WORLD TRADE  
ORGANIZATION  TN/MA/W/6/Add.4 
8 November 2004 
 
 (04-4729) 
Negotiating Group on Market Access Original:   English 
  
MARKET ACCESS FOR NON-AGRICULTURAL PRODUCTS 
 
NTBs of the Electronics Industry
 
Korea’s Contribution to Vertical  Approach to NTBs Negotiation  
 
Addendum  
 
 The following communication, dated 5 November 2004, is being circulated at the request of 
the Delegation of Korea. 
 
_______________ 
 
 I. INTRODUCTION 
 
1. The Doha Ministerial Declaration states th at NAMA should address not only tariffs but also 
NTBs. In the context of this Agenda, NAMA is currently discussing possible NTBs modalities 
including request/offer, horizontal and vertical approaches. Some members have proposed the 
possibility of a vertical approach in several i ndustries. Korea wishes to contribute to the NTB 
discussions based on its own experiences in the el ectronics industry, which most member countries 
are interested in, and which accounts for a consider able share in global trade as well as having shown 
continuous growth. 
  II.  WHY NTBS ARE IMPORTANT TO THE ELECTRONICS INDUSTRY 
 
A.
  T HE NEED TO ELIMINATE “THE ELECTRONICS NTB S” 
 
2. Most member states, including both developed and developing countries, have shown interest 
in the electronics industry for its high-tech and la bor-intensive characteristics. In the case of major 
electronics parts, technological sophistication is re quired. And in the case of assembled electronics 
products, in which these high-tech parts are used as co mponents, a large labor force is needed in order 
to create value-added, thereby making the industry labor-intensive. 
 
3.  The structure of production and trade in the global electronics industry shows that the 
industry is well balanced in terms of internationa l division of labor. According to an electronics 
research institution, 26 devel oped countries account for 61.4% while 25 developing countries account 
for 38.6%1 of production among 51 major electronics pr oducing countries. The UN has reported that 
developed countries account for 58.4% of imports while developing countries account for 41.6%, and 
that the former is responsible for 56. 9% of exports while the latter, 43.1%2 of global electronics trade.  
 
                                                      
1 The yearbook of world electronics data (2003-2004), REED ELECTRON ICS RESEARCH (UK); Classifying 
the EC members as developed countries. 
2 2001 International Trade Statistics Yearbook, UN. TN/MA/W/6/Add.4 
Page 2  
 
4.  The electronics industry takes up a considerable share in international trade and it’s share is 
continuously growing. Therefore, the need to el iminate NTBs in this industry is greater. The 
electronics industry’s exports have shown vigorous grow th, registering a growth rate of 41.8% in the 
last ten years. It accounted for 13.8% of total exports in 1991, but this figure jumped to 19.1%
3 in 
2001. In 2002, the electronics industry accounted for 19.6%4 of global trade (export: 19.57%, import: 
19.64%), further supporting the need to remove NTBs in the electronics industry. 
 
5.  The electronics industry has a lower tariff rate  than the overall average of bound tariffs of 
non-agricultural products. The average tariff rate of electronic products is assumed to be 11.9%, while 
the overall average of bound tariffs is assumed to be 12.7%5. Moreover a drastic cut in electronics 
tariffs is expected, whether by formula cut or by sectoral elimination, in future DDA tariff 
negotiations. On the other hand, the reduction of ta riffs is taking place rapidly, given that many ITA 
items are being introduced into the electronics industry. 
 6.  Even if an ambitious tariff cut is implem ented, NTBs will continue to be a formidable 
obstacle in the trade liberalization of electronics i ndustry. As such, the removal of electronics NTBs 
will promote free trade and contribute to boost global  welfare, thereby enabling many countries to 
share in the benefits of eliminating NTBs. According to a study
6 of NTBs notifications submitted to 
the WTO secretariat until April 2004, NTBs in the electronics industry accounted for 11.2% of total 
NTBs reported by 30 countries. This figure is  the highest among manufactured products. Among 
1,326 cases that cited specific products, 148 cases were related to electronic products.  
 7.  The Korean Experience tells a similar stor y. According to a recent survey conducted by a 
Korean institution
7, 65% of electronics-related companies point ed out that NTBs had a greater impact 
as a trade barrier than tariffs. 33.5% of the re spondents said that NTBs undermined free trade and 
45.3% said that NTBs were a burden on companies.  As such results show, about 80% of Korea's 
electronics-related companies responded that NTBs hi ndered free trade, and this finding would not be 
isolated to Korean companies alone.   
8.  In the WTO, The Committee of Participan ts on the Expansion of Trade in Information 
Technology Products (ITA Committee) has also recogni zed the importance of eliminating NTBs in the 
industry. The zero-tariff negotiations on IT-relate d products are almost complete. Given its serious 
trade-distorting effects, the ITA Committee is focusing on outright abolition of NTBs. 
 
