Taiwan should speed up the pace of its economic reforms by amending laws to raise its global competitiveness, a move which is expected to assuage the impact of a failure by the Legislative Yuan to ratify a service trade pact with China, said Roy Lee (李淳), deputy director of the Taiwan WTO Center under the Chung-Hua Institution for Economic Research (中華經濟研究院).
The service trade agreement, signed in June between Taiwan and China, seeks to open up the service sectors on each side of the Taiwan Strait. The agreement is considered the most significant bilateral economic accord since the two sides signed the landmark Economic Cooperation Framework Agreement in 2010.
However, strong resistance from opposition parties has prevented the legislature from ratifying the pact.
On Saturday, Lee said that although the service trade pact is stuck in the Legislative Yuan, Taiwan can still prop up its global competitiveness.
A move to change the law to harmonize the local legal environment is expected to benefit Taiwan’s enterprises through internal adjustments instead of external factors, such as a bilateral trade agreement, Lee said.
However, if the agreement remains pending, Taiwan will lag behind its major rivals, in particular South Korea, which has signed free-trade agreements with 47 countries, he said.
Seoul’s FTAs have encouraged foreign investors to move their funds into South Korea, Lee said, adding that foreign investments in that country have been two to three times larger than foreign funds entering Taiwan.
The FTAs signed by Seoul will help South Korean exporters enjoy zero tariffs in the US market in one-and-half years and in the EU in two years, Lee said.
However, Taiwan’s exporters still have to shoulder 2.5 percent to 10 percent tariffs in US and EU markets, which account for about 40 percent of Taiwan’s and South Korea’s total exports, he added.
Economic officials also said the legislature’s foot-dragging in ratifying the service trade pact will blunt Taiwan’s trade edge as South Korea is reportedly to complete its free-trade talks with China soon.
Opening up the market to overseas competitors is a worldwide trend which will benefit Taiwan’s entire economy in general, although some specific businesses may suffer, they said.