, South Korea was willing to lower tariffs on LCDs.
However, the South Korean delegation wanted China to offer at least a face-saving concession, most likely in advanced lithium batteries, a product in which China has a US$1 billion trade surplus, according to a US official with knowledge of the talks. China rebuffed appeals from US and South Korean negotiators, even from the head of the WTO.
“I think it says very profound things about China’s ability to negotiate,” the US 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.
In a statement on Friday, WTO Director-General Roberto Azevedo 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 (ITA) to include new and more advanced products broke down last year after China objected to the scope of products covered. Momentum for a new agreement was restored during Obama’s visit to Beijing last month, when the US and China agreed to eliminate tariffs on more than 200 categories of products. However, the Chinese have been unwilling to expand the list beyond the items agreed upon with the US, angering other countries.
Though the US 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 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 Ministry of Economic Affairs yesterday expressed regret over the breakdown in WTO negotiations on cutting trade tariffs on hundreds of information technology products, which make a substantial contribution to Taiwan’s economy, according to a statement posted on the ministry’s Web site.
“We will continue to work hard to expand the coverage of the ITA agreement in future talks for the best interests of Taiwan’s industries,” it said.
Additional reporting by staff writer
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