1 “ITA - Plus Program”

2 Goals The “ITA-Plus” Program was published on September 4th, 2002 in the Diario Oficial de la Federación (DOF), as the Mexico’s reaction to the entry in force of the ITA (“Information Technology Agreement”), which is an agreement signed under the WTO among 56 countries that considers the tariff elimination on diverse goods of computer and telecommunications sectors, including their subassemblies.

3 Goals As in the “ITA”, Mexico’s “ITA-Plus”: Completely eliminates tariffs by January, 2004 on goods from three sectors: computer (computers, monitors, printers, scanners), telecommunications (modems, cellular phones, carrier - current line systems and telephone centers, broadcasting equipment for T.V. and radio), and other electronic devices (calculators, photocopiers, register machines) to import into Mexico from any country.

4 Goals This liberalization allows electronic goods traders to offer larger variety, higher quality and cheaper products, providing a wide range of benefits from a restaurant to a small grocery stores, from banks to wholesale stores, as well as all modern manufacturing process and all the office services, consequently promoting benefits in productivity and competitiveness in the whole economy.

5 Goals Additional goals of the ITA-Plus are: To promote Mexico’s competitiveness in the global scenery, not exclusively in the telecommunications and computer subsectors, but in all electronics, including consumer electronics (TVs, stereos, CDs, video equipments). To keep the tariff consistency along the productive chains, in order to additionally promote the production of subassemblies and components in Mexico.

6 Advantages over the ITA 1) The ITA-Plus considers backward linkages in productive chains, by including additionally the raw materials (steel, plastics) required by the components producers. 2) It benefits manufacturing in the consumer electronics subsector, which is now excluded from the ITA, through the liberalization of the inputs required in the whole chain of production, including raw materials. The advantages of the “ITA-Plus” over the ITA are:

7 Advantages over the ITA CONSUMER ELECTRONICS ITA - PLUS ITA FINAL GOODSINPUTS Computer / Telecommunications Subassemblies and Components Subassemblies, Raw Materials Consumer Electronics Subassemblies, Components and Raw Materials Computer / Telecommunications Subassemblies only Not Included

8 Characteristics of the ITA-Plus 1) Tariff elimination for all the imports of parts, components and final goods in computer and telecommunications. 2) Tariff elimination on inputs, parts and components under the PROSEC for the electronic sector currently in force (only for use in manufacturing of electronic products). The “ITA-Plus considers two packages:

9 Characteristics of the ITA-Plus The tariff elimination for all imports under 290 HTS codes will be applied according to three “baskets””: BASKET 1: (entry into force) BASKET 2: (2003) BASKET 3: (2004) Parts and components for telecommunications, computers consumer electronics and office equipment. Telecommunication final goods. Computer Final Goods.

10 The ITA Plus considers the tariff elimination on raw materials and inputs from sectors such as steel, plastics and chemicals only to be used in the manufacturing of electronic products. Therefore, 278 additional HTS codes were incorporated into the PROSEC of the electronic sector currently in force. Characteristics of the ITA-Plus

11 Coverage ProgramDuty Free3-5%15%Total Prior PROSEC 3, ,327 ITA-Plus* - MFN Year Year Year ITA - PROSEC TOTAL 3, ,897 The total of HTS Codes liberalized are almost 4,000: * Tariff elimination according to three “baskets”.

12 Program for the Competitiveness of the Electronics Industry In order to further promote the competitiveness of the electronics sector, the Government of Mexico jointly with the productive sector, put in place on october 9 th, 2002 the “Program for the Competitiveness of the Electronics Industry” (PCIE).

13 Program for the Competitiveness of the Electronics Industry 1) Design a competitive fiscal policy. 2) Promote a competitive tariff structure. 3) Make more efficient international transactions. 4) Develop supply chains. 5) Promote technological development in Mexico. 6) Promote the human factor. 7) Generate an adequate infrastructure. The PCIE considers, among other strategies:

14 Conclusions Through the “ITA-Plus”, Mexico establishes an aggressive tariff scheme that promotes: 1) Competitiveness in the whole economy. 2) The e-Economy (e-Commerce, e- Government). 3) The demand for software, as well as for the skilled labor needed to design and to operate the software.

15 Conclusions 4) Trade of electronic goods. 5) The local manufacturing of electronic goods, and 6) The production of electronic subassemblies and components in México

16 Conclusions The “ITA-Plus” program, complemented with the strategies undertaken under the PCIE, constitute a fundamental factor to promote the competitiveness of a strategic sector with influence in the productivity of the entire economy, while promoting the competitive development of Mexico towards High Technology.