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Trillion-euro global high-tech trade deal agreed

EU Reporter Correspondent

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Digital Single MarketThe European Union, the United States, China and the vast majority of the World Trade Organization (WTO) members that were participating in the negotiations agreed on 24 July to eliminate custom duties on 201 high-tech products. The extension of the 1996 Information Technology Agreement (ITA) is the biggest tariff-cutting deal in the WTO in almost two decades. The agreement initiated and brokered by the EU, will benefit both consumers and firms alike by removing customs duties on a wide range of goods, including medical equipment, video games and consoles, home hi-fi systems, headphones, blue-ray/DVR players, semi-conductors, and GPS devices. All in all, the deal will cover €1 trillion in global trade, covering close to 90% of world trade in the products concerned. A total of 54 WTO members[1] negotiated the expansion of the ITA. A limited group of countries is expected to confirm its participation in the coming days.

"This is a great deal for consumers, and for companies big and small," said Trade Commissioner Cecilia Malmström. "We’ve worked hard to broker this compromise between different countries and to find the best solutions for Europe. This deal will cut costs for consumers and business – in particular for smaller firms, which have been hit especially hard by excessive tariffs in the past. Just as important, this deal shows how we can use the EU’s trade policy to encourage innovation in the IT sector – a part of our economy that is crucial for Europe's growth and for creating jobs."

The commissioner added: "This major achievement adds much-needed momentum to the World Trade Organization. It clearly shows that countries around the world can work together to achieve solutions that benefit everyone. I count on other countries joining soon. And looking ahead, this agreement is an inspiration to step up our efforts in the run-up to the WTO ministerial in Nairobi in December. That will be the 'make or break' meeting for the Doha development round – it will be the last chance to conclude it."

The new, expanded ITA agreement concluded today will reduce the costs for consumers and for manufacturing IT products in Europe. It will offer new market access for many of Europe's high tech companies – some of which are leaders in their fields – and encourage innovation by simplifying access to state-of-the-art technology. As such, it will contribute to the further development of the digital economy in the EU.

The role of the EU

The EU made the original proposal back in 2008 to review and expand the ITA. Other WTO members finally took up the proposal in 2012, when negotiations started. From the outset, the EU proposed liberalising a wide range of goods, including consumer goods with relatively high tariffs in the EU (up to 14%), such as set top boxes, video cameras and cathode ray tube monitors. The EU then played a key role in brokering compromises throughout the negotiations, and chaired the last three negotiating rounds.


Background on ITA expansion

Tariffs will be eliminated within 3 years from the date of application of the agreement, which is foreseen for 1st July 2016. For sensitive products longer phase-out periods will be negotiated to give industry time to adapt to a zero-tariff environment The EU has a trade surplus in the products covered of around €15 billion. The deal will not cover certain electronic products subject to duties in the EU, such as certain monitors, projectors, non-digital car radios as well as TVs.

The extension of the ITA aimed at broadening the original Information Technology Agreement between Members of the World Trade Organization (WTO), which came into force in 1997. A total of 54 WTO members negotiated the expansion of the ITA.

Under the original ITA, participants eliminated all customs duties on IT products such as computers, telephones, digital cameras and their parts. Since the ITA was completed and entered into force in 1997, trade in the sector has quadrupled. In May 2012 a number of participants started negotiations to expand ITA to new products. The new agreement will substantially expand the range of products covered, that include consumer and other finished products, parts and components, and machinery used in the manufacturing of IT products (enclosed a summary of the products covered by the ITA expansion).

Commissioner Cecilia Malmström on Twitter

ITA-expansion product list, explained

The expansion list covers both consumer and other finished products as well as components and manufacturing equipment.

Examples of finished products

  • Multimedia products (GPS, DVD players, smart cards, optical media)
  • Multifunctional printing and copying machines, ink cartridges
  • Electronics (TV-cameras, video recording, digital car radios, set top boxes)
  • Medical equipment: sophisticated medical equipment such as scanners, machines for magnetic resonance imaging, tomography or dental care and ophthalmology
  • Video games and consoles
  • Routers and switches, microscopes and telescopes
  • Weighing and money-changing machines
  • Loudspeakers, microphones and headphones
  • Telecommunication satellites

Examples of parts and components

  • Parts and components for production of IT goods and semiconductors, including TV parts and parts and other machinery incorporated in IT products, from smartphones to optical or medical equipment. This includes e.g. lasers, LED modules, touch screens, measuring and weighing instruments, switches, electromagnets, amplification apparatuses, etc.
  • Multicomponent integrated circuits (MCOs), which are the latest and future generation chips included in many electronic and other products: over 30 tariff lines included
  • Instruments for aeronautical and space navigation

Machinery for production of IT goods and semiconductors

  • Machine tools for the manufacture of printed circuits or semiconductors and other IT products, filtering machines, and their parts

[1] The European Union and its 28 member states; Albania; Australia; Canada; China; Colombia; Costa Rica; Guatemala; Hong Kong, China; Iceland; Israel; Japan; Korea; Malaysia; Mauritius; Montenegro; New Zealand; Norway; the Philippines; Chinese Taipei; Singapore; Switzerland; Thailand; Turkey; and the United States.

