Nations Agree to Drop Computer Tariffs

Nations Agree to Drop Computer Tariffs --- Some High-Tech Firms See Pact as a Boost for Trade In Markets World-Wide By Helene Cooper and Bhushan Bahree

12/13/1996 The Wall Street Journal Page A2 (Copyright (c) 1996, Dow Jones & Company, Inc.) SINGAPORE -- Countries representing most of the world's high-technology trade agreed yesterday to abolish tariffs on computers, software and related goods, giving trade envoys and business leaders something to cheer about at an otherwise uneventful World Trade Organization meeting. The pact, negotiated on the periphery of the WTO's ministerial meeting, is a boon for high-tech companies that envision global markets for their products. While U.S. tariff rates already are low -- around 2% -- some in Asia are in the teens, according to industry executives. "This could mean $100 million dollars a year at least for IBM," said Aaron Cross, IBM Corp.'s public-policy director who has been here all week monitoring progress on the talks. "This is a terrific agreement." Microsoft Corp., the world's largest software maker, called the pact "an extraordinary accomplishment." Chief Operating Officer Bob Herbold said in a statement: "This will be a win-win for every country and every consumer." The U.S. had pushed hard for the information-technology agreement over the past month, and at one point President Clinton personally prodded Asian leaders to endorse it. But while U.S. negotiators scrambled to persuade Asian officials, the European Union dithered. The EU clearly has less at stake. Western Europe's share of the global trade in high-technology products is a mere 15% while the U.S., Canada and countries of the Asia-Pacific region account for about 80%. But the EU had a different goal: Aware of how keenly the U.S. wanted the agreement, E.U. ministers sought and won a side deal accelerating tariff cuts on shipments of cognac, whiskey and other liquors. Now France and other European countries will be able to export an additional $30 million of liquor duty-free to the U.S. Finally satisfied, the EU's Council of Ministers officially endorsed the technology pact yesterday, and joined the Americans stumping for more signatories. The two quickly rounded up Hong Kong, Iceland, South Korea, Norway, Singapore, Switzerland, Taiwan, the Philippines and New Zealand. Canada and Japan were already on board. Altogether, the group represents nearly 90% of global trade in information-technology products -- the percentage needed to ratify the agreement, U.S. and European officials said. Global trade in information-technology products, now at about $500 billion a year, will rocket to $1 trillion by the year 2000, according to U.S. estimates. U.S. officials said the pact covers some 500 products, including fax machines, calculators, CD-ROMs, and automatic- teller machines. Acting U.S. Trade Rep. Charlene Barshefsky has spent the bulk of her time here at the WTO meeting trying to rally support for the technology pact. Ms. Barshefsky, who stayed up all night Wednesday trying to keep skittish Asian countries from backing out, has often been frustrated with the Europeans for not pushing the pact as ferociously as she would have liked. "We did not wait for Europe to make up its mind," said Ms. Barshefsky, "If we had, we'd just now be starting out." In theory, the agreement should lower prices for consumers since it essentially eliminates tariffs that are often passed along to buyers. That benefit will be more obvious in Asian countries where the tariffs are higher than in the U.S. But tariffs also are relatively high in Europe. An end to such levies would attract more imports in Europe, U.S. officials said. Corporate executives, however, weren't committing yet to passing the benefits on to consumers. IBM's Mr. Cross said the computer giant planned to put its cost savings into research and development, manufacturing and production. The consumers, he said, would see "improvements in quality." But the industry's fierce competition could quickly flatten that cushion. Intel Corp., the world's largest computer-chip maker, praised the pact saying it will lower costs to consumers and drive more demand. Intel gets slightly more than half of its revenue from overseas. "Billions of people have never used a computer. Anything you can do to lower the barriers is good," a spokesman said. But the treaty won't change Intel's strategies. "We're going to stay on our normal pricing curve," the spokesman said. Others cautioned that the pact won't set the industry on a new course. "This is a dramatic step forward. . . . but this is not a revolution. It's an evolution," said Robbins Pancake, Hewlett-Packard Inc.'s international-trade policy manager. "Thanks to the Uruguay round [of trade talks between 1986 and 1994], tariffs have been coming down anyway." In developing countries, tariffs on computer technology range from 5% to 30%, down from 10% to 50% a decade ago. The computer maker and printer giant, which had $38.4 billion in sales for the year ended Oct. 31, gets about 60% of its revenue from overseas. While high-tech companies are leaving Singapore with a victory, labor unions left disappointed. Late yesterday, in a move that was widely anticipated, the trade ministers decided to leave the issues of child labor to the International Labor Organization. In doing so, the WTO rejected efforts by U.S. officials to link labor and trade. --- Joan Indiana Rigdon in San Francisco contributed to this article.