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Taiwan faces pressing export challenges from Japan, South Korea

2014/01/01 16:02:57

Taipei, Jan. 1 (CNA) Taiwan faces pressing challenges from Japan and South Korea at a time when the country is eager to grasp a larger share of the export market, economists said Wednesday.

The Japanese yen has depreciated against the U.S. dollar much more than the Taiwan dollar against the greenback in the past year, which has made Taiwan-made goods less competitive in the global market compared with their Japanese counterparts, the economists said.

South Korea is gearing up to sign free trade agreements with its major trading partners in an attempt to win preferential tariff status to fend off competition from its rivals, they added.

The Taiwan government has repeatedly cut its 2013 economic growth forecast, citing slower exports as a main reason. In late November, the government downgraded its estimate for economic growth to 1.74 percent from 2.31 percent.

In the first 11 months of last year, Taiwan's exports only rose 0.9 percent from the previous year to US$277.63 billion.

Gordon Sun, director of the Macroeconomic Forecasting Center at the Taiwan Institute of Economic Research, said he is worried about the sharp depreciation of the yen, which has made local industries victims, in particular machine tool manufacturers.

In 2013, the yen fell about 21.5 percent against the U.S. dollar, while the Taiwan dollar only depreciated 2.7 percent against the greenback.

Due to the fiercer-than-ever competition from Japan, Taiwan's machine tool exports in the first 11 months of 2013 totaled US$3.23 billion, down 17.4 percent from the same period of the previous year.

Sun said the 2.7 percent drop of the Taiwan dollar against the U.S. dollar in 2013 is unlikely to give any significant boost to outbound sales of locally made goods, adding that unless the local unit falls at a double-digit rate, like the yen, the small downward adjustment will not make any difference.

In addition to the sharp yen depreciation, Sun said, Japanese goods are renowned for their high quality, so that Japanese manufacturers do not have to engage in price competition to win orders.

He said the foreign exchange rate is not the only problem for Taiwan's exporters, adding that the same is also applied to the country's competition against South Korea. For the whole of 2013, the won even rose 1.37 percent against the U.S. dollar, compared with the Taiwan dollar's 2.7 percent drop.

Sun said Seoul's strategy is to ink as many free trade agreements as possible to lower tariff barriers and accelerate outbound sales, in sharp contrast to the policy during the financial crisis in 2008, in which the country tried to depreciate its currency to secure its export market.

In December, South Korea and Australia concluded talks on an FTA, which could boost its FTA coverage to 62.56 percent, 10 times that of Taiwan's.

South Korea's FTA coverage rate is 36.5 percent now, which means that US$36.5-worth of goods in every US$100-worth of exports are shipped to areas with which South Korea has FTAs.

In 2013, Seoul's exports hit a record high of $559.72 billion, up 2.2 percent from the previous year.

Academia Sinica, the top research institute in Taiwan, has urged the country to boost its efforts to boost internationalization and economic freedom to improve its competitiveness, while speeding up the pace of signing FTAs with trade partners and joining regional trading blocs.

(By Lin Hui-chun and Frances Huang)