The Ministry of Economic Affairs yesterday said the planned US-South Korea free trade agreement (FTA) will leave Taiwan in the position of underdog, as Taiwan and South Korea share similarities in their respective industrial development and have long been competing head-to-head in certain sectors.
“Taiwanese products will easily be replaced by those from South Korea in the US market after the FTA takes effect,” the ministry said in a statement.
In terms of LCD TVs, a sector in which Taiwan and South Korea have been competing intensely, the US imposes a 3.9 percent to 5 percent tax on imported TVs — a tariff deemed relatively high in the US’ industrial products category, the statement said.
With the FTA coming into effect, South Korean TVs will be priced more competitively in the US.
“The FTA poses a strong threat to Taiwan,” the ministry said, adding that Taiwanese companies have to enhance their product differentiation and technological advantages in order to remain competitive.
The ministry’s comments came after US and South Korean negotiators struck a deal on Friday on the long-delayed FTA pact, which was signed in 2007, but had not been ratified for three years because of US auto and beef industry concerns.
The agreements under the FTA include a revised deal that keeps the 2.5 percent US tariff on South Korean cars until the fifth year of implementation, while South Korea will immediately halve its 8 percent tariff on US auto imports.
Last year, US imports were valued at US$1.56 trillion. Of that, imports from South Korea accounted for US$39.22 billion, or 2.5 percent, and those from Taiwan were worth US$28.36 billion, or 1.8 percent, the ministry’s data showed.