U.S. Tech Firms Get a Big WTO Win over the EU

Last Updated Aug 17, 2010 4:50 PM EDT

There's been a trade dispute over tariffs on electronics brewing for years between the European Union on one side and the U.S., Japan, and Taiwan on the other. Now the World Trade Organization has ordered the EU to drop the protective tariffs or face trade sanctions on items such as... cheese. And such companies as Cisco (CSCO), Canon (CAJ), HP (HPQ), and Dell (DELL) must be dancing a victory jig.

The dispute started in the mid-1990s with the Information Technology Agreement trade treaty. Items covered by the treaty have zero tariffs in 70 different countries. However, the EU refused to agree that television cable boxes, flat-panel computer screens, or multi-function printers were high tech products, claiming that they were consumer goods.

Even a casual watcher of high tech would know that such talk was ridiculous. Why is a printer or computer monitor consumer electronics but a PC not? In 2008, the U.S., Japan, and Taiwan filed a complaint with the WTO at the behest of some major high tech companies.

The EU is unhappy about the resolution:

The European Commission criticized the 704-page ruling before it was published, repeating its view that negotiations on a comprehensive revision of the agreement were preferable to litigation on only a few aspects of it.

"The report does not establish general principles that would imply any form of generalized conclusions," it said in a statement. "Negotiations are the vehicle for mutually beneficial liberalization."

However, it seems unlikely that any of the three countries would be willing to renegotiate the entire treaty, given how things came out after the first one.

Companies like Cisco, which is a major cable box manufacturer, and such printer vendors as HP, Dell, and Canon will look to the ruling as a chance at lower tariffs, which means prices that are more competitive with European competitors. The EU has 60 days to appeal, which does seem likely, as there's no down side. However, should the ruling ultimately stick, the EU will either have to comply or the U.S., Japan, and Taiwan would be able to impose tariffs on such goods as cars and pharmaceuticals in addition to the aforementioned cheese. That could be a major problem for the EU, which, in 2008, had roughly $89.8 billion in pharmaceutical exports alone and $114.6 billion in automotive exports in 2009.

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Image: RGBStock.com user leocub, site standard license. Photo editing: Erik Sherman.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.