B.
  T YPES OF THE ELECTRONICS NTB S 
 9. According to the above-mentioned survey on Korean companies, the NTBs that seriously 
undermine trade in the electronics industry are those related to: 1) TBT, 2) customs clearance, 3) 
quantitative restrictions, 4) pre-shipment inspection (pre-check of a consulate post on export items), 5) 
others (restrictions on trade licensing, obliga tions of export and local contents, etc.).  
 
TBT:
 
 
i) In relation to certification, only the inspec tion results of designated inspection agencies in 
importing countries are recognized, and such practice leads to excessive waiting time due to lack of 
processing capacity and extra costs because of ove rlapping inspections with other agencies. ii) 
Unnecessary costs occur because of  different certification standards among countries and because of
                                                      
3 1991-2001 International Trade Statistics Yearbook, UN. 
4 2002 International Trade Statistics Yearbook, UN. 
5 The figures are verified by Korea, based on the data of IDB CD-ROM rel ease 11 (December 2003). 
6 Analysis of NTBs notifications (May 2004), Korea Trade-Investment Promotion Agency. 
7 Research of NTBs of concern to Korean companies (January 2004), Korea Intern ational Trade Association.  TN/MA/W/6/Add.4 
 Page 3 
 
 
 excessively tighter standards, thus requiring the adaptation for separate product specifications in 
order to meet individual importing countries’ standards.  
Customs clearance: 
 
 
The development of technology, especially in  the phenomenon of “Digital Convergence”, is 
leading to the production of multi-functional electr onic products. However, as customs regulations lag 
in relation to technological innovation, customs ag encies are classifying these new products based on 
the existing HS code system, but HS codes do not have accurate classifications for those products, 
customs agencies arbitrarily classify such products  imposing higher tariff rates. For example, an 
increasing number of people are watching TV prog rams or movies on personal computers recently. 
Therefore, some manufacturers of computer monito rs are producing monitors equipped with some TV 
functions. Also, consumers can install peripheral devices on their PCs to expand capabilities, such as 
to watch TV programs or movies. Computer monitor is  an ITA product with a 0% tariff rate. However, 
if there is a possibility that computer monitors  could be ultimately used for watching TV (e.g. 
monitors equipped with the A V cable), some member countries are classifying these monitors as TVs and are imposing high tariff rates. Such classificati on is based on arbitrary judgment of the customs 
agencies, not on the official classification criteria of international organizations such as the WCO. 
 Quantitative restrictions: 
 
 
Quantitative restrictions on imports have si gnificantly decreased but are modified into 
different kinds of quantitative restrictions. For ex ample, there are cases of domestic production quota 
system and domestic sales quota which are unfairly designated and allocated to the advantage of 
companies owned by domestic investors, which causes discrimination against foreign-invested 
companies, including new market entrants. 
 Pre-shipment inspection (pre-check of a consulate on export items): 
 
 
Excessive amounts of unnecessary documents, high fees, and complex procedures are 
required to go through pre-shipment inspection in the consulate post of the importing country 
stationed in the exporting country. For instance, th e approval of relevant agencies and consulate 
officers are needed for the export-related documents  including export declaration, commercial invoice 
and certificate of export price. When there is no c onsulate post in an exporting country, the applicant 
must go to the consulate post in a neig hboring country to receive approval. 
 Other cases:
 
 
i)  In some cases, foreign-invested compani es are excluded and specific domestic importers are 
given import licenses, and this discriminatory import licensing has the effect of being barriers that 
hinder free trade. ii) De jure  export obligation or local contents obligation is not forced, but such 
obligation is imposed on de facto  basis through approvals and licensing of administrative agencies. 
For example, in case of electronic products relate d to telecommunications equipment in a member 
state, 50-70% of local production should be used fo r export and 60% of parts used should be locally 
produced. 
 
III. HOW TO ELIMINATE “THE ELECTRONICS NTBS” 
 
A. T HE PROCEDURAL ROADMAP TO ELIMINATE ELECTRONICS NTB S 
 
10. In order to effectively deal with NTBs wh ich require expertise at the NAMA negotiations, sub-
groups could be established in different industri es. And then the sub-group of electronics could 
explore electronics industry-related issues, build  a consensus on NTBs elimination and lay out TN/MA/W/6/Add.4 
Page 4  
 
individual countries’ specialized approaches to  remove NTBs as we ll as the methods of 
implementation.  
11. In the case of NTBs that require expertise, such as customs clearance, customs classification 
and TBT, experts from existing bodies under the WTO or other relevant inte rnational organizations 
can be called upon to hold discussions. This does not me an that NTBs negotiations will be transferred 
to other bodies but the participation of experts are guaranteed in sub-groups. 
 
