Minister without Portfolio Schive Chi (薛琦) says that upgrading industrial technology and negotiating free trade agreements (FTA) are equally important, like two wheels on a bicycle, so such negotiations cannot be delayed.
He challenged the idea that because signatories to the WTO’s Information Technology Agreement (ITA) impose zero tariffs on information and communication technology (ICT) products, Taiwanese ICT products, which have accounted for about 54 percent of the nation’s exports in recent years, will not be greatly affected by Taiwan joining FTAs or not.
The first point Schive makes is that only if Taiwan joins FTAs will industries outside the ICT sector have greater scope for international expansion, and this would help rectify a long-term imbalance in Taiwan’s industrial structure. His second point is that although China is a signatory to the ITA, it still subjects flat-panel displays to import duties of 5 percent, and may even raise the tariff in the future.
Schive thinks it would be a big mistake for Taiwan not to gain an advantage by persuading China to set zero tariffs for more Taiwanese goods in the trade in goods agreement that is under negotiation. However, his opinions are not logical.
First, signing free-trade agreements alone will not make any country more competitive or transform its industrial structure. Before Hyundai Motor entered the European and US markets, South Korea had not signed any trade agreements with those countries. On the other hand, Taiwan’s Yulon Motor Co had the advantage of the Cross-Strait Economic Cooperation Framework Agreement (ECFA) when it started marketing its Luxgen cars in China, but its sales have been much weaker than expected. This shows that however big and tasty the cake may be, you still have to know how to eat it.
Secondly, Taiwan tried hard to get flat-panel displays included in ECFA’s early-harvest list, but China said no.
To foster its own panel manufacturers, China raised its tariff on imported flat-panel displays, which it had previously cut to 3 percent, back to 5 percent in April 2012. It was able to do this because when the ITA took effect in 1997 it was too early for LCD devices and flat-panel displays to be included in the list of zero-tariff goods.
There are even rumors that China may raise duties on flat-panel displays to 8 percent. China’s intention is to get South Korean, Japanese and Taiwanese manufacturers to give up on competing with its flat-panel display sector. China’s exclusion of flat-panel displays from the ECFA early-harvest list and its use of tariff barriers are expressions of its development strategy for this sector.
China’s 12th Five-Year Plan includes the target of 80 percent self-sufficiency in flat-panel displays by next year. NPD DisplaySearch forecasts that Chinese panelmakers using 8 and 8.5-generation substrates will surge to more than 38 percent of worldwide flat-panel display output by the end of next year, second only to South Korea at 45 percent, and far ahead of Taiwan and Japan at 9 percent and 6 percent respectively.
Given that China snubbed Taiwanese flat-panel displays under the ECFA, how will Taiwan be able to get anything better under the planned goods trade agreement? Schive is kidding himself and the public by overlooking the setbacks that Taiwan has suffered in past negotiations, and that the roadmap for the flat-panel display sector has already been clearly laid out.