The Ministry of Economic Affairs (MOEA) yesterday said Taiwanese firms in certain sectors should brace themselves for when the free-trade agreement between the US and South Korea takes effect, which will probably be in January.
The ministry’s warning came after the US Congress on Wednesday approved the long-delayed free-trade pact with South Korea in Washington, which now goes to US President Barack Obama to sign into law.
The ministry said Taiwan and South Korea are very similar in terms of exports structure to the US, with 70 percent composed of electronics, machinery and automobiles.
“Safe sectors” from the trade pact impact are electronics and electrical parts, because Taiwan exports them to the US with zero tariffs, the ministry said in a statement. These products totaled 65.9 percent, or US$22.58 billion, of Taiwan’s exports to the US last year, it said.
However, certain sectors that are not duty-exempt — especially plastics, textiles, garments, chemicals, machinery and panels — would take a hit when the accord takes effect, the statement said.
These products accounted for 34.1 percent, or US$11.84 billion, of Taiwan’s exports to the US last year, it added.
The US is currently Taiwan’s third-largest trading partner with trading reaching US$56.8 billion last year.
In related news, Vice Minister of Economic Affairs Lin Sheng-chung (林聖忠) said on Wednesday in London that Taiwan has obtained the support of the UK for its effort to forge an economic cooperation agreement (ECA) with the EU.
The nation will continue to seek backing from other EU nations in the hope that the trade deal could be signed within two years, Lin told a meeting with a group of Taiwanese businesspeople in London.
Britain is the third leg of Lin’s European tour that has taken him to the Czech Republic and Ireland. The main purpose of the trip is to promote the proposed ECA with EU.
Lin said the EU-South Korea free-trade agreement that took effect on July 1 threatens Taiwan because South Korea is Taiwan’s main competitor in the international market. Therefore the drive for the ECA needs to speed up to protect the interests of Taiwanese businesses, he said.
The European Chamber of Commerce Taipei has expressed its support for the ECA, which according to a study by the consultancy Copenhagen Economics has the potential to deliver considerable economic gains to European businesses, Lin said.
In addition, a resolution adopted on May 11 by the European parliament in support of the ECA has been very helpful to Taiwan’s lobbying efforts in Europe, he said.
According to Lin, since the signing of the Economic Cooperation Framework Agreement with China, Taiwan’s chemical, textile, machinery and vehicle exports to China have gained an advantage over those from Japan, South Korea and ASEAN nations.
Decreases in Taiwan’s corporate income tax and gift and estate tax rates have made the country more attractive to foreign investors, he said.
Many of them have indicated that they plan to increase their investment in Taiwan and use Taiwan as a platform to access emerging markets, he said.
Lin was scheduled to deliver a speech to the British parliament yesterday and will also brief lawmakers on the ECA proposal.