The government is seeking to reduce the potential impact of a South Korea-EU free-trade agreement (FTA) on local industries by boosting product differentiation and market expansion, Minister of Economic Affairs Shih Yen-shiang said yesterday.

In addition, Shih said his ministry had set up a task force with the Ministry of Foreign Affairs (MOFA) to lobby European countries to sign a Taiwan-EU FTA.

“The government will seek effective short-term means to either slow down the South Korea-EU FTA’s negative impact on Taiwanese industries or to promote the signing of FTAs between the EU and other countries [including Taiwan],” Shih said at a seminar held by the Chinese National Federation of Industries

However, Shih said that compared with South Korea, it is very late for Taiwan to pursue free-trade deals with the world’s major markets and it is difficult to discuss, negotiate or sign an economic cooperation agreement (ECA) or FTA with another country in the absence of diplomatic relations.

After the South Korea-EU free-trade pact takes effect on July 1, Taiwan’s GDP growth could be knocked down by 0.017 percentage points per year, Bureau of Foreign Trade Director-General Bill Cho said, quoting a report issued last month by the Chung-Hua Institution for Economic Research

Cho said a total of 1,500 products that Taiwan exports to the EU could suffer after the FTA comes into effect. The industries that will feel the impact most are plastics, textiles, mechanics, metals, transportation and flat panels.

“These exports are worth US$5.27 billion a year, which accounts for 16.8 percent of Taiwan’s total exports to the EU,” he said.

The ministry has set up three plans to cope with the potential impact of the FTA, Cho said.

These include increasing research and development subsidies for local companies, suggesting that the Ministry of Finance -expand tax rebates on exports for industrial raw materials and components, and assisting companies in export marketing and foreign investment, he said.

“These measures may help local companies manufacture differentiated products, increase their competitiveness and further extend their markets, while avoiding the marginalization of Taiwanese industries,” Cho said.

Tariffs of 81.71 percent for South Korean-made products being exported to the EU will drop to zero once the agreement takes effect. In five years, tariffs on all industrial products and 97.15 percent of agricultural products produced in South Korea will be reduced to zero.

June 17, 2011

Source: Taipei Times, Taiwan

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