Taiwan and its ally Nicaragua yesterday inked a free trade agreement (FTA) in the hope of boosting bilateral trade and economic cooperation between the two countries.
The FTA -- signed by Minister of Economic Affairs Morgan Hwang (
Steve Chen (
Nicaragua is Taiwan's third FTA partner, after Panama and Guatemala, while Taiwan is the first Asian country Nicaragua signed a free-trade pact with.
Under the terms of the Taiwan-Nicaragua FTA, 3,374 categories, or 51.1 percent of Taiwanese exports to Nicaragua will be duty free, while 5,797 categories, or 65.6 percent of Nicaraguan imports to Taiwan will enjoy zero tariff as well.
The duty free measure will extend to 95.1 percent of Taiwanese exports to Nicaragua, and 97.3 percent of Nicaraguan goods to Taiwan 15 years after the effective date.
A major benefit carried by the agreement is it would allow Taiwan to tap into the Central and North American markets, as the US-Nicaragua FTA through the Central American Free Trade Agreement went into effect on April. 1, Hwang said at the signing ceremony.
By investing in Nicaragua, Taiwanese companies can sell their goods to Central America and the US, Canada and Mexico, where they enjoy zero tariffs or preferential customs rates, Chen said.
Chen cited textile manufacturing as a business worth developing in the Central American country, as Nicaragua enjoys tariff-free, instead of the regular 32 percent levy, exports to the US in this category.
Taiwanese companies have invested US$220 million in Nicaragua, with textiles making up the bulk of the investment, Chen said after the signing ceremony, quoting government data.
Nicaragua is Taiwan's 99th largest trade partner with bilateral trade reaching US$46.27 million last year, according to government statistics. Of the amount, exports accounted for US$39.67 million, while imports from Nicaragua only made up US$6.6 million.
The trade volume is expected to pick up after the implementation of the FTA, Chen said.
Government statistics shows that following the signing of the Taiwan-Panama FTA in 2004, bilateral trade between the two countries surged from US$127.17 million in 2003 to US$269.36 million in 2004, and further climbed to US$249.61 million last year.
While Nicaragua expects Taiwan to export more consumer industrial products to the country, it plans to introduce more farm produce such as coffee, sugar, tropical fruit to Taiwan, said the Nicaraguan minister.
As the amount of imports from Nicaragua is small, the market opening will not affect local farmers, Chen said.
Meanwhile, the FTA with Gua-temala, inked last September, will go into effect next month.
The government is also negotiating free trade pacts with El Salvador and Honduras, wrapping up the first round of talks last week. The second round is scheduled to start in the middle of next month and be completed by October, said Chen, the lead negotiator.
After inking FTAs with four of the five Central American countries, Taiwan plans to sign a FTA with Costa Rica, after the US approves the FTA with the country, he added.
The FTAs with Central or South American allies, however, are deemed more symbolic rather than a material boost to Taiwan's international trade. Taiwan has been seeking FTAs with major trade partners such as the US and Japan, but has encountered difficulties owing to opposition from China.
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