It is urgent that Taiwan and China sign a trade-in-goods pact to cope with the challenges that would arise when China and South Korea seal a free trade agreement (FTA) by the end of the year.
The importance of the cross-Taiwan Strait trade-in-goods agreement is highlighted by the fact that it will allow the removal of tariffs on Taiwanese-made components and semi-finished goods, which make up nearly 70 percent of Taiwan's exports to China. This will help to boost Chinese buyers' interest in Taiwanese goods.
However, Taiwan's competitive edge may be dulled when South Korea, its major trade rival, obtains a zero tariff concession on components and semi-finished goods under its pending FTA with China.
To make matters worse, Taiwan's major exports -- LED lighting products and panels -- are expected to come under pressure as rivalry is emerging between the LED and panel industries on both sides of the strait, in a departure from their usual cooperation in the supply chain.
Chinese manufacturers are planning to mass-produce LED lighting products and panels as Beijing is investing heavily in those sectors to meet rising domestic demand.
China's planned mass-production of products that overlap with Taiwan's major exports also comes amid improved production expertise of Chinese companies, which poses another threat to Taiwanese exporters.
As the Chinese and South Korean leaders prepare to move one step closer to a bilateral FTA during their upcoming meeting at the Asia-Pacific Economic Cooperation forum in Beijing, we hope Taiwan will complete its trade-in-goods negotiations with China as soon as possible. (Editorial abstract -- Nov. 2, 2014)
(By Scully Hsiao)