Trade surplus to decrease, but no deficit, yet

If Taiwan joins the WTO next year, the trade surplus would decrease, but it would not become a deficit, according to a leading economist.

Contradicting a local newspaper report that Taiwan's trade surplus would turn to deficit following WTO entry, Wu Chung-shu (吳??書), macro-economic researcher at the Academia Sinica (??央研究院), said "the trade surplus would decrease, but it should remain for at least two years."

Local press reports yesterday focused on the likelihood of a trade deficit, citing a study by the Chung-hua Institute for Economic Research (??華經濟研究院), which was asked by the Council for Economic Planning and Development (CEPD, 經建會) to analyze the impact of WTO entry on Taiwan's economy.

The media reports quoted the Chung-Hua study as saying that the trade surplus would become a trade deficit of roughly US$5.3 billion next year, based on the worst-case scenario of no "exclusionary clause."

However, Wu said a deficit was not likely, also based on the assumption that Taiwan will not use the exclusionary clause.

That clause allows one WTO member to cite national security concerns to exclude another country from the general agreement on trade tariffs reached with all the other members, explained Cheryl Tseng of the international affairs division at the CEPD.

The use of the clause would soften any negative impact on Taiwan's trade balance.

"Imports would definitely increase," said Wu. "However, Taiwan's electronics and machinery products would benefit from the entry, and they count for a significant portion of our exports."

"Whether the trade surplus would become a trade deficit depends on the speed by which the market opens up, and the price of import and export goods," said Wu.

"Accumulating a trade surplus can boost public confidence," said Wu.

"However, a decreasing trade surplus means that our trade relations are becoming healthier," Wu said.

The net effect on trade remains to be seen, he said.

The CEPD also denied newspaper reports that the trade surplus would decrease by NT$5.395 billion for next year and by US$2.718 billion during the period from 2000 to 2004

"I feel regret to see the research numbers have been misinterpret-ed," said Schive Chi (薛琦) of the CEPD.

However, the CEPD did confirm yesterday's media reports that other effects of WTO entry would include an increase in GDP by 0.97 percent, an export decrease of 2.66 percent, and an import increase by 2.73 percent.