Sino-Korea FTA May Divert One-fourth of Orders from Taiwan to China
2014/08/07 | By Steve ChuangWith China and Korea stepping up bilateral negotiations to strike a free trade agreement (FTA), Taiwan's Ministry of Economic Affairs (MOEA) warns that about one-fourth of the island's export orders from China may be diverted to S. Korea once the FTA becomes effective.
MOEA said that China last year imported US$156.3 billion of industrial products as display panels, polarizers, auto parts, machine tools, textile, glass and petrochemicals, from Taiwan, US$49 billion of which being subject to average duty rate of over 5%.
Given that many Taiwan-made products in China overlap those from Korea, MOEA forecasts that based on current trade with China and feedback from domestic industrial federations, about 24.7% of Taiwan's exports to China, including some covered by the information technology agreement and Economic Cooperation Framework Agreement to enjoy duty exemption, will be impacted by the China-Korea FTA, with 2-5.4%, or an equivalent of US$3.16-8.42 billion, of the total to be completely taken by Korean competitors.
MOEA emphasized that the display panel and petroleum industries in Taiwan, whose products shipped to China are generally imposed with tariff rates of 5-6.5%, will both suffer losses of over US$1 billion yearly in diverted orders to Korea as the biggest victims. Meanwhile, Taiwanese auto parts, machine tools, glass manufacturers will also lose orders exceeding several tens of millions of US-dollars to Korea.
To cope with the imminent, unfavorable fate resulting from the FTA, Taiwanese enterprises in the abovementioned sectors are urging the government to kick off new negotiations with China to sign the cross-strait goods and service trade agreements as soon as possible.
However, with lingering stalemate in legislative review of the agreement, Taiwanese officials admit that the island simply has few chips left to bargain for preferential treatment that has been promised by China, especially when Korea is likely to open its automotive and other markets to China in exchange for more favorable trade conditions. More bad news is that past negotiations have seen China insistently decline to grant tariff cuts on imports of Taiwan's petrochemical, machinery, display panel and auto parts sectors. (SC)
| Overview of Taiwan's Industries to Be Impacted by Sino-Korea FTA | |||
| Sector
| Average Tariff Rate on Exports to China in 2013
| Value Forecast of Orders to Be Transferred to Korea
| Products Most Likely to Be Replaced by Korean Competitors
|
| Steels
| 5.31%
| US$153-307 M.
| Ordinary hot and cold-rolled steel plates and coils, coated steel plates and coils
|
| Machine Tools
| 8.87%
| US$33-66 M.
| Vertical and horizontal machining centers
|
| Cars and Parts
| 10.09%
| US$8-18 M.
| Cars and spare parts
|
| Display Panels
| 5.00%
| US$1.449-3.082 Bn.
| LCD panels
|
| Polarizers
| 8.00%
| US$299-480 M.
| Polarizers
|
| Petrochemicals
| 6.54%
| US$1.065-4.151 Bn.
| EG, PTA, AN, PE (including EVA), PP, PS, ABS, PVC, PET, nylon pellets,
|
| Textile
| 11.15%
| US$140-265 M.
| PP yarns and fibers, nylon filament yarns, PE filament yarns, acrylic fibers
|
| Glass
| 13.25%
| US$15-50 M.
| Flat glass, mirrors, container glass
|