12. A mechanism should be established to ensu re the implementation of results of NAMA 
negotiations. This will monitor individual countries' efforts to remove NTBs and their progress with 
the implementation. This can be more efficient than the dispute settlement procedures that are 
relatively complicated and time-consuming. It  can also go towards promoting voluntary 
improvements through negotiations.  
B. P
OSSIBLE ALTERNATIVES TO RESOLVE THE ELECTRONICS NTB S 
 13. To resolve the electronics NTBs according to  their patterns, the following alternatives could 
be suggested. The resolution process of NTBs will be wholly addressed by the NAMA sub-group on 
electronics:  
-- Given that TBT-related electronics NTBs require expertise, it would be efficient to encourage 
standardization and mutual recognition through WTO-related bodies or international standards 
organizations. For example, i) the inspection agency  should not be limited to the local authorities but 
expanded to places approved by international standa rds organizations such as the IEC and the ILAC. 
Overlapping inspections can be avoided by rec ognizing the results of internationally approved 
inspection agencies. ii) MRA at the WTO level, not at the bilateral level, can be pursued by the 
NAMA sub-group or the existing WTO TBT Committee. A model MRA could be proposed with the participation of various internati onal standardization organizations. 
 
-- Given the characteristics of cu stoms clearance-related NTBs in the electronics industry, they 
should be discussed not only at the WTO bodies, su ch as trade facilitation negotiations, but also at 
customs-related international orga nizations such as the WCO. Negotia tions should aim to establish a 
standardized customs system. For example, interna tional organizations, which have expertise such as 
WCO and the WTO Customs Valuation Committee, woul d work together for resolving the issues of 
customs classification and customs valuation. 
 -- Solutions for NTBs in relation to pre-shipme nt inspection, including pre-check on export 
items, can be sought by using the existing WTO ag reements. For example, to reduce the submission 
of unnecessary documents and excessive fees when a c onsulate post in the exporting country checks 
export items, relevant provisions can be included in the Agreement on Pre-shipment Inspection. 
 
-- Elimination for NTBs that could violate GATT  provisions, such as quantitative restrictions, 
restrictions on trade licensing, export obligations , local contents obligations could be sought by 
establishing institutional mechanisms that guarantee the implementation of the GATT. For example, a 
separate channel for discussion could be established for continuous negotiations to remove NTBs. 
NAMA could adopt a stronger monitoring system or  a separate NTBs committ ee could be established. 
 
IV .  CONCLUSION 
 
14. Given the experiences of Korean companies in  NTBs in the electronics industry, Korea hopes 
that NAMA will actively address the electronics NT Bs because it believes that NTBs are causing 
various trade distortions throughout the electronics industry. For the items of mutual interest to both 
developed and developing countries such as electro nic products, the vertical approach should be 
sought more actively.  TN/MA/W/6/Add.4 
 Page 5 
 
 
 15. As is seen in the electronics industry, even if NTBs are to be removed through negotiations, 
they are very likely to return in modified forms, given that NTBs cannot be uniformly regulated based 
on a concrete and clear definition by nature. Theref ore, institutional mechanisms such as a regular 
monitoring system should be considered when se tting up NTBs modalities (e.g. the establishment of 
NTBs committee) in order to effectively implemen t what has been agreed upon in negotiations and 
prevent modified NTBs. 
 
16. Lastly, in the case of developing countries and LDCs, NTBs are mostly attributed to the lack 
of capacity such as export/import procedures, facilities and human resources. When establishing NTBs negotiation modalities, S&D factors such as support for computerization of customs clearance, 
capacity building and technical assistance programs should be considered to reduce NTBs within the 
developing countries and LDCs. TN/MA/W/6/Add.4 
Page 6  
 
 
Attachment 1
 
          
Comparison of Production share between Developed and Developing Countries in Electronics Industry 
          
          
          
 Summary of Developed and Developing Countri es' 2003 Production & Market Shares>    
          
  Production share Market share     
  Developed  Developing Developed  Developing     
  61.39% 38.61% 70.46% 29.54%     
          
