The government has repeatedly emphasized the potential impact to the Taiwanese economy of the proposed free-trade agreement (FTA) between China and South Korea that is set to be signed at the end of the year, and demanded that regulations be passed governing the supervision of all cross-strait agreements and of the cross-strait service trade agreement in particular.
It also wants to expedite talks on the cross-strait agreement on trade in goods. A Ministry of Economic Affairs official has said it is a matter of urgency that regulations governing the supervision of cross-strait agreements are passed before the winter vacation, otherwise, even if the government manages to ink a trade in goods agreement early next year, it still would not come into force until after the proposed FTA between China and South Korea.
Even though consensus was achieved during April’s summit between China and South Korea that negotiations on the FTA would be completed by the end of the year, that is just subjective expectation, and judging from the conclusion of last week’s 12th round of talks, signing the agreement by the end of the year looks extremely unlikely.
The seventh round, carried out in September last year, ended in agreement that there would be a staggered implementation, that the talks would aim for eliminating tariffs on 90 percent of goods and tariffs on 85 percent of trade amounts, and that the subsequent two rounds would focus on discussing product lists.
However, South Korea listed its subsidiary agricultural products as highly sensitive, and China wanted the same conditions for its iron and steel, petrochemicals and machinery industries. This would mean that these products would be shielded from tariff reductions for 20 years, and neither side showed any signs of backing down. No progress was made on this during the 10th and 11th round of talks.
According to a July 17 op-ed published in the Chinese-language International Business Daily (國際商報), which is run by China’s Ministry of Commerce, whether the FTA can be signed by the end of the year depends on whether the two sides are able, during the latest round of talks, to abolish the obstacles to free trade in agricultural goods.
The next day, South Korea announced that as of next year, it would open its market to rice imports, but would levy a 400 percent customs duty to maintain the competitiveness of South Korean rice. Clearly, this would be unacceptable to China, and in fact China has yet to make any assurances about deregulating iron and steel, petrochemicals or machinery imports.
Following the talks on July 18, South Korean officials said there had been “no appreciable progress” on the trade in goods negotiations, but its negotiators had offered the early abolition of tariffs on manufactures and had discussed the issue of a timetable for the elimination of tariffs with China. However, the South Korean side also stressed the sensitivity of deregulating the agricultural goods subsidiaries market, while saying it would strive to address any differences between the two parties.
Despite media reports that the two sides have achieved agreement on how trade in services and investment are to be deregulated, the reality is that the talks are going nowhere.
Regarding the opening up of the trade in services sector, South Korea is pushing for a negative list — items to be exempted from the agreement — whereas the Chinese favor a positive list, and the agreement on this occasion was to address the positive list first.
This, however, is par for the course for service trade agreements, where the list of sectors to be included are always clearly specified in a list, which is, essentially, a positive list.
In terms of the investment sector, both parties decided to incorporate deregulation of current investment and clauses on protection of investment in the talks, and to return to these issues at a later date, but this is merely reiterating the Trilateral Investment Agreement between China, Japan and South Korea which was implemented in May.
This is how far China and South Korea have actually progressed with the current 12th round of talks on the bilateral FTA. You would not know this from media reports in Taiwan, which has, on the contrary, followed the government line, exaggerating the threat the proposed FTA between China and South Korea would pose to Taiwan.
Lai Chung-chiang is convener of Cross-Strait Agreement Watch.
Translated by Paul Cooper
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