No time to smileThe members of the World Trade Organization (WTO) agreed on a product list of over 200 items valued at around $1 trillion subject to tariff elimination as part of the Information Technology Agreement (ITA). The list includes a handful of IT items Korean manufacturers excel in. The conclusion could be a windfall to Korea which has seen a sharp contraction in exports due to its strong currency.
In IT trade, Korea raked in a surplus of $38.1 billion on shipments of $105.2 billion in 2013. Korea was one of the biggest beneficiaries when 203 items were liberalized through the first agreement of ITA negotiations in 1996. Thanks to the removal of the tariff and other export barriers, Korea’s exports of computers, semiconductors and mobile phones increased by more than five-fold over the last two decades, helping to build the country’s reputation as an IT powerhouse.
The updated ITA is expected to work favorably for Korea in trade with China. Tariffs on 94 items will be removed before Korea and China enter a bilateral free trade arrangement. About 25 items which cover semiconductors and display, that China resisted opening its market for in bilateral trade, will be liberalized under the WTO accord.
But it is too early to be optimistic. ITA negotiations have dragged on for three years. The U.S. and China finally reached an agreement in November. But China remained protective of items like liquid crystal displays and organic light-emitting diodes. It kept its doors closely shut for its growing industries that are a part of the country’s design to build a technology manufacturing powerhouse by 2025. China’s IT technology and companies have made great strides. Cheaper but quality copycat Chinese products are making quick inroads in overseas markets including Korea’s. Korean electronics and technology companies must not underestimate the potential and power of their Chinese rivals. Both the government and the technology sector must join forces to make the best of the ITA to enhance the competitiveness of Korean IT products. The market opening could be a double-edged sword.
JoongAng Ilbo, July 27, Page 34