ECFA : Implications for Taiwan and East Asia

Transcription

1 1 ECFA : Implications for Taiwan and East Asia Yun-Peng Chu Cross-Straits Economic Relations:Progress and Implications of the Proposed ECFA in the East Asian Region Dec. 17, 2009

2 Ⅰ. Foreword : Two Weeks from Now In two weeks, the year ends and a new year begins. 2 To ASEAN, 2010 has a special meaning. From Jan. 1, 2010, the tariff on most (95%) products exported to China will be zero. That is ASEAN + 1, and it belongs to the realizations of Early Harvest.

3 3 Two Weeks from Now From that day on, most Taiwan industries will be at a disadvantage in competition compared to ASEAN. Industries of man-fiber/textile, petrochemical, and machinery will be affected more seriously. Most affected industries are upstream materials and equipment manufacturers, and this isn t accidental.

4 4 Two Weeks from Now Division of labor in Asia : ASEAN + 1 will weaken the share of Taiwan in this supply chain.

5 Products Global Market Value of Taiwan s Export in 2007 (USD Million) Export to China Share of Exports to China Fiber 1, % Yarn 2,261 1,029 46% Fiber / Textile Fabric 6,757 2,817 42% Clothes 1, % Sundry Textile % Others Subtotal 11, PE PVC PP PS ABS 6,437 4,505 70% Chemical- Plastic Machinery 純對苯酸 (PTA) 1,797 1,574 88% 乙二醇 (EG) 1,130 1,032 91% Others 9, Subtotal 18, ,538 2, % Transportation Equipment 8, % Total 54, Share of Export in % - -

6 Products MFN Tariff with China (applied to Taiwan) Tariff of ASEAN-6 Countries with China Fiber 5% 5.0% 0.0% 0.0% 0.0% 0.0% Fiber / Textile Yarn 6.5% 6.2% 3.5% 0.0% 0.0% 0.0% Fabric 10% 8.0% 5.0% 0.0% 0.0% 0.0% Clothes 14% 8.0% 5.0% 0.0% 0.0% 0.0% Chemic al- Plastic Sundry Textile 14% 8.0% 5.0% 0.0% 0.0% 0.0% PE PVC PP PS ABS 6.5% 6.5% 5.0% 0.0% 0.0% 0.0% 純對苯酸 (PTA) 6.5% 5.0% 5.0% 0.0% 0.0% 0.0% 乙二醇 (EG) 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% Machinery 15.0% 8.0% 5.0% 0.0% 0.0% 0.0% Transportation Equipment 13.0% 8.0% 5.0% 0.0% 0.0% 0.0%

7 7 FTA of Other East Asian Countries Recently, Korea and Japan have signed FTA with many other countries and regions, and it has severe effects on Taiwan s trade competitiveness.

8 ASEAN10 Market Chile Market Singapore Market 8 Before Korea+ ASEAN After Korea+ ASEAN Before Korea+ Chile After Korea+ Chile Before Korea+ Singapore Before Korea+ Singapore Period (Take Effect) (Take Effect) (Take Effect) Taiwan (%) Korea (%) Before Korea+ASEAN FTA taking effect, the average export growth rate of Taiwan to ASEAN was 20.1%, and the one of Korea was only 16.6%. After it took effect on June 2007, the average export growth rate of Taiwan to ASEAN became 11.8%, whereas that of Korea became 24.0%. From MOEA,

9 Singapore Market Malaysia Market Thailand Market 9 Before Japan+ Singapore After Japan+ Singapore Before Japan+ Malaysia After Japan+ Malaysia Before Japan+ Thailand After Japan+ Thailand Period Taiwan (%) (Take Effect) (Take Effect) (Take Effect) Japan (%) Before Japan+Singapore FTA taking effect, the average export growth rate of Taiwan to Singapore was 9.9%, and the one of Japan was only 2.5%. After it took effect on November 2002, the average export growth rate of Taiwan to Singapore became 15.8%, whereas the one of Japan became 11.2%. From MOEA,

10 10 Emerging Effects of ASEAN+China FTA Observed from China Imports : Tariff reduction owing to ASEAN+China FTA started in Value of China imported from ASEAN exceeded the value imported from Taiwan, and achieving 11,690 million dollars. From MOEA,

11 11 USD. Hundred Million Value of Imports fromtaiwan Value of Import from ASEAN Share of Imports from Taiwan 11.55% 11.31% 11.01% 10.56% 9.13% Share of Imports from ASEAN 11.23% 11.36% 11.31% 11.33% 10.34% From MOEA,

12 12 Observed from the tariff on Taiwan industrial products (HS25~HS97) faced in China market. The tariff on Taiwan products exported to China is not low. The average tariff on manufacture products is 8.94%. While the tariff of most products in China+ASEAN FTA reduced to zero, the tariff gap become sizable--the gap of average tariffs on manufacture products is 7.25%. It works against Taiwan's competitiveness. From MOEA,

13 13 Example : The Tariff Gap between China and Taiwan on Machinery Products Tariff Applied to Taiwan (average Under ASEAN+1 The favored Tariff with China to ASEAN (average nominal tariff) Taiwan s Export to China in 2007 Taiwan s Export to Global in 2007 Taiwan s Employ ment nominal tariff) Total 0 Value China/ Global (%) Machinery Products , , ,480 From MOEA,