Business

Antitrust: Commission sends Statement of Objections to Apple on App Store rules for music streaming providers

EU Reporter Correspondent

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The European Commission has informed Apple of its preliminary view that it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store. The Commission takes issue with the mandatory use of Apple's own in-app purchase mechanism imposed on music streaming app developers to distribute their apps via Apple's App Store. The Commission is also concerned that Apple applies certain restrictions on app developers preventing them from informing iPhone and iPad users of alternative, cheaper purchasing possibilities.

The Statement of Objections concerns the application of these rules to all music streaming apps, which compete with Apple's music streaming app “Apple Music” in the European Economic Area (EEA). It follows-up on a complaint by Spotify. The Commission's preliminary view is that Apple's rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers. This in turn leads to higher prices for consumers for their in-app music subscriptions on iOS devices. In addition, Apple becomes the intermediary for all IAP transactions and takes over the billing relationship, as well as related communications for competitors. If confirmed, this conduct would infringe Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position. The sending of a Statement of Objections does not prejudge the outcome of an investigation.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “App stores play a central role in today's digital economy. We can now do our shopping, access news, music or movies via apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.” A full press release is available online.

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Aviation/airlines

Portugal extends COVID-19 air travel curbs until mid May

Reuters

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Portugal is extending until 16 May flight restrictions that stop non-essential travel from countries including Brazil with high coronavirus incidence rates, and added India to the list due to the rapid rise in infections there.

Travellers from countries where 500 or more cases per 100,000 people have been reported over a 14-day period - which also include South Africa, France and the Netherlands - can only enter Portugal if they have a valid reason, such as for work or healthcare, the government said on Saturday.

Arrivals must then quarantine for 14 days.

The decision on India means Portugal is joining a growing number of countries imposing such restrictions. Neighbouring Spain also on Saturday said passengers arriving there from India must go into quarantine for 10 days to avoid spreading COVID-19, a government bulletin said. Read more

Portugal said people from countries where the incidence rate is 150 or more COVID-19 cases per 100,000 inhabitants, such as Spain and Germany, can also travel by plane to the country only for essential reasons.

They will have to present proof of a negative COVID-19 test taken within 72 hours of departure for Portugal. Those without a test will have to take one on arrival and wait for the result at the airport.

The extension of air travel restrictions came on the same day most of Portugal moved to the final phase of a gradual easing of rules imposed in January to tackle what was then the world's worst COVID-19 surge.

As infections dropped sharply, lockdown restrictions started to be eased in mid March. Schools, restaurants and cafes, shopping malls, museums and other non-essential services have since reopened, but under strict rules to reduce contagion risk.

Portugal's 1,200 km land border with Spain also reopened on Saturday after more than three months of restrictions and border checks.

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Competition

Vestager accuses Apple of abusing its role as gatekeeper in music streaming market

Catherine Feore

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The European Commission accuses Apple of abusing their position as a gatekeeper in the music streaming market.

In its ‘statement of objections’ the Commission says music streaming app developers who want to reach Apple device users (iPhone, iPad) have to use Apple store and are charged a 30% commission fee on all subscriptions. They are also obliged to follow Apple’s ‘anti-steering provisions’, which limit developers from informing consumers of alternative purchasing possibilities outside of apps. 

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store. With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”

Markus Ferber MEP, European People’s Party group spokesman on economic affairs welcomed the development: “There is always a big risk of abuse for a platform operator like Apple to give preference to its own services on its platform compared to competing services. 

“Apple has been using its App Store for a while to keep its competitors at bay by using dodgy contractual clauses and exorbitant fees. By making use of these anti-competitive practices, gatekeepers such as Apple are preventing true competition from emerging in the first place.”

Long overdue

Ferber also called the Commission’s action long overdue: “It took years for EU competition authorities to get their act together. Apple’s competitors have had to take the hit in the meantime. We urgently have to move from ex-post competition enforcement to ex-ante prevention of market abuse. The Digital Markets Act can be a powerful tool in this regard.”

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