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Potential FTA impacts studied

Taipei Times, Taiwan

Potential FTA impacts studied

Effects::The Ministry of Economic Affairs said it was studying the potential effects an FTA between South Korea and the EU would have on local industries’ competitiveness

By Jason Tan/Staff Reporter

26 May 2011

The Ministry of Economic Affairs yesterday said it was looking into Taiwanese industries that could suffer a potential blow after a South Korea-EU free-trade agreement (FTA) takes effect on July 1.

Minister of Economic Affairs Shih Yen-shiang (施顏祥) told reporters the ministry was determining whether those sectors have a niche advantage over their South Korean peers, and that it would take measures to minimize the impact for those not found competitive.

The FTA could affect the competitiveness of several local sectors, including petrochemicals, textiles and machinery, as local exports to the EU are burdened by higher tariffs, Shih added.

However, under the WTO’s Information Technology Agreement, most Taiwanese IT products exported to the EU are exempted from duties, he said. The technology sector is Taiwan’s anchor industry and accounts for the bulk of Taiwanese exports.

The minister said the government has been aggressive in -initiating possible FTA talks with other countries to avoid the marginalization of Taiwan in the global economy.

The process has been picking up especially after Taiwan and China signed the Economic Cooperation Framework Agreement (ECFA) in June last year.

Singapore announced its intention in August last year to sign an FTA with Taiwan, the first such announcement from another country after the ECFA was signed.

Taiwan and Singapore have begun talks and they plan to sign a trade pact within a year, the ministry said earlier this week.

Apart from Singapore, the Philippines and India have also taken steps toward initiating free-trade talks with Taiwan.

The Taiwan External Trade Development Council (TAITRA, 貿協) has warned of the potential impact of a South Korea-EU FTA.

According to a report published by TAITRA on Tuesday, Taiwanese exports — especially plastics, vehicles, steel, machinery and electrical equipment — to Europe will be 16 to 55 percent more expensive than those of South Korea after July 1.

This is because the implementation of the FTA will make 75 percent of South Korean exports to Europe tariff-free.

Together with products that already enjoy preferential tariff treatment, as many as 94 percent of South Korean exports to Europe will be tax free, the council said.

TAITRA cited the case of electrical equipment and machinery, which are subject to an average tariff of 20 percent in Europe.

South Korean exports of these products to the EU totaled US$17.71 billion last year, while those of Taiwan were US$14.48 billion.

Once the FTA goes into effect, South Korean exporters will save about US$3.54 billion in tariffs a year, it said.