Tai­wan to speed up cross-strait trade talks to counter FTA: gov’t


In re­sponse to the Chi­naSouth Korea free trade agree­ment ( FTA) news yes­ter­day, Cabi­net spokesman Sun Li­hchyun ( ) said that the agree­ment will in­deed send shock­waves through Tai­wan’s in­dus­try, and pro­posed that the gov­ern­ment should quickly speed up trade agree­ment ne­go­ti­a­tions with China and other coun­tries.

South Korea and China fin­ished sign­ing the FTA yes­ter­day, and the deal will be im­ple­mented once both coun­tries’ par­lia­ments ap­prove it, which is likely to be be­fore the end of this year.

Apart from say­ing that Tai­wan should quickly ne­go­ti­ate trade agree­ment terms with neigh­bor­ing coun­tries, Sun also en­cour­aged the Leg­isla­tive Yuan to ex­am­ine the Cross-Strait Agree­ment Su­per­vi­sory Act as soon as pos­si­ble.

Sun stated that as Tai­wan and South Korea share fun­gi­ble prod­ucts, it would be dif­fi­cult to re-es­tab­lish ties once sup­ply­de­mand chains are bro­ken.

Huge Ef­fects in Long Term:


While the FTA be­tween China and South Korea will not se­verely af­fect Tai­wan’s econ­omy in the short term, the Min­istry of Eco­nomic Af­fairs (MOEA, ) es­ti­mates that the neg­a­tive im­pacts will be­come ev­i­dent in the long term, due to the similarities be­tween Tai­wan and South Korea’s in­dus­try make-up.

The MOEA stated that once the agree­ment comes into force, af­ter 20 years Tai­wan- made prod­ucts’ sub­sti­tu­tion rate will rise to be­tween US$2.341 bil­lion and US$6 bil­lion. The dis­play panel in­dus­try will take the brunt, with the sub­sti­tu­tion rate ris­ing to be­tween US$1.45 bil­lion and US$3.084 bil­lion.

Apart from the Cross-Strait Agree­ment Su­per­vi­sory Act, which is still “stuck in the leg­isla­tive ex­am­i­na­tion pro­ce­dure,” and the trade in goods pact that had un­der­gone ten ses­sions of ne­go­ti­a­tions, of­fi­cials be­lieve talks re­gard­ing open- mar­ket op­er­a­tions and tax cuts are still slug­gish.

Ac­cord­ing to a re­port re­leased by the Chung- Hua In­sti­tu­tion for Eco­nomic Re­search ( ) , Tai­wan’s Real Gross Do­mes­tic Prod­uct ( GDP) will drop around 0.04 per­cent dur­ing the first year of the Chi­naSouth Korea FTA tax cut, and its real GDP will face an­other plum­met of 0.13 per­cent and 0.15 per­cent af­ter 10 years and 20 years, re­spec­tively.

Af­fected in­dus­tries in­clude petro­chem­i­cals, tex­tiles and cloth­ing, glass, steel, au­to­mo­biles, po­lar­iz­ers, pan­els and ma­chine tools. Tar­iff re­duc­tion be­tween the two coun­tries will not be im­ple­mented in­stantly once the agree­ment is in place. For ex­am­ple, in the case of the dis­play panel in­dus­try, a 2.5-per­cent tar­iff cut will be im­ple­mented in the ninth year of the FTA en­force­ment, while a zero tar­iff re­duc­tion will begin in the 10th year, ac­cord­ing to the MOEA.

The MOEA pointed out that South Korea will ef­fec­tively ex­pand its in­vest­ments in China in or­der to in­crease its mar­ket share, and ef­fec­tively push Tai­wan prod­ucts out of China should no fur­ther mea­sures be taken.

To tackle the po­ten­tial im­pact of the China-South Korea FTA, the MOEA em­pha­sized the im­por­tance of en­ter­ing the Tran­sPa­cific Part­ner­ship, the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship and an agree­ment of eco­nomic part­ner­ship with China.

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