2017 marks the 21st anniversary of the Information Technology Agreement (ITA), an initiative of the World Trade Organization (WTO) to eliminate trade tariffs on hundreds of high-tech products. The acronym ITA is something of a misnomer as the agreement covers a broad gamut of products that far exceeds the traditional IT industry. This includes products such as certain electronic components which SA imports for the manufacture, maintenance and repair of electronic equipment, as well as finished products the country exports or is looking to establish an export market for, such as electricity meters, set-top boxes and smartphones.
In May, the non-profit, US-based Information Technology and Innovation Foundation (ITIF) released a comprehensive study on the potential benefits of joining the ITA. The study (accessible at www.dataweek.co.za/*itad1) focused specifically on six developing nations including South Africa, proving that there is substantial international interest in bringing the country on board.
The study recognises that there are two likely concerns behind South Africa’s reluctance to join the agreement, namely a decrease in tariff revenues that comprise a sizable portion of the government’s tax revenue, and the potential harm to the country’s domestic ICT production industries and employment therein.
On the first point, ITIF notes that by eliminating ICT tariffs, ITA accession lowers prices for ICTs, which disproportionately raises demand for these productivity and innovation-empowering capital goods. “Keeping ICT prices low is paramount if countries wish to participate in global value chains for the production of ICT parts, components and final products,” the report states. “In contrast, maintaining high ICT tariffs (in part by not joining the ITA) harms both developing countries’ ICT-producing and ICT-consuming sectors. In particular, failure to join the ITA has caused nations to be left out of global production networks for ICT products, causing them to miss out on tremendous growth opportunities.” To put a number on said growth opportunities, the report estimates that South African GDP stands to grow by $770 million after 10 years if it were to adopt the ITA.
As to the second point, the study recognises that “developing country policymakers have raised concerns about the impact that removing tariffs may have on domestic ICT firms and their workers. Indeed, tariffs remain a popular (if discredited) tool for those who think that protectionism is an effective way to develop domestic industries by protecting them from the forces of global competition.” These concerns are addressed by pointing out that by giving a country’s citizens cheaper access to ICT products, they will have more disposable income to spend elsewhere, benefiting the entire economy. Going forward, analysts estimate that if South Africa could increase the size of its ICT sector by 10%, it could create 45 000 direct new jobs (and as many as 140 000 jobs if direct and indirect employment is counted) over the next eight years.
In the past, the electronics industry has teamed up with the South African Electrotechnical Export Commission (SAEEC) to lobby for South Africa’s International Trade Administration Commission (ITAC) to amend its tariff codes to come more in line with classifications of electronic components and equipment that make sense to the engineering and manufacturing sector, with the aim of reducing import tariffs on components. These efforts have repeatedly hit a brick wall and the government shows no signs of wanting to adopt the ITA, but perhaps the time has come for it to consider removing some barriers to trade by adopting the agreement, and accept that while we may lose on the swings we might ultimately gain on the roundabouts.
Brett van den Bosch