Independent nonprofit, nonpartisan research institute Information Technology and Innovation Foundation (ITIF) recently released a report on the Information technology agreement three (ITA-3). This third agreement expands the 25-year-old trade agreement ending trade taxes on information and communication technology goods (ICT). The report suggests that cheaper ICT would allow more countries to adopt the ICT, in turn, growing innovation and technology worldwide.
The digital global economy is growing by the technologies of ICT goods and services. The International Data Corporation, a global provider of information technology, research analysts have predicted that up to 60 percent of global GDP will be impacted by digital tools by 2022. The means that half of the global goods made over the next 10 years will be digital.
The digitalization of the global industry has brought about new jobs and enterprises social media, artificial intelligence internet etc. —but ICT is also used in traditional industries like farming and agriculture. ICT goods such as routers, computers and smartphones fundamentally make up the backbone of the digital economy.
By taking out the trade taxes, the ICT price can be reduced to allow more countries to implement ICT goods and services. ITA becomes a part of global production and trade in the ICT products that power the global digital economy. For instance, the U.S. Bureau of Statistics report estimates that the U.S. price index, in personal computers and nonessential devices dropped 94 percent from 1997 to 2015.
Originally signed in 1996 by 82 countries, the Information Technology Agreement {link) stops tariffs on trade in hundreds of ICT products. An expansion of the original ITA, ITA-2 eliminated tariffs on $1.3 trillion in global trade in ICT parts.
Though the third version of the trade agreement is in process of being created, ITA-3 was originally tested as a way to index ICT products. An initial group of companies worked together to identified over 250 additional ICT six-digit product codes in the Harmonized Commodity Description and Coding System, a numerical method of classifying traded products. Fourteen countries including Kenya and Nigeria were accepted into the ITA.
ITA participation has benefitted countries in economic development.
Economic benefits from ICT comes from it increasing productivity in economic output per unit of input through capital, labor data or technology to grow economies over time. Heightened productivity can come from every enterprise in a country that increases productivity, like banks, farms and manufacturing, or from countries upgrading inefficient sectors with technology, such as call centers with ICT services providers.
Kenya has greatly benefited from ICT’s production and innovation-enabling rewards from individual businesses to entire industries. Reports confirm the link between ICT usage and economic growth.
A December 2010 World Bank report found that ICT was the main factor in economic growth in the last decade. ICTs made up close to one-quarter of Kenya’s GDP growth during the 2000s. The ICT sector has contributed over six times more to the Kenyan GDP in 2009 compared with 1999.
” These findings are emblematic of the many benefits that African economies stand to gain from joining the ITA and supporting long-term digitalization policy,” Luke Dascoli, Research Assistant of Economic & Technology Policy of the Information Technology and Innovation Foundation, told The Plug. “An ITA-3 would greatly improve policy efforts of African nations to digitalize economies, expand clean energy tech, and support future innovations.”
Similar to Kenya, Chinese ICT accounts made up 38 percent of total factor productivity (TFP) growth as much as 21 percent of Chinese GDP growth from 1980 to 2001. The authors, Esladig Ahmed and Rahim Ridzuan, further found a good correlation of ICT to economic growth across eight East Asian countries: China, Japan, Korea, Indonesia, Malaysia, Philippines, Singapore, and Thailand.
Economic professionals also advocate the importance of ICT to country economic growth. A report from Plos, a open-access publication, suggests that ICT creates economic growth the more a country uses it. Richard Heeks, professor of development informatics at the University of Manchester gauges that ICTs will have contributed to one-quarter of in several developing countries before the 21st century.
Many countries have benefited from previous ICT integrations, but the impacts of ITA-3 could be worthwhile.
ITIF selected 14 countries based on the ICT goods production and trade companies to see how well they would work with ITA-3. ITIF’s guide for estimating the economic impacts of ITA-3 uses price elasticity, a measure of the change in the quantity purchased of a product in relation to a change in its price, of 1.3. The formula for calculation is based on research findings pioneered by Cette et al. in 2012. There will be more of a focus on the ITA-3 impacts on African countries in comparison to the U.S.
African countries like Kenya could grow it would benefit GDP by 1.23 percent in GDP growth than the United States from joining the ITA-3(spell out) switch. In one year, Kenya can earn 0.24 percent GDP growth in ICT goods from their annual growth of 5.24 percent. Over a cumulative 10 year GDP growth Kenya can potentially make 2.15 percent or $3.01 billion thanks to the ITA-3 expansion. Nigeria comes close in growth with 0.16 percent in one year and 1.61 percent or $11.74 billion in a 10 year period.
ITA-3 can potentially boost the U.S. economy by $200 billion in economic growth, increasing U.S. exports of ICT products by $3.5 billion and increasing revenues of U.S. ICT firms by $12 billion. Projected growth of U.S. exports of the proposed ICT products to the other 13 countries in this study is $59.7 billion dollars, according to the author’s analysis of Un Comrade data.
ICT is beneficial for providing more jobs in the U.S. workforce. The ITA-3 expansion can support 21,575 new jobs. That job increase boosts the economy seeing that The U.S. Department of Commerce reports that everyone $1 Billion manufacturing exports, 6,250 jobs in manufacturing companies are created. The Economic Policy Institute (EPI) report provided current employment multipliers for specific positions in the U.S. economy. They found that every 100 jobs in durable manufacturing help an extra 289.1 jobs, with a multiplier of 2.89.
U.S. exports assist world exports. ITIF predicted, based on applying dynamics of decreasing tariff rates and the elasticity multiplier, that a fully working ITA-3 would equate to a $35 billion increase in global imports of such ITA-3 products. Thus, growing ITA would help the world ICT markets, making U.S. ICT stronger as well.
In a year, U.S. can increase GDP growth in ICT goods by 0.08 percent and 0.83 percent or $208.64 billion in long term economic growth.
African countries will benefit more in ICT product adoption and growth percentages than the U.S. Utilization of this technology trade agreement can offer many economic benefits to developing and developed countries to improve economic growth in ICT products and services.
