Research Report Shows U.S.-Korea FTA Clearly Impacting Taiwan's Exports to the U.S.

Entering its third year of implementation, the U.S.-Korea FTA (free trade agreement) has, as expected, put increasing pressure on Taiwanese firms relying on exports to the U.S., as reflected by the gradual declines of shares of Taiwan-made goods in the U.S. market, according to the latest U.S.-Korea FTA impact assessment and research report released by the Ministry of Economic Affairs (MOEA).

The research report has been completed by Chung-Hua Institute for Economic Research, a Taiwan-based international policy think tank for economic and industry-related research, upon request by the MOEA and focuses on the ebbs and flows of shares held by Taiwan exports in the U.S. market due to the U.S.-Korea FTA from March 2011 to February 2015.

Citing the results of the research report, the Bureau of Foreign Trade (BOFT) under the MOEA notes that imports from S. Korea to the U.S. during the four-year span had showed the strongest growth of 23.44 percent compared to those from U.S.'s top ten import sources, to which the FTA is absolutely attributable.

Meanwhile, however, U.S.'s annual imports from Taiwan had sagged by 1.13 percent to US$40.44 billion compared to US$40.9 billion seen a year before the FTA became effective, the BOFT stresses.

Accordingly, the share of Taiwan's exports in the U.S. market had shrunk from 1.83 percent to 1.73 percent overall, contrasted against S. Korea's that had significantly risen from 2.57 percent to 3.05 percent.

To offer more revealing details, the BOFT indicates that of Taiwan's 34 sectors researched in the report, 18, including machinery, plastic, apparel and furniture, had seen market shares of their products in the U.S. decline during the period, with the electrical and electric equipment sector suffering the deepest drop of 1.58 percentage points. Meanwhile, the market share of Taiwan-made musical instruments in the U.S. had showed the second-worst drop of 0.9 percentage point, while those of steel products and hardware (mainly hand tools) had both declined over 0.4 percentage point.

The BOFT emphasizes that Taiwan's exports of machinery, steel products, automobiles and motorcycles, plastics and hand tools, in fact, all had grown in value during the four-year span as shown by the report, albeit with market shares in the U.S. having indeed dropped to indicate encroachment by rivals.

On another front, the BOFT notes, the overall market share of S. Korea's exports that are ineligible for duty-exemption in the U.S. had increased to 2.96 percent from 2.15 percent, while that of Taiwan's comparable products had grown slowly from 1.27 percent to only 1.39 percent. Such disparity in the growths achieved by Taiwan and S. Korea is due mostly to the U.S.-Korea FTA.

One more indicator of the damage against Taiwan imports due to the FTA, the BOFT adds, is that American annual imports from March 2014 to March 2015 edged down 0.92 percent year-on-year to US$1.36 trillion, but that from S. Korea rocketed 36.17 percent during the same period, contrasted against the 8.22 percent growth in the imports from Taiwan.

To cushion impacts from the U.S.-Korea FTA on Taiwan's exports to the U.S., the MOEA stresses that the government has been doing its utmost to facilitate Taiwan's participation in the TPP (Trans-Pacific Partnership) and RCEP (Regional Comprehensive Economic Partnership) agreements, as well as aggressively pushing further cooperation between the island and global trade partners.

Market Shares of Exported Goods from Taiwan, S. Korea, China and Japan in U.S. during Mar., 2011-Feb., 2015
	Taiwan	China	Japan	S. Korea
One year before the U.S.-Korea FTA comes into effect	1.83%	18.00%	5.93%	2.57%
Three years after the U.S.-Korea FTA came into effect	1.73%	20.03%	5.69%	3.05%

Source: Bureau of Foreign Trade, MOEA