SIA ISSUE BACKGROUNDERS

Free and Fair Trade

Issue: The SIA supports a strong World Trade Organization (WTO) and the market opening proposals of the Doha Development Agenda. However, these advances must not come at the expense of a reliable antidumping remedy.

SIA has long supported China's entry into the WTO and the world trading system. Today, China is actively implementing its WTO commitments and this process must continue, particularly in the areas of intellectual property protection, standards and subsidies.

Importance: The U.S. industry has 77 percent of its manufacturing capacity in the U.S., while over 70 percent of the chip market is outside the U.S. In 2001, the Asia-Pacific region, driven primarily by growth in China, surpassed the U.S. for the first time as the largest market for semiconductors and is now over twice the size of the U.S. market. Because most chip sales are outside the U.S., free and fair trade is vital to the semiconductor industry.

SIA Position/Action:

• Tariffs: The Information Technology Agreement (ITA) eliminated tariffs on semiconductors, telecom equipment, computers and other IT goods in approximately 90% of the world in 1997. The U.S. should work to expand the ITA to include additional countries and IT products; and should ensure that technology changes such as multi-chip packaging do not inadvertently result in duties being applied to previously tariff-free products. SIA continues to support strong free trade agreements that eliminate tariffs on high-tech goods and urges the U.S. to swiftly continue negotiations. The recent passage of the U.S. Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) will eliminate duties on a range of high tech products estimated to save U.S. firms over $75 million annually.
  
  
• Intellectual Property: Intellectual property is the lifeblood of our industry. Unfortunately, enforcement in some countries remains short of what is necessary to be effective and provide adequate deterrence. There has been recent progress in China including information sharing and seminars, and new interpretations to clarify enforcement policies. To achieve further progress, China should adopt and implement effective enforcement measures including enhanced civil remedies and customs enforcement policies, and, where appropriate, criminal prosecution.
  
  
• Antidumping and Countervailing Duty Laws: To help ensure that all foreign competitors play by the same rules SIA has long supported maintenance of trade laws that allow countries to take action against dumping and trade distorting subsidies. Companies must be able to compete fairly to recoup the cost of their investments - companies that rely on standard capital markets and free and fair trade must not be forced to compete against foreign governments. The U.S. must retain its trade laws in the new round of WTO negotiations.
  
  
• Levies: Several countries apply levies to all products capable of making or storing digital copies - the money is used to compensate domestic recording artists and other rights holders, whether or not their creations have been copied. Levies are indiscriminately imposed on all technologies regardless of their intended use. There have been cases in which the levy exceeded the price of the product. The SIA believes that future U.S. trade agreements must include an obligation that prohibits the application of new levies to digital products.
  
  
• Digital Trade, Product Regulations, and Standards: Free trade should extend to e-commerce and telecommunications services, and electronic transmissions should receive no less favorable treatment than like products delivered in physical form. Future U.S. trade agreements should include an obligation that prohibits the application of new levies to digital products. Environmental and other regulations must be nondiscriminatory and based on sound and widely accepted scientific principles and up-to-date technical information. The semiconductor industry today is truly global, and any use of proprietary national standards is likely to cause more harm than good for both domestic and foreign firms.