Exports of Goods per Capita vs Tariffs for Selected Countries 1999

1. Exports of Goods per Capita vs Tariffs for Selected Countries 1999 sources: WTO and Global Competitiveness Report 2000

2. IV. What is the Impact of Trade Barriers? • Increases costs to consumers and business • Information Technology use is limited • Stalls growth of e-commerce • Lack of new technology inhibits productivity gains • Deters growth of national competitiveness • Limits demand for higher paying jobs • Increases demand for Gray/Black market products Source: "Emerging Digital Economy", USG DOC and ITA Coalition

3. Worldwide IT Tariff Rates 113 Countries - 1999 Very High IT tariff countries Surinam 55% 9% of countries India 40% 7% of countries Thailand Very High > 19% 40% 15%-19% Brazil 34% Moderate 10% - 14% Very Low tariffs 0 - 4% 18% of countries Kenya 31% 45% of countries Malawi 30% Low tariffs 5% - 9% Azerbaijan 25% Mexico non-Nafta 20% 21% of countries Senegal 20% Source: www.ita.doc.gov Tanzania 20%

4. Latin America: IT Tariffs for Hardware - 2000 maximum rates for hardware * Chile-Canada FTA means effective IT tariffs are zero. ** Mexico tariffs are for trade with non-NAFTA countries. IN late 2001, Mexico announced their intent to eliminate IT tariffs source for tariffs: www.ita.doc.gov

5. What is the Impact of Non-Tariff Barriers? • Trade barriers elude fixed definitions • government laws, regulations, policies, or practices • protect domestic products from foreign competition • artificially stimulate exports of particular domestic products • Trade barriers negatively affect imports • add costs to imports not imposed on goods produced locally • Difficult to estimate the impact of trade barriers • warehouse storage • delayed deliveries • lost sale opportunities • costly paper work • But the costs are real Sources: USTR, Non-Tariff Barriers 2000 Report and anecdotal information from the IT industry

6. Non-Tariff Barriers • Complex import procedures • Import licenses • Spare parts import restrictions • Rework restrictions • Performance requirements • Standards, testing, labeling, certification • Import container • Customs administration • Pre-Shipment inspection • Intellectual property - lack of effective protection • E-commerce - lack of legal framework Sources: CSPP Draft Report on Latin America Trade; Heritage Foundation/Wall Street Journal, Index of Economic Freedom; USTR, Non-Tariff Barriers 2000 Report

7. V. Information Technology Agreement (ITA) • Negotiated in 1996 as optional WTO agreement • Eliminated tariffs on products and parts by 2000 • computer hardware • semiconductors • semiconductor manufacturing equipment • software • telecommunications equipment • Some countries will phase-in reductions • Costa Rica, Indonesia, India, Korea, Malaysia, Taiwan, Thailand • Membership is continuing to increase • now 55 countries • China is joining ITA - will phase-in tariff elimination

8. ITA Member Countries Europe Albania Georgia Norway Croatia Iceland Poland Czech Rep. Latvia Romania Estonia Liechtenstein Slovak Rep. EU-15 Lithuania Switzerland Middle East Israel Jordan North America Canada United States Asia Australia Hong Kong India Indonesia Japan Korea Kyrgyz Rep. Macau Malaysia New Zealand Philippines Singapore Taiwan Thailand Turkey Central America Costa Rica El Salvador Panama Africa Mauritius (not to scale) South America none China has agreed to join ITA. Mexico has announced elimination of IT tariffs Source: www.wto.org and www.ita.doc.gov

9. Development of the Internet and E-commerce Depends on Growth of Communications Technologies.......... WTO Basic Telecom Agreement Argentina Yes Brazil Yes Bolivia Yes Chile Yes Colombia Yes Ecuador Yes Mexico Yes Peru Yes Paraguay Yes Uruguay Yes Venezuela Yes Worldwide 75 countries Source: www.wto.org and www.ita.doc.gov

10. .......and Information Technologies WTO Basic Telecom Agreement ITA Argentina Yes No Brazil Yes No Bolivia Yes No Chile Yes No Colombia Yes No Ecuador Yes No Mexico Yes No Peru Yes No Paraguay Yes No Uruguay Yes No Venezuela Yes No Worldwide 75 countries 52 countries Source: www.wto.org and www.ita.doc.gov

11. VI. What are the Potential Benefits of Lowering IT Tariffs? • Increases a nation's competitiveness • Offsets tariff loss by increased economic activity • Reduces cost of IT to consumers and business • Expands demand for higher paying jobs • Encourages increased use of e-commerce • Diffuses use of IT throughout economy • Simplifies custom procedures Source: "Emerging Digital Economy", USG DOC and ITA Coalition

12. E-commerce and IT industries contribute to fundamentally altering a country's economy Worker Productivity GDP Growth Employment and Wages Inflation Source: "Emerging Digital Economy", USG DOC

13. Digital Economy Creates Demand for High Skilled Workers.... • 1. Communications and Network Services • 2. Customer Support • 3. Data Management • 4. Information Systems Security • 5. Policy, Planning, and Management • 6. Software Engineering, Application • 7. Software Engineering, Systems • 8. Systems Administration • 9. Systems Analysis • 10. Web Development Source: USG, Office of Personnel Management

14. VII. Econometric Studies - Country Specific • Brazil • Federacao das Industries do Rio de Janeiro (Firjan) • developed by Eliezer Batista - a leading Brazilian economist • presented to President Cardoso and several cabinet ministers • Firjan study written up in VEJA - September 2000 • LCM Consultores Associados • "Technologia da Informacao e Competitidade" • developed by Lourdemir Carvalho - respected economist • report published September 2000 • favorable reviewed by several government ministries in 2000 • Argentina • Fundacion de Investigaciones Economicas Latinoamericanas • "Apertura Comercial en el Sector Informatico" • FIEL - prominent think tank - study done in spring 2001

15. Firjan: "Why Brazil is Losing the Technology Race" • Education level lags the rest of Latin America • Workforce is unprepared and lack needed skills • Exports of Manufactured Goods • declined in 1990's as a percent of total exports • PC's are expensive • Brazil has very high IT tariffs ( > 30%) • Tariffs plus other taxes adds 100% to cost of PC's • Internet use is low - only 25 users per 1000 population • Conclusion for Brazil • eliminating IT tariffs would increase PC use by 50% in 3 yrs.

16. Brazil: "Information Technology and Competitiveness" LCM Consultores Associados • Eliminating IT tariffs in 5 years: • reduce cost of IT products to consumers and businesses • average 8% • as high as 23% • increase productivity • generates USD 7.4 billion of value-added exports • offset loss of tariffs with increased tax revenue • gain RS 250 in tax revenue for every RS 100 lost in tariffs • fuel growth of the economy • add $22b to GDP • reduce gray market sales • IDC: current illegal sales is 50% - 75% of total market • increase lost tax revenue of $600m USD

17. FIEL: Commercial Opening in the IT Sector • Quantification of the advantages gained by reducing tariffs in Argentina • Liberalizing IT market will generate economic gains • increase use of PCs and e-commerce • increase productivity - personal and national • improve competitiveness of products made in the country • increase export of value-added goods • Argentina is a country that counts on the importance of human capital (measured in years of education average). • " However, this is not seem sufficiently complemented by the use of new technologies from the more industrialized countries " • Conclusion • IT tariff elimination would significantly add to GDP growth

18. UN Human Development Report 2001 Making New Technologies Work for Human Development "IT offers the potential for developing countries to expand exports, create good jobs and diversify their economies. "