14 14 Shocks in 2010 ASEAN+China FTA Tariff reduction on products started on Jan. 1, Zero tariff on most products on Jan. 1, ASEAN+Korea FTA Tariff reduction on products started on July 1, Zero tariff on 90% products on Jan. 1, From MOEA,

15 FTA Effective Date Expected Achieving 15 Schedule ASEAN+Japan EPA December, % Products in % ASEAN+Australia, N.Z. FTA Expected the Beginning of % Products in % ASEAN+India FTA Trade Agreement on Products Signed on Aug., 2009 (Expected to Be Effective on Jan., 2010) Bilateral Tariff reduction on 80% Products between 2013 and 2016 Japan+Vietnam EPA October, % Bilateral Production in % ASEAN+3 (China+Japan+Korea) Under Consultation ASEAN+6 (China+Japan+Korea+Australia+New Zealand+India) Under Consultation From MOEA,

16 FTA Effective Date Expected Achieving 16 Schedule Korea+U.S. FTA Signed on June, 2007 (Effective until Approvals of Bilateral Congress) 95% Industrial Products and Consumer Goods in 3 Years 0% Korea+E.U. FTA Expected to Be Signed in 2010 (Counsel Completed on July, 2009) Korea+India FTA Signed on Aug., 2009 (Expected to Be Effective on Jan., 2010) India Promised to Reduce Tariff or Reduce to Zero Tariff on 85% Products Imported from Korea; Korea Promised to Reduce Tariff or Reduce to Zero Tariff on 93% Products Imported from India Korea+China FTA Under Consultation (Five Industry-Government-Academia Joint Studies Have Be Held on June, 2008)

17 17 Two Weeks from Now Unfortunately, this emergency situation doesn t evoke a sense of unity in Taiwan. ECFA is a possible solution. We can not simply engage in bilateral tariff reduction with China, as it isn t allowed under the WTO. We have to sign a framework agreement first.

18 18 Two Weeks from Now Right now, popular support for ECFA is still low. Chinatimes Daily Polls (three days ago): Support : 48% (vs. 38% against) Know about ECFA : 57%, of which, 1. 34% know what issues the ECFA will address % think it is positive for Taiwan. (vs. 35%) 78% think the government does a poor job in communication.

19 19 Two Weeks from Now However, we can t take ECFA as a cure-all. 1. Taiwan has to develop own brand names and key technologies to ensure profitability. Moreover, we also have to develop emerging service industries to promote employment. 2. ECFA is bilaterally decided. There is no such thing as failure-proof negotiations.

20 20 Ⅱ.. Progress Order of planned progress

21 21 Effects of ASEAN+N on Taiwan Item ASEAN+1 ASEAN+3 GDP (%) Export (%) Import (%) Terms of Trade (%) Social Welfare (USD. million) ,684.2 Trade Surplus (USD. million) From MOEA,

22 22 Effects of ECFA on Taiwan Item Scenario Scenario One Taiwan s Existing Item Restrictions Remain, All Others Tariff Reduced to Zero; PRC s Tariff Reduced to Zero Completely Scenario Two Taiwan s Existing Restrictions on Agriculture Products Remain the Same, All Others Tariff Reduced to Zero; PRC s Tariff Reduced to Zero Completely GDP (%) Export (%) Import (%) Terms of Trade (%) Social Welfare (USD. million) 7, , Trade Surplus (USD. million) 1, , Total Production (USD. million) 28, , From MOEA,

23 23 Early Harvest List It still needs to be decided via cross-straits negotiation. In case of industrial products, MOEA will consult with firms and consider overall industry competitiveness. Aim at including the key products in manmadefiber/textile (upstream), petrochemical, cars, and machinery industries. In case of service/trade industry, MOEA will consult each relevant authority.

24 24 Ⅲ. Implications FTA? Long way to go: it is only a framework; the beef is in the early harvests. Psychologically important: attract more investment and avoid hollowing out of existing industries. Financial sector: high expectations among Taiwanese firms but not sure what the results will be. Taiwan s competitiveness will be enhanced as it is more likely to become a gateway to the Chinese market. Future progress will depend on internal consensusbuilding, which in turn depends on the trickling down effects of globalization very little so far especially for the southern parts of Taiwan.

25 25 Implications Likely to speed up the process of Korea and Japan forming ASEAN+3. Eventually leading to pan-east-asia FTA. Will eventually leading to a new world order? Possible but political and other obstacles will have to be resolved first.

26 26 Ⅳ. Conclusions Countries with unity have better prospects for growth compared to ones with internal strife. There would be a better chance for unity if the government can help local products to be marketed globally; give assistance to industries in distress; and does a good job in communication. It is very important for Taiwan to start negotiations with any or all of ASEAN countries--it has become an important market for Taiwan

27 27 Thank you for your attention Yun-Peng Chu Cross-Straits Economic Relations:Progress and Implications of the Proposed ECFA in the East Asian Region Dec. 17

28