TARIFFS ON MULTI-CHIP TECHNOLOGY ELIMINATED
WASHINGTON, DC - 11/08/05 - The US has joined with major trading partners to eliminate tariffs on multi-chip integrated circuits - also called multi-chip packages, or MCPs - the new technology used in the production of cell phones, digital cameras, and personal digital assistants.
At a recent press conference, US Trade Representative Rob Portman announced the pact, saying he hoped the agreement with the European Union (EU), Japan, South Korea, and Taiwan "will spur other zero-tariff sectoral agreements in World Trade Organization (WTO) negotiations."
Under the agreement, the US will eliminate its 2.6% duty, the EU its duties ranging up to 4% and Korea its 8% duty. Japan will keep its existing rate at zero.
Although China, a prospective major MCP producer, is not part of this agreement, China maintains zero tariffs on MCPs as part of its WTO accession agreement, according to industry representatives.
According to Portman, the five parties to the agreement, which account for more than 70% of global MCP production as well as most of the trade in MCPs, will cooperate to find other WTO member countries willing to join the agreement.
Once countries covering a critical mass of the global trade in MCPs, say 90%, agree on eliminating tariffs, the parties would seek to add MCPs to the list of electronic products covered by the 1996 WTO Information Technology Agreement (ITA), he said.
The ITA commits more than 60 WTO members that signed it to allow duty-free entry of the covered products.
Global trade in MCPs - which came on the market in 1999 - has increased from zero in 1999 to $4.2 billion in 2004, and is expected to double again by 2008, according to the Office of the US Trade Representative (USTR).
Congress has granted the White House authority to proclaim certain tariff cuts without further legislation.
However, the administration has consulted closely with Capitol Hill on this issue and plans to notify Congress shortly of the president's intent to enter into the agreement, according to a USTR fact sheet.
January 1, 2006, is the target date for the zero duties on MCPs to go into effect.
"This agreement is not only important for US companies but for the ongoing WTO Doha Development Agenda [DDA] negotiations," Portman said.
A "key goal" of the US in the DDA negotiations, he said, "is to eliminate tariffs on manufactured products in all sectors and this agreement will serve as a shot in the arm for these talks."
Among industrial sectors where the US seeks zero-tariff agreements, he said, are chemicals, energy services, medical devices and wood products.
Portman left Washington over the weekend for a number of international meetings aimed in part at making possible success at the crucial WTO ministerial meeting scheduled December 13-18 in Hong Kong, where participants hope to propel the long-stalled Doha negotiations toward conclusion a year later.
His planned stops include London, Geneva, New Delhi, Beijing, and Pusan, South Korea, for the Asia-Pacific Economic Cooperation (APEC) forum leaders' meeting.
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