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Boost in U.S. tech sales foreseen as China, U.S. vow to work to eliminate tariffs

In a move likely to benefit U.S. information and technology companies, President Barack Obama announced Tuesday that he had reached an “understanding” with China that could eliminate tariffs on global sales of high-tech equipment.

If and when finalized, the tentative deal between Obama and Chinese President Xi Jinping would eliminate tariffs on $1 trillion in annual global sales of such items as medical devices, global positioning systems, video game consoles and other IT equipment. That total includes $100 billion from the United States, according to the White House.

Industry groups applauded the understanding while acknowledging it still requires China and the United States to follow through on a final agreement that would expand the scope of the Information Technology Agreement, an international pact overseen by the Geneva-based World Trade Organization.

“Once completed, ITA expansion will make history, representing the biggest tariff-elimination undertaking achieved by the WTO in nearly two decades,” said John Neuffer, senior vice president for global policy at the Information Technology Industry Council. He represents a trade group that includes Google, Facebook, Intel, Microsoft, eBay, Hewlett-Packard and other U.S. and international companies.

Obama announced the deal on the second of a three-day visit to Beijing as part of the Asia-Pacific Economic Cooperation summit.

A day prior, he announced an agreement with China to extend visas for both U.S and Chinese citizens traveling between the two countries. U.S. business groups and the White House said the visa agreement would help expand business links with China and also ease tourism and education exchanges.

“This latest breakthrough – combined with the deal announced the previous day on extending the validity of visas for businesspeople, students and tourists – demonstrates how cooperation can create long-term benefits to the business interests of both countries,” said Gregory Gilligan, chairman of the American Chamber of Commerce in China.

Negotiations remain, however, since talks on the Information Technology Agreement stalled last summer as parties disputed which products would be included in an expanded deal.

Although the deal was announced with fanfare Tuesday, it likely was brokered in advance of the APEC summit, which officially concluded Tuesday in Beijing.

Several other pacts were announced in recent days, including trade pacts between China and South Korea and China and Australia, and a gas deal between China and Russia. On Monday, regulators approved a plan to link stock exchanges in Hong Kong and Shanghai, opening Chinese markets more to foreign investors. China also announced a $40 billion fund to improve trade links between Asian economies.

Obama departs from China to Myanmar on Wednesday afternoon, but not before spending several hours with President Xi in Beijing, where more tentative deals may also be announced. Tuesday night, Obama dined with Xi at the Chinese president’s Zhong Nan Hai palace.

According to a pool report of their Tuesday meeting, Xi told Obama he wants to work with him, noting a Chinese proverb that a large body of water “begins with many drops of water.”

Obama reportedly responded, “When the U.S. and China are able to work together effectively, the whole world benefits.” Obama, who has sometimes been critical of China but has two years left in office, added that he wants to “take the relationship to a new level.”

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