Developing Countries Could Grow Their Economies by Billions
If developing countries join the Information Technology Agreement—an international pact eliminating tariffs on hundreds of information and communications technology (ICT) products—they could boost their economies by billions of dollars, according to a new economic analysis by the Information Technology and Innovation Foundation (ITIF).
ITIF, a global tech-policy think tank, also found that countries could recover a significant portion of the tariff revenue they would forgo in the form of new tax revenue, making this a win-win economic policy.
“Increasing the use of technology in all sectors of the economy is one of the most important drivers of economic growth in developing countries because it enhances productivity, spurs innovation, and bolsters living standards,” said Stephen Ezell, ITIF’s vice president and the report’s lead author. “If developing nations join the Information Technology Agreement, their businesses and consumers will use more technology products because of lower prices, while also becoming more deeply integrated in global value chains for ICT production. This will spur significant economic growth for the countries while generating new tax revenues that substantially offset tariff losses.”
Established in 1996, the Information Technology Agreement (ITA) eliminates tariffs on hundreds of ICT products for its 82 signatory countries. Despite its economic benefits, some developing nations have yet to join because their governments are concerned about the loss of operating income from tariffs.
Disproving this false narrative, ITIF analyzed how the increase in ICT imports and lower prices due to tariff elimination under the ITA would spur greater economic growth and tax revenue in six developing countries—Argentina, Cambodia, Chile, Kenya, Pakistan, and South Africa.
Among the report’s findings, joining the ITA would bolster Argentina’s economic growth by an estimated 1.52 percent, or $12.7 billion in additional output, in the 10th year; Cambodia’s by 0.98 percent or $320 million; Chile’s by 0.23 percent or $920 million; Kenya’s by 1.29 percent or $1.4 billion; Pakistan’s by 1.30 percent or $4.6 billion; and South Africa’s by 0.17 percent or $770 million. Chile and South Africa realize lower, yet still positive, economic impact, because these countries already have relatively low tariff rates on ITA-covered ICT products.
In the 10th year after joining the ITA, new tax revenues would allow Argentina to recover 133 percent of forgone tariff revenues ($1.3 billion); Cambodia 23 percent ($24 million); Chile 67 percent ($94 million), Kenya 109 percent ($139 million); Pakistan 75 percent ($231 million); and South Africa 92 percent ($152 million).
“Countries that haven’t joined the ITA are missing a significant opportunity for economic growth, innovation, and prosperity,” concluded Ezell. “Joining the ITA makes countries more attractive locations for ICT goods and services producers and exporters, and sends a strong signal that these countries are open for business.”