Mon, Feb 27, 2006 - Page 10 News List

Think tank warns of China-ASEAN trade deal impact

CNA , TAIPEI

Taiwan will see its GDP shrink by 0.0187 percent if it fails to take measures to cushion the impact of the establishment of a free-trade zone between China and ASEAN, a private think tank warned yesterday.

The Taipei-based Taiwan Institute of Economic Research (TIER, 台經院) said in a study that Taiwan is facing mounting challenges as China and ASEAN are pushing ahead with a program to establish a free-trade area by 2010.

Taiwan will be shunted to the sidelines or will see its competitiveness seriously undermined if it is shut out of the trade bloc, which is a likely scenario in light of the tense cross-strait relations, the think tank said.

As if that were not bad enough, the study said, Japan has followed China's footsteps in forging an all-out economic cooperation agreement with ASEAN with an eye to joining the free-trade bloc by 2012, which has prompted South Korea to consider jumping on the bandwagon.

Should a free-trade bloc covering China, Japan, South Korea and ASEAN take shape, the study predicts, Taiwanese businesspeople's investments in ASEAN states will be replaced by Chinese firms, while multinational firms that are interested in exploring the ASEAN markets are likely to set up their regional business centers in China.

The impact of this trend could be alleviated somehow if direct transportation links between Taiwan and China are established, according to the study.

Two-way trade between Taiwan and China reached US$71.7 billion last year, with Taiwan enjoying a trade surplus of US$31.8 billion, a year-on-year increase of 12.6 percent, the Bureau of Foreign Trade reported on Friday. Last year, Taiwan's trade with China accounted for 19.3 percent of its entire foreign trade, up 1.3 percentage points from 2004, the bureau said.

Were direct transportation links across the Taiwan Strait to be established, the decrease in Taiwan's GDP would be 0.0135 percent, according to the TIER study.

Other measures the country could take to brace for the impact of any China ASEAN deal would be to improve its economic ties with India, Japan and South Korea and forge strategic alliances with the three countries.

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