Opinion: The Obama administration gets a free-trade win without the controversy

U.S. Trade Representative Michael Froman made it official Friday: The United States and nearly 50 of its trading partners have agreed to eliminate some 200 tariffs on high-tech goods, including GPS devices, game consoles and advanced medical imaging machines.

The deal to update the aging Information Technology Agreement has been in the works for months, yet never attracted the attention or controversy that has surrounded the confidential Trans-Pacific Partnership talks. It’s not that the ITA negotiations were more transparent, because they weren’t. The difference is in the substance of the discussions.

The ITA represents the most straightforward aspect of global trade talks: reducing the financial barriers to trade. The United States’ tariffs are, on average, about 80% lower than the rest of the world’s, which puts its exports at a competitive disadvantage.

Missing from the ITA talks is any discussion of non-tariff trade barriers, which are deeply intertwined with a range of important public policies. These include safety and health standards that may put imports at a disadvantage to domestic products. They could be weak labor laws that enable manufacturers in developing nations to produce goods at far lower cost than those in developed ones. Or they could be intellectual property statutes that provide so little protection for copyrights and patents in a country, U.S. publishers and manufacturers can’t afford to distribute products there.

That’s not to suggest that the new ITA isn’t a big deal, because it is. The initial version, which took effect in 1997, covered many of the high-tech products of its day, but whole new categories of products have emerged since then. And many countries reflexively slapped tariffs onto new tech products in the name of protecting fledgling industries within their borders.

Noting that 95% of the world’s consumers live outside the United States, Josh Kallmer, senior vice president for global policy at the Information Technology Industry Council, said the extended ITA presents “huge opportunities for our companies and our workers and our innovators” to make and sell more products. The administration estimates that the deal will generate as many as 60,000 new U.S. jobs.

The updated agreement should be a boon to semiconductor companies, medical device makers and a host of other U.S. tech manufacturers. (Here is a list of the covered products.) Naturally, there are trade-offs; although U.S. tariffs have been comparatively low, eliminating them will cut the price of imported goods, helping them compete more effectively with U.S. products. That’s good for U.S. consumers, though, and potentially good for the U.S. companies that supply components and services to foreign manufacturers.

The bottom line here is that reducing trade barriers will increase economic activity worldwide. U.S. officials believe that such an increase will be good for this country on balance because U.S. innovation and quality will sustain a strong global demand for U.S. products.

That’s the same underlying argument behind the free-trade deals that have drawn such fierce resistance from both the union-friendly left and the populist right. To those critics, reducing trade barriers will only encourage U.S. companies to move more production offshore, where they can cut costs.

Yet globalization is happening anyway, in part because U.S. companies are expanding overseas to be closer to potential customers and partners there. Kallmer of the ITIC argued that lower tariffs won’t accelerate those trends. “These are global companies, and they would be global anyway because there are opportunities to build the best possible products by doing different things in different places,” he said.

Regardless, the new ITA is likely to attract a fraction of the criticism that the not-yet-completed Trans-Pacific Partnership has drawn. Again, credit the straightforward nature of the deal. A change in a tariff is easy to measure, and its effects are relatively easy to model. Winners and losers are pretty clear.

By contrast, the changes that will be proposed in the TPP to safety, labor and environmental standards, prescription drug patents, copyright protections and other non-tariff barriers will be harder to gauge. That’s because of the different methods used around the world to try to balance the competing interests involved.

The debate won’t simply be about whether the deal will increase trade. It will also be about the policy issues implicated by the changes in non-tariff barriers. What’s the right balance between encouraging the development of new drugs and providing affordable generic alternatives? How do you protect the publishers of creative works while still allowing innovative and appropriate new uses? How do you protect U.S. companies against corruption abroad without giving multinational companies license to challenge legitimate U.S. laws?

The administration will celebrate the new ITA, and rightly so. But the next deal is going to produce a different kind of fireworks.

Follow Healey’s intermittent Twitter feed: @jcahealey