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Taiwan Association of Machinery Industry Urges New Administration Resume Trade Talks With China ASAP

Jan 26, 2016 | By Ken Liu

TAMI Chairman X.B. Ke.TAMI Chairman X.B. Ke.
Chairman B.X. Ke of the Taiwan Association of Machinery Industry (TAMI) has suggested the newly elected Democratic Progressive Party (DPP) administration should resume the trade-in-goods talks between Taiwan and mainland China as soon as possible, and allow the NT-dollar-to-greenback ratio to devalue to 36:1 in order to boost the Taiwan industry's competitiveness at global level.

Ke, whose association represents nearly 3,000 local machinery builders including machine-tool makers, notes that the Economic Cooperation Framework Agreement (ECFA) signed between the two sides of the Taiwan Strait stipulates in an article that all Taiwan-made mid-range and high-end lathes bound for the mainland must be outfitted with controllers made either on Taiwan or the mainland beginning the first day of 2016. Otherwise, all such machines will be no longer granted duty-free treatment as they have been for the past five years, instead to be subject to a 9.7 percent tax rate.

Ke says he has repeatedly expressed the idea of extending the said deadline to executives of the China Machine Tool & Tool Builders' Association (CMTBA), who he says did not object to the idea. He hopes the newly elected government to resume the trade-in-goods talks between the two sides with the top priority being convincing the mainland to extend the grace period, which he says is less controversial.

In addition, he points out that although the NT-dollar had devalued to a seven-year low of 33.838 to one US-dollar a few days ago, to further widen the gap against the Japanese yen, such devaluation has not clearly helped the island's machinery and machine-tool makers land more orders.

Ke says many of the association's machine-tool members have complained of having lost 60 to 70 percent of orders due to underselling by some members. Such reckless competition, he adds, has even led to the loss of 60 to 70 percent of orders for members specializing in die-casting process and controllers.

Underselling among Taiwanese suppliers indicates desperation, harsh business climate as well as lack of technological advantages. After all buyers who typically source multi-functional lathes will not opt for lower-end, single-functional machines due to lower price.   

Members who have been seeing swarming orders are few, including Victor Taichung Machinery Works Co., Ltd., Yeong Chin Machinery Industries Co., Ltd., Tongtai Machine & Tool Co., Ltd. and Kao Ming Machinery Industry Co., Ltd., which have migrated to the manufacturing of tools for making aviation products.

The top TAMI executive points out that in 2015 Taiwan's machinery shipments dropped 6.9 percent from a year earlier, to US$19.43 billion, due to the weak global economy coupled with plunging oil and commodity prices, mIssing the Taiwan industry's goal of generating revenue of up to NT$1 trillion (US$30.30 billion) for the eighth year in a row.

He concedes that the association can hardly be optimistic about the business prospects in 2016 given the still strong NT-dollar-to-greenback ratio relative to counterparts of South Korean won and Japanese yen, the likely cancellation of duty exemptions on Taiwan-made lathes by China, and the likely imposition of antidumping penalties on Taiwan-made machines in some countries.

He reminds the newly elected government of the importance to let the NT-dollar fall to 34 to 36 a US-dollar to enhance the competitiveness of the Taiwan industry.


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