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China ends preferential tax status for 12 Taiwan goods

Taiwan News | 21 December 2023

China ends preferential tax status for 12 Taiwan goods

By Jono Thomson

TAIPEI (Taiwan News) — China’s State Council said that preferential tax rates on the import of 12 Taiwanese petrochemical products will be suspended on Wednesday (Dec. 21), raising concerns in Taiwan about economic impacts and election interference.

The preferential import tariffs, established under the cross-Strait Economic Cooperation Framework Agreement (ECFA), will end on Jan. 1, 2024, according to the State Council, per CNA. The council said the decision was made in retaliation for Taiwan violating the terms of ECFA through discriminatory trade practices.

Shortly after the State Council announcement was made, China’s Taiwan Affairs Office (TAO) said that it was confident both sides of the Taiwan Strait could resolve issues “based on the 1992 consensus.”

Democratic Progressive Party presidential candidate Lai Ching-te (賴清德) strongly opposes the consensus, while his Kuomintang opponent Hou Yu-ih (侯友宜) upholds it. After China’s announcement, associate professor of international trade at Chihlee University of Technology Chang Hung-yuan (張弘遠) was quick to call election interference.

Chang told CNA that China is trying to remind voters in economic and industry circles that “electing the wrong person” will come at a price. Meanwhile, a cross-strait relations expert at Tamkang University, Chang Wu-yueh, said this marks the first time that China has used economic retaliation against Taiwan before an election.

Chang said he does not think China will completely abolish ECFA, and added the move is designed to highlight the necessity of mutual trust on political issues through trade issues. Chang said from Beijing’s perspective, the basis of “mutual political trust” is an adherence to the 1992 consensus.

"Whether there will be any follow-up actions still depends on Beijing’s assessment of cross-strait relations before and after the election," Chang said.

Meanwhile, Taiwan’s national industry federation said that the decision will affect up-and-downstream production. It encouraged the government to establish a communication mechanisms with China, while also accelerating the globalization of the petrochemical industry.

A representative for the petrochemical industry association said that because many of the products produced by its manufacturers were used in the production of others, the impact of the move would likely spread beyond the industry itself.

The industry federation also said that if China continues to remove the preferential rates on Taiwanese imports, “traditional industries” that employ large numbers of people will be affected. The federation said that Taiwan’s petrochemical producers have to compete with countries such as Japan and Korea, that hold free trade agreements with other trading partners.

 source: Taiwan News