Obama’s High-Tech Deal With China in Trouble as WTO Talks Break Down

GENEVA (McClatchy Foreign Staff/TNS) -

A China-U.S. agreement to scrap tariffs on high-tech items that was hailed as a major achievement of President Barack Obama’s November visit to Beijing fell apart Friday during negotiations in Geneva, because of differences between China and South Korea, diplomats here said.

The deal would have eliminated tariffs on such products as medical devices, global positioning systems and video game consoles worth more than $1 trillion in global trade annually. But after eight days of talks here, representatives of about 80 countries adjourned without an agreement.

“We don’t have an agreement on a list of products,” Seokyoung Choi, South Korea’s ambassador to the World Trade Organization, told McClatchy.

Expectations had been high that a deal would fall into place, following the bilateral understanding reached last month between Obama and Chinese President Xi Jinping. The agreement resolved Sino-U.S. differences over what new products should be covered by the WTO’s 1996 Information Technology Agreement.

Roberto Azevedo, the WTO’s director-general, said the talks had “significantly reduced the gaps on expanding the coverage of the ITA,” and he expressed hope that the nations would “remain actively and constructively engaged as we try to bridge the gaps.”

But several of the negotiators said a deal was unlikely, without new policies in both Beijing and Seoul.

“Like everyone in the room, we are disappointed not to be celebrating a deal this week. We missed a big opportunity,” said Michael Punke, a deputy U.S. trade representative. “All of us will need to go back to our capitals and reflect hard on next steps.”

A deal would have eliminated tariffs on as much as $100 billion of U.S.-made high-tech products, making them more competitive on the world market. Estimates were that such a deal would have created 60,000 new jobs in the United States alone.

About 200 products, from semiconductors to medical devices, advanced measuring instruments and satellite parts would have been affected by an agreement, which would have added about $190 billion a year to the global economy.

South Korea, backed by Taiwan, had pushed to have flat-panel displays included in the expanded list of products that would have tariffs removed. Flat-panel displays were not part of the November U.S.-China understanding.

Senior Western negotiators said China refused even to consider South Korea’s efforts to add flat panels. “China did not move an inch. All through the week China made no move,” said one negotiator, who asked not to be identified because of the sensitive nature of the negotiations.

“China thought the U.S.-China deal was untouchable. They were wrong,” said another envoy.

Obama originally announced the deal on the second day of a three-day visit to Beijing, as part of the Asia-Pacific Economic Cooperation summit last month. Industry groups applauded the understanding, with John Neuffer, senior vice president for global policy at the Information Technology Industry Council, calling it “the biggest tariff-elimination … in nearly two decades.”

On Friday, Neuffer said the deal proved elusive because “China was not able to move off that package” that it had agreed to with the United States.