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Commercial Times: The key to enhancing trade competitiveness

2012/05/25 11:05:55

The economics ministry recently launched a NT$3.16 billion trade promotion program to try to boost Taiwan's declining exports.

Although the government's effort is commendable, we must point out that the real problem with Taiwan's foreign trade does not lie in the short-term downturn in exports, but in the long-term fall in competitiveness.

The situation is demonstrated by changes in Taiwan's export performance over the past 20 years. Back in 1992, Taiwan was the world's 12th largest exporter, with South Korea trailing closely behind at 13th. But in 2011, Taiwan's ranking dropped to 17th, while South Korea shot up to 7th. Taiwan's export volume that year was just US$308 billion, compared with Korea's US$555 billion.

Our government believes that signing free trade agreements with the United States, the European Union and the Association of Southeast Asian Nations will help boost Taiwan's export competitiveness. But are FTAs really that effective?

The Korea-EU FTA only came into force last July, and the Korea-U.S. FTA was launched just two months ago. Obviously, South Korea has been able to stand out from its many competitors over the past decade, not because of FTAs, but because of its industrial strength.

In fact, many countries had already reduced their customs duties to very low levels since the eight round of talks under the General Agreement on Tariffs and Trade, prior to the creation of the World Trade Organization. Even without an FTA, approximately 66 percent of Taiwan's exports to the United States now enjoy zero-tariff treatment.

This demonstrates that even if Taiwan fails to reach free trade deals with the United States and Europe within a short period of time, the impact on Taiwan will not be as serious as imagined. But if Taiwan lacks industrial strength, it will not help no matter how many FTAs it signs.

Trade liberalization is not a panacea, nor is it a free lunch. In promoting the signing of free trade deals with other countries, our policy makers should do more and talk less and fight for terms that are favorable to Taiwan at the negotiation table.

The most important thing is to enhance Taiwan's industrial strength, without which everything will be no more than a castle in the air. (Editorial abstract -- May 25, 2012)

(By Y.F. Low)