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US should warm frozen FTA talks with Taiwan

Taiwan Journal, Taipei

US should warm frozen FTA talks with Taiwan


By TJ Editors

13 April 2007

Following last week’s inking of an accord between the United States and South Korea for future implementation of a free trade agreement, Taipei has good reasons to urge the U.S. side to restart the FTA talks with the ROC, which were unilaterally suspended by Washington in 2006.

This would calm concerns in Taiwan regarding the impact the U.S.-ROK FTA on the island’s economy. It would also dispel anxieties among Washington’s allies in the region that the United States is not ready to discuss FTAs with other longtime Asian friends on a fair and equal basis. These allies are keen to establish bilateral or multilateral FTAs with the United States as a counterweight to China’s rising influence in the area.

While trade officials in Taipei—as well as in other Asian capitals—are still assessing the likely impacts of the U.S.-ROK deal on their economies individually and the region as a whole, some have already made it clear they think the FTA would seriously affect Taiwan, particularly by diverting American investment and technological cooperation to South Korea, which would result in lessening economic interaction between the United States and Taiwan or any other nation of the region.

Others are worried that, since Taiwan and South Korea export similar high-tech products to the United States, Taiwanese exporters could be at a great disadvantage because their Korean counterparts would enjoy tariff-free imports, strengthen technological cooperation and gain trade privileges.

The Council for Economic Planning and Development has estimated that Taiwan would lose at least US$2 billion annually in high-tech exports to the United States, a figure that represents about 5 percent of Taiwan’s annual total U.S.-bound export volume, once the U.S.-ROK FTA goes into effect. Impact will also be experienced by other industries, such as Taiwan’s garment and shoe exporters to the United States, whose products are subject to import taxes of 32 percent and 17 percent respectively.

While discussions of an FTA between the United States and Taiwan have been off the table, the government has been encouraging Taiwanese investors and manufacturers to take advantage, where possible, of the FTAs between the United States and Central and South American countries as a means of helping their products penetrate the U.S. market. From a more long-term perspective, however, given China’s continual efforts to isolate Taiwan economically and aiming for a balanced economic development in the region, nothing can substitute for a U.S.-Taiwan FTA.