Taiwan is facing pressing challenges from Japan and South Korea at a time when the country is vying to grasp a larger share of the global export market, economists said yesterday.
The yen depreciated against the US dollar much more than the New Taiwan dollar did over the past year, which has made Taiwan-made goods less competitive in the global market than their Japanese counterparts, they said.
Furthermore, South Korea is gearing up to sign free-trade agreements (FTA) with its major trading partners in an attempt to win preferential tariff treatment to fend off the competition, they added.
In the first 11 months of last year, Taiwan’s exports rose just 0.9 percent from the previous year to US$277.63 billion.
Amid the sluggish export growth, the government in November slashed its estimate for the nation’s annual economic growth to 1.74 percent from 2.31 percent.
Gordon Sun (孫明德), director of the Macroeconomic Forecasting Center at the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院), said he is worried about the yen’s sharp depreciation, which has hurt many local industries, in particular machine tool manufacturers.
Last year, the yen fell about 21.5 percent against the US dollar, while the Taiwanese currency only depreciated 2.72 percent against the greenback.
Due to the fiercer-than-ever competition from Japan, Taiwan’s machine tool exports in the first 11 months of last year totaled US$3.23 billion, down 17.4 percent from the same period in the previous year.
In addition to yen’s rapid depreciation, goods made in Japan are globally renowned for their quality, so Japanese manufacturers do not have to engage in price competition to win orders, Sun said.
For the whole of last year, the won rose 1.37 percent against the US dollar, but South Korean exports hit a record-high US$559.7 billion after rising 2.2 percent annually.
Sun said Seoul’s strategy is to ink as many free-trade agreements as possible to lower tariff barriers and accelerate outbound sales. The strategy is a sharp departure from South Korea’s policy during the financial crisis in 2008, which consisted of trying to depreciate the on to secure its export market.
Last month, South Korea and Australia concluded talks on a trade deal that could boost the latter’s FTA coverage to 62.56 percent, 10 times that of Taiwan’s.
Seoul’s rate stands at 36.5 percent now, which means that for every US$100 of exports shipped, US$36.5 worth of goods go to places with which the country has a trade pact.