Taiwan can relax for now, as China’s tax reductions on goods imported from South Korea are to be smaller than expected, posing a milder threat to Taiwanese firms, the Ministry of Economic Affairs said yesterday, citing the China-South Korea free-trade pact text.
The ministry’s remarks came after South Korea and China initialed their free-trade pact yesterday, moving closer to signing the deal.
Vice Minister of Economic Affairs Bill Cho (卓士昭) told a news conference that he has “roughly” read the text of the pact, saying that the range of the tariff declines for flat panels, machine tools and petrochemical products in the pact was not as significant as the ministry expected.
Most automobiles and automotive parts were not included in the agreement, Cho added.
Former minister of economic affairs Woody Duh (杜紫軍) had said that the ministry was most worried about the potential impact of the trade agreement on these four sectors because Taiwan aims to include them in its cross-strait trade in goods pact, and is competing with Seoul over exports to China.
“The stress for the flat-panel and automobile industries is slightly relieved for now,” Cho said.
The tariffs for South Korea’s flat-panel products to China are to be eliminated within 10 years, but the tax rates are to remain unchanged in the first eight years, which is better than the ministry’s expectation, Cho said.
Most South Korean machine tools are excluded from the preferential tariff program by China, while the tariffs for some are to be lowered 30 percent within five years, Cho said, adding that tariffs for others would be removed within 20 years.
Cho did not specify which machine tools were covered.
A ministry official said the four main petrochemical products that Taiwan exports to China would not be heavily affected by the agreement.
“Overall, Taiwan’s petrochemical industry will be affected US$1.716 billion at most and US$1 billion at least annually, after the pact goes into effect in 20 years, which is not a big influence,” the official said.
Beijing is to officially sign the pact with Seoul in the first half of this year, and the agreement might take effect at the beginning of next year, Cho said.
The context of the Beijing-Seoul trade agreement is “quite” different from the ministry’s previous expectations, Minister of Economic Affairs John Deng (鄧振中) said.
Deng said he has asked the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) to evaluate the potential effects of the agreement on Taiwan and report its findings within two months.
The ministry previously expected that the pact might go into effect in the second half of this year, and now that the pact might take effect next year, the ministry and Taiwanese manufacturers have more time to respond, Deng said.
“We do not need to panic about their trade agreement, but we still need to be very cautious about it,” Deng added.
The ministry plans to contact Beijing this week to discuss the date for the 10th round of cross-strait trade in goods agreement negotiations, Cho said, adding that the ministry hopes to negotiate better tariff treatments than South Korea.
“From a positive perspective, we can take the Beijing-Seoul trade pact text as a reference to negotiate with China, as we know their bottom lines,” Cho said.
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