"Feature expansion" of hi-tech products sparks EU-US trade dispute

Stuart Corner
Wednesday, 20 August 2008 06:08

IT Industry - Market

The European Union is at loggerheads with leading hi-tech exporting countries - The US, Japan and Taiwan - for applying import tariffs to goods that were previously tariff free, on the grounds that new features have expanded the functionality of these products.

The US claims that, as a result of these actions, the EU is now applying duties of up to 14 percent on products which were previously receiving duty-free treatment. The US, Japan & Taiwan have requested that the World Trade Organisation (WTO) form a dispute resolution panel "to bring the EU into compliance with the Information Technology Agreement (ITA)."

The move follows what, according to Office of the US Trade Representative (USTR), have been "numerous discussions with the EU" and requests under WTO dispute resolution procedures for consultations filed earlier this year, separately by the US, Japan and Taiwan.

According to USTR, since 2005 the EU has been applying duties on LCD monitors, set top boxes, and certain multifunction computer peripherals (e devices that can scan/print/copy/fax), all of which should be exempt under the ITA.

It claims that "The EU has started applying duties to certain of these products simply because they incorporate certain features or technologies....for example: to virtually all LCD computer monitors on the market, simply because they connect to a computer using a digital video interface (DVI);...to set-top boxes that can access the Internet (eg cable boxes) simply because they have a hard drive...and to virtually all multifunction computer peripherals simply because the devices are able to copy more than 12 pages per minute."

The USTR claims that such 'feature creep' was anticipated when the ITA was drawn up, and that it was intended to cover this eventuality. "ITA negotiators recognized that ITA products would likely develop new features and that technology would improve over time. If ITA signatories were allowed to deny duty-free treatment to ITA products simply because they have become more technologically-sophisticated, virtually no products would be eligible for duty-free treatment."