China’s new free-trade agreement with South Korea is expected to erode Taiwan’s tax revenues by NT$7 billion (US$227.87 million) a year, Minister of Finance Chang Sheng-ford (張盛和) said yesterday.
Chang said he arrived at the figures by assuming GDP growth would drop by 0.5 percent, based on the Ministry of Economic Affairs’ forecast.
The GDP retreat would translate into NT$60 billion in terms of absolute value and losses of NT$7 billion in tax revenues, with average tax burdens standing at 12.6 percent, he said.
Meanwhile, Minister of Economic Affairs Woody Duh (杜紫軍) said the pact’s effect on Hiwin Technology Corp (上銀科技), the nation’s biggest machine toolmaker, would be minimal because it produces high-value-added linear guideways and ball screws.
Hiwin can differentiate itself from competitors, so it should be able to maintain a strong competitive position, Duh said.
Duh’s remarks came after Hiwin chairman Eric Chuo (卓永財) said the pact would largely affect small or low-end machine toolmakers in Taiwan instead of firms like his.
A weak Japanese yen would have a greater impact on Taiwan’s machine tool industry than the trade pact, Chuo said.
The challenge is likely to be much harder for Taiwanese machine toolmakers that compete directly with South Korean rivals in vying for a share of China’s market, as South Korean firms can expect zero-tariff market entry after the pact is fully implemented, Duh said.
Taiwanese machine toolmakers could lose their price advantage against Japanese rivals if the yen continues to depreciate against the US dollar, but the situation would be temporary, he said.
“However, the impact of the Beijing-Seoul trade pact on Taiwan will last for a long time,” he said.
Duh said signing free-trade agreements benefits a country’s exports, otherwise there would not be so many nations inking new international trade agreements.
The Economic Cooperation Framework Agreement (ECFA) “early harvest” list also benefited Taiwan’s banks, hospitals and movie industry, Duh said, saying that without the agreement, Taiwan’s 13 banks would not be able to set up branches in China.
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