Minister of Economic Affairs Shih Yen-shiang (施顏祥) yesterday told lawmakers that the US-South Korea free-trade agreement (FTA) would have a “limited” impact on Taiwan after it takes effect early next year.
“There will definitely be some impact from the FTA. The key is to launch contingency plans to help ensure that impact is minimized,” Shih said during a legislative question-and-answer session.
In response to a question from Democratic Progressive Party (DPP) Legislator Huang Wei-cher (黃偉哲), Shih said the pact, set to take effect in January, would affect “less than 1 percent of Taiwan’s GDP growth.”
“That is because electronic products, which account for 66 percent of the country’s exports to the US, enjoy zero tariff rates, while Taiwanese exporters of textiles, plastics and mechanical products and their South Korean counterparts target different consumers in the US market,” Shih said.
Overall, the impact of the FTA could cost Taiwan as much as US$6 billion in trade, he said.
The ministry’s data show that products that enjoy zero duties accounted for 65.9 percent, or US$22.58 billion, of Taiwan’s total exports to the US last year. Products that are not duty exempt accounted for 34.1 percent, or US$11.84 billion, of exports to the US last year.
However, on Thursday, the ministry was more forceful in warning Taiwanese manufacturers of plastics, textiles, garments, chemicals, machinery and panels that they could be hurt by the US-South Korean pact, telling them to brace themselves for the impact.
Also on Thursday, the Bureau of Foreign Trade said the ministry would launch seven plans devised to help local firms weather the impact, including assisting them to research and develop products different from those produced by South Korea, encouraging them to move into own-brand business to increase the value and international profile of their products, as well as enhancing cross-industry cooperation to devise innovative products.
The bureau said it would also work to push Taiwan’s FTA talks with other countries.
Citigroup chief economist Cheng Cheng-mount (鄭貞茂) yesterday said the pact posed a long-term threat to Taiwan in terms of losing foreign investors to South Korea.
The FTA would boost South Korea’s investment environment because foreign companies would find it easier to export their products from there to more countries, Cheng said.
However, the deal would have a limited impact on Taiwan’s exports because only certain companies in the traditional sector would be under pressure from South Korean competitors — and they account for a very small portion of overall exports, he said.
Electronics companies, the biggest contributor to exports, would stay competitive since a large chunk of their products are exempt from US tariffs, Cheng said.
In related news, central bank Governor Perng Fai-nan (彭淮南) yesterday criticized the Currency Exchange Rate Oversight Reform Act of 2011 passed by the US Senate on Tuesday. Perng said the act, aimed at penalizing China and other countries for undervaluing their currencies, would not be good for the US, China or other countries.
Additional reporting by Shih Hsiu-chuan
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