          
 Total Global Breakdown of 51 major producers by country    
          
          
     *Unit: U$ million     
     *Classifying the EC members as developed 
countries   
   Country Production 
value Production 
(%) Market size Market share(%)    
 1 United States 300,662  25.94  376,425  31.98     
 2 Japan 180,046  15.53  150,789  12.81     
 3 Germany 45,226  3.90  55,883  4.75     
 4 England 42,236  3.64  49,225  4.18     
 5 France 28,666  2.47  32,532  2.76     
 6 Ireland 17,113  1.48  7,132  0.61     
 7 Italy 15,761  1.36  25,306  2.15     
 8 Canada 11,509  0.99  26,530  2.25     
 9 Netherlands 8,563  0.74  13,798  1.17     
 10 Hungary 8,477  0.73  6,866  0.58     
 11 Switzerland 7,904  0.68  8,134  0.69     
 12 Finland 7,522  0.65  4,149  0.35     
 13 Sweden 6,888  0.59  7,771  0.66     
 14 Spain 6,495  0.56  13,692  1.16     
 15 Belgium 4,847  0.42  7,391  0.63     
 16 Poland 3,982  0.34  7,480  0.64     
 17 Australia 3,480  0.30  13,188  1.12     
 18 Austria 3,232  0.28  5,486  0.47     
 19 Czechoslovakia 3,223  0.28  4,223  0.36     
 20 Denmark 2,341  0.20  3,393  0.29     
 21 Portugal 2,312  0.20  3,489  0.30     
 22 Norway 1,344  0.12  3,161  0.27     
 23 Slovakia 1,107  0.10  1,969  0.17     
 24 Slovania 785  0.07  1,084  0.09     
 25 Greece 593  0.05  2,355  0.20     
 26 New Zealand 472  0.04  2,063  0.18     
 DEVELOPED 
NATIONS 714,786  61.39  833,514  70.46     
 27 China 130,431  11.25  120,216  10.21     
 28 South Korea 66,107  5.70  33,677  2.86     
 29 Chinese Taipei 49,031  4.23  23,982  2.04     
 30 Singapore 38,335  3.31  17,677  1.50     
 31 Malaysia 36,305  3.13  14,936  1.27     
 32 Mexico 28,856  2.49  29,686  2.52     
 33 Thailand 18,743  1.62  11,161  0.95      TN/MA/W/6/Add.4 
 Page 7 
 
 
 34 Brazil 14,106  1.22  19,913  1.69     
 35 Philippines 13,790  1.19  5,648  0.48     
 36 Indonesia 9,223  0.80  5,152  0.44     
 37 Israel 8,246  0.71  7,546  0.64     
 38 Puerto Rico 6,313  0.54  3,593  0.31     
 39 Hong Kong, 
China 5,820  0.50  8,586  0.73     
 40 India 5,706  0.49  8,225  0.70     
 41 Vietnam 2,772  0.24  2,178  0.19     
 42 Russia 2,543  0.22  7,114  0.60     
 43 Turkey 2,361  0.20  7,894  0.67     
 44 Romania 1,486  0.13  2,444  0.21     
 45 South Africa 1,071  0.09  4,150  0.35     
 46 Ukraine 803  0.07  1,824  0.15     
 47 Venezuela 734  0.06  2,314  0.20     
 48 Saudi Arabia 667  0.06  2,540  0.22     
 49 Egypt 508  0.04  1,569  0.13     
 50 Croatia 231  0.02  834  0.07     
 51 Bulgaria 182  0.02  601  0.05     
 DEVELOPING 
NATIONS 444,370  38.61  343,460  29.54     
 TOTAL 1,159,155  100.00  1,176,972  100.00     
          
Source: The yearbook of world electronics data,  2003-2004, REED ELECTRONICS RESEARCH(UK).   
  TN/MA/W/6/Add.4 
Page 8 Attachment 2  
            
Global Electronics Industry's Export Growth Trends: 1991-2001    
            
         *Unit: U$ million   
         *Classify the SITC 751~778 as 
electronics industry 
            
  1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 
Total global exports 3,398,672  3,721,263  3,634,614  4,167,811  4,925,668  5,149,910  5,337,073  5,339,494  5,500,477  6,062,739  5,814,640  
Electronics exports 468,953  487,433  539,755  658,711  825,978  865,403  986,027  942,617  1,039,073  1,318,099  1,109,223  
Electronics (%) 13.80  13.10  14.85  15.80  16.77  16.80  18.48  17.65  18.89  21.74  19.08  
            
Reference: 1991~2001 International Trade Statistics Yearbook, UN        
 
  
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Total exports Electronics industry's exports
 
 
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