Wall Street Journal (8.17.10)

WTO Orders EU To Lift Tech Tariffs

BRUSSELS—The World Trade Organization ordered the European Union to strike down import tariffs on billions of dollars of high-tech goods or risk retaliatory trade sanctions.

In dollar terms, the decision could be one of the biggest wins yet for the U.S. at the Geneva-based trade body.

The dispute concerns the 1996 Information Technology Agreement, a trade treaty signed by some 70 countries that set 0% tariffs on a wide category of electronic goods.

A 1996 treaty set 0% tariffs on a wide category of electronic goods.

The ITA accounts for $5 billion a year in tariffs that don't have to be paid, according to industry groups.

"U.S. high-tech companies and their workers depend on the ITA to reach foreign markets," said John Neuffer, vice president of the Washington-based Information Technology Industry Council.

Global trade in products covered by the ITA increased to $4 trillion in 2008 from $1.2 trillion in 1996.

The dispute among the signatories was over the definition of "high-tech."

The European Union declined to designate as high-tech three categories of goods: television cable converter boxes that also deliver the Internet, flat-panel computer screens, and printers that also scan, fax or copy.

The EU argued that these products were old-fashioned consumer goods, not cutting-edge high-tech products.

Under the EU's tariff classifications, these goods were considered ordinary cable boxes, TV screens and photocopiers, subject to tariffs between 6% and 14%.

The EU's total imports of these products were valued at $11 billion in 2007, according to the ITIC.

The U.S., Japan and Taiwan for years lobbied the EU to reduce these tariffs.

The three countries are home to some of the world's largest makers of electronic goods.

Those with operations in the U.S., such as Hewlett-Packard Co., Dell Inc. and Japan-based Canon Inc., have taken a front position in lobbying the EU to lower its tariffs and in lobbying the U.S. government to take the case to the WTO.

The EU, a U.S. trade official said, was "manipulating tariffs to discourage technological innovation."

The EU declined to remove the tariffs.

In 2008, the three countries filed a case against the EU at the WTO.

The wording in Monday's ruling was clear: The WTO's arbitration panel requested "the European Communities to bring the relevant measures into conformity with its obligations."

U.S. Trade Representative Ron Kirk hailed the decision as "an important victory for U.S. technology manufacturers and workers."

The EU now has 60 days to appeal. The 27-nation bloc is divided on high-tech tariff policy, so it isn't a given that it will appeal. If it does, the WTO will rule within three months.

"The report does not establish general principles that would imply any form of generalized conclusions," the European Commission said in a statement. "No decision on a possible appeal to the WTO report is taken yet."

EU officials say, however, that they would like to renegotiate the entire ITA.

If the EU doesn't respect the WTO ruling and lift the tariffs, the U.S., Japan and Taiwan would have the right to impose tariffs on goods made in Europe—including cars, pharmaceuticals and cheese—valued at an amount equal to the tariffs that the WTO has now ruled illegal.