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Exports of Goods per Capita vs Tariffs for Selected Countries 1999 sources: WTO and Global Competitiveness Report 2000


Increases costs to consumers and business Information Technology use is limited Stalls growth of e-commerce Lack of new technology inhibits productivity gains Deters growth of national competitiveness Limits demand for higher paying jobs Increases demand for Gray/Black market products Source: "Emerging Digital Economy", USG DOC and ITA Coalition IV. What is the Impact of Trade Barriers?


Very High > 19% 9% of countries Moderate 10% - 14% 18% of countries Low tariffs 5% - 9% 21% of countries Very Low tariffs 0 - 4% 45% of countries Worldwide IT Tariff Rates 113 Countries - 1999 Source: Surinam 55% India 40% Thailand 40% Brazil 34% Kenya 31% Malawi 30% Azerbaijan 25% Mexico non-Nafta 20% Senegal 20% Tanzania 20% Very High IT tariff countries 7% of countries 15%-19%


Latin America: IT Tariffs for Hardware - 2000 maximum rates for hardware * Chile-Canada FTA means effective IT tariffs are zero. ** Mexico tariffs are for trade with non-NAFTA countries. IN late 2001, Mexico announced their intent to eliminate IT tariffs source for tariffs:


Trade barriers elude fixed definitions government laws, regulations, policies, or practices protect domestic products from foreign competition artificially stimulate exports of particular domestic products Trade barriers negatively affect imports add costs to imports not imposed on goods produced locally Difficult to estimate the impact of trade barriers warehouse storage delayed deliveries lost sale opportunities costly paper work But the costs are real What is the Impact of Non-Tariff Barriers? Sources: USTR, Non-Tariff Barriers 2000 Report and anecdotal information from the IT industry


Non-Tariff Barriers Complex import procedures Import licenses Spare parts import restrictions Rework restrictions Performance requirements Standards, testing, labeling, certification Import container Customs administration Pre-Shipment inspection Intellectual property - lack of effective protection E-commerce - lack of legal framework Sources: CSPP Draft Report on Latin America Trade; Heritage Foundation/Wall Street Journal, Index of Economic Freedom; USTR, Non-Tariff Barriers 2000 Report


V. Information Technology Agreement (ITA) Negotiated in 1996 as optional WTO agreement Eliminated tariffs on products and parts by 2000 computer hardware semiconductors semiconductor manufacturing equipment software telecommunications equipment Some countries will phase-in reductions Costa Rica, Indonesia, India, Korea, Malaysia, Taiwan, Thailand Membership is continuing to increase now 55 countries China is joining ITA - will phase-in tariff elimination


Middle East Israel Jordan Central America Costa Rica El Salvador Panama Asia Australia Hong Kong India Indonesia Japan Korea Kyrgyz Rep. Macau Malaysia New Zealand Philippines Singapore Taiwan Thailand Turkey Europe Albania Georgia Norway Croatia Iceland Poland Czech Rep. Latvia Romania Estonia Liechtenstein Slovak Rep. EU-15 Lithuania Switzerland China has agreed to join ITA. Mexico has announced elimination of IT tariffs North America Canada United States ITA Member Countries Africa Mauritius (not to scale) South America none Source: and


WTO Basic Telecom Agreement Argentina Yes Brazil Yes Bolivia Yes Chile Yes Colombia Yes Ecuador Yes Mexico Yes Peru Yes Paraguay Yes Uruguay Yes Venezuela Yes Worldwide 75 countries Development of the Internet and E-commerce Depends on Growth of Communications Technologies.......... Source: and


WTO Basic Telecom Agreement ITA Argentina Yes No Brazil Yes No Bolivia Yes No Chile Yes No Colombia Yes No Ecuador Yes No Mexico Yes No Peru Yes No Paraguay Yes No Uruguay Yes No Venezuela Yes No Worldwide 75 countries 52 countries .......and Information Technologies Source: and


VI. What are the Potential Benefits of Lowering IT Tariffs? Increases a nation's competitiveness Offsets tariff loss by increased economic activity Reduces cost of IT to consumers and business Expands demand for higher paying jobs Encourages increased use of e-commerce Diffuses use of IT throughout economy Simplifies custom procedures Source: "Emerging Digital Economy", USG DOC and ITA Coalition


E-commerce and IT industries contribute to fundamentally altering a country's economy Employment and Wages GDP Growth Worker Productivity Inflation Source: "Emerging Digital Economy", USG DOC


1. Communications and Network Services 2. Customer Support 3. Data Management 4. Information Systems Security 5. Policy, Planning, and Management 6. Software Engineering, Application 7. Software Engineering, Systems 8. Systems Administration 9. Systems Analysis 10. Web Development Digital Economy Creates Demand for High Skilled Workers.... Source: USG, Office of Personnel Management


VII. Econometric Studies - Country Specific Brazil Federacao das Industries do Rio de Janeiro (Firjan) developed by Eliezer Batista - a leading Brazilian economist presented to President Cardoso and several cabinet ministers Firjan study written up in VEJA - September 2000 LCM Consultores Associados "Technologia da Informacao e Competitidade" developed by Lourdemir Carvalho - respected economist report published September 2000 favorable reviewed by several government ministries in 2000 Argentina Fundacion de Investigaciones Economicas Latinoamericanas "Apertura Comercial en el Sector Informatico" FIEL - prominent think tank - study done in spring 2001


Firjan: "Why Brazil is Losing the Technology Race" Education level lags the rest of Latin America Workforce is unprepared and lack needed skills Exports of Manufactured Goods declined in 1990's as a percent of total exports PC's are expensive Brazil has very high IT tariffs ( > 30%) Tariffs plus other taxes adds 100% to cost of PC's Internet use is low - only 25 users per 1000 population Conclusion for Brazil eliminating IT tariffs would increase PC use by 50% in 3 yrs.


Brazil: "Information Technology and Competitiveness" LCM Consultores Associados Eliminating IT tariffs in 5 years: reduce cost of IT products to consumers and businesses average 8% as high as 23% increase productivity generates USD 7.4 billion of value-added exports offset loss of tariffs with increased tax revenue gain RS 250 in tax revenue for every RS 100 lost in tariffs fuel growth of the economy add $22b to GDP reduce gray market sales IDC: current illegal sales is 50% - 75% of total market increase lost tax revenue of $600m USD


Quantification of the advantages gained by reducing tariffs in Argentina Liberalizing IT market will generate economic gains increase use of PCs and e-commerce increase productivity - personal and national improve competitiveness of products made in the country increase export of value-added goods Argentina is a country that counts on the importance of human capital (measured in years of education average). " However, this is not seem sufficiently complemented by the use of new technologies from the more industrialized countries " Conclusion IT tariff elimination would significantly add to GDP growth FIEL: Commercial Opening in the IT Sector


UN Human Development Report 2001 Making New Technologies Work for Human Development "IT offers the potential for developing countries to expand exports, create good jobs and diversify their economies. "

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