Sino-S. Korea FTA May Impact Taiwan's Manufacturing Industry by NT$600 Billion: IEK

A recent analysis by Industrial Economics and Knowledge (IEK) of Industrial Technology Research Institute (ITRI), a government-sponsored researcher, says that a free trade agreement (FTA) between China and South Korea may gravely impact Taiwan's manufacturing industry in 3-5 years totaling some NT$600 billion (US$20 billion) in output, coupled with exports to shrink over NT$300 billion (US$10 billion).

In contrast South Korea will benefit from the FTA, with GDP growth of 1.76% in addition to estimated rise of 2.95% in imports and 2.18% in exports.

Taiwan's industries to be impacted by such  FTA include LCD panels, electronic & optical items, petrochemicals, machine tools, steel & iron, textiles etc., particularly LCD panels and polarizers that are Taiwan's major exports to China.

Taiwan and S. Korea are China's two major suppliers of LCD panels and polarizing plates, with the former taking a 31% of China's LCD panel market and 33% of its polarizing plate market, and S. Korea's corresponding percentages being 36% and 25%, respectively.

Taiwan's LCD panels and parts industry hire over 100,000 workers, generating products of NT$1.48 trillion (US$49.33 billion) yearly,  accounting for 8.2% of the island's total manufacturing output value.

The statistics released by the Ministry of Economic Affairs (MOEA) show that Taiwan exports to China US$15.4 billion worth of LCD panels and US$1.2 billion worth of plates yearly. Currently China imposes 5% tariff on imported LCD panels and 8% on polarizing plates. A Sino-S. Korea FTA, to be inked  reportedly at the end of 2014, looks certainly to work against Taiwan in the Chinese market.

IEK suggests that Taiwan should focus on exploring the Asian market as the region is becoming economically important. Today Taiwan's exports to ASEAN (Association of Southeast Asian Nations) account for 17% of that to its top-10 export outlets. IEK believes the impact from the Sino-S. Korea FTA may be offset by Taiwan's raising exports to ASEAN by 5%.

IEK urges the government to resume as soon as possible the commodity trade talks with China and continue to try to join regional economic blocs. (JL)