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SIA: Tariffs on electronic transmission will hit global semiconductor industry hard
2022-07-11

Recently, the Semiconductor Industry Association (SIA) of the United States expressed its views on the issue of tariffs on electronic transmissions, when the 25-year-old tariffs on electronic transmissions, which are the basis of global digital trade, will be determined within a week.

The SIA believes that the WTO has not imposed tariffs on electronic transmissions since 1998. By creating a free zone for the cross-border flow of data, the tax exemption supports the rapid growth of global trade in Internet-related services, entertainment and goods.

While the tax exemption is vital to the global economy and must be extended, the SIA analysis presents serious risks to the moratorium as a handful of WTO opponents claim they need to raise taxes. Some WTO members may choose to go the tax route, imposing tariffs on nearly everyone who crosses borders digitally, including streaming music, software, social media and financial transactions.

SIA: Tariffs on electronic transmission will hit global semiconductor industry hard

SIA believes that in the context of the spread of the epidemic, inflation and the Russian-Ukrainian conflict, imposing tariffs on electronic transmissions will bring a major blow to the economy and is not conducive to trade liberalization.

The SIA noted that if digital transmissions were subject to tariffs, U.S. manufacturing and the entire global economy would suffer. Take the U.S. semiconductor industry, for example. Semiconductors are the most complex products in the world to develop, design, and manufacture. They depend on the seamless and frictionless flow of semiconductor research, design, software, and other data that flows uninterruptedly across national borders. . Without the tax-free flow of data over the past 25 years, we wouldn't be able to innovate today, enabling the semiconductor industry to integrate more than 50 billion transistors on a small chip and sell it in global markets.

The semiconductor industry, like other advanced industries, can only succeed and be competitive in an environment that allows R&D, design, engineering and manufacturing data to be protected and flow seamlessly across borders. If a tax increase is chosen, it could seriously affect the progress made after the passage of the competitiveness legislation currently under consideration in Congress.

The benefits of taxing digital flows are likely to outweigh the disadvantages. Countries that impose tariffs on data flows will lose more in consumer welfare and export competitiveness than they gain from new tariff revenue, according to an OECD report. Another report by ECIPE (European Centre for International Political Economy) found that "the loss of economic growth and the reduction in tax revenue from the imposition of tariffs on electronic transmissions outweighs the additional tariff revenue they generate".


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