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““ITA - Plus ITA - Plus ProgramProgram””

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GoalsGoals

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.

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GoalsGoals

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.

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GoalsGoals

•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.

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GoalsGoals

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.

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Advantages Advantages over the ITAover 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:

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Advantages Advantages over the ITAover the ITA

CONSUMER ELECTRONICS

ITA - PLUSITA - PLUS

ITAITA

FINAL GOODSINPUTS

Computer / Telecommunications

Subassemblies and Components

Subassemblies,

Raw Materials

Consumer Electronics

Subassemblies, Components and

Raw Materials

Computer / Telecommunications

Subassemblies only

Not Included

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Characteristics Characteristics of the ITA-Plusof 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:

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Characteristics Characteristics of the ITA-Plusof 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.

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•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 Characteristics of the ITA-Plusof the ITA-Plus

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CoverageCoverage

Program Duty Free 3-5% 15% Total

Prior PROSEC 3,309 16 2 3,327

ITA-Plus* - MFN

Year 2002 207 207

Year 2003 22 22

Year 2004 61 61

ITA - PROSEC 278 2 280

TOTAL 3,877 18 2 3,897

The total of HTS Codes liberalized are almost 4,000:

* Tariff elimination according to three “baskets”.

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Program for the Competitiveness Program for the Competitiveness of the Electronics Industryof 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 9th, 2002 the “Program for the Competitiveness of the Electronics Industry” (PCIE).

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Program for the Competitiveness Program for the Competitiveness of the Electronics Industryof 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:

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ConclusionsConclusions

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.

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ConclusionsConclusions

4) Trade of electronic goods.

5) The local manufacturing of electronic goods, and

6) The production of electronic subassemblies and components in México

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ConclusionsConclusions

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.