Taiwan not expected to be hard hit by new regional trade pact: experts

11/15/2020 09:10 PM
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The live streaming of the signing ceremony in Hanoi. CNA photo Nov. 15, 2020
The live streaming of the signing ceremony in Hanoi. CNA photo Nov. 15, 2020

Taipei, Nov. 15 (CNA) Two Taiwanese trade experts said Taiwan's foreign trade is unlikely to be significantly affected by a major trade deal that was signed Sunday among 15 Asia-Pacific countries.

The Regional Comprehensive Economic Partnership (RCEP), which is expected to take effect in the second half of 2021, accounts for 30 percent of the global economy and is the world's largest trade pact in terms of GDP.

It was signed Sunday by 10 Southeast Asian economies, as well as China, Japan, South Korea, New Zealand and Australia, during the annual Association of Southeast Asian Nations (ASEAN) summit in Hanoi.

For Taiwan, which depends heavily on foreign trade, exclusion from the RCEP could have significant implications for its economy, in particular its steel, textile, petrochemical, and machine tool exports, some local business leaders have warned.

However, Roy Lee (李淳), deputy executive director of Taiwan WTO and RTA Center, said Taiwan is not likely to suffer any major impact, as 70 percent of its trade with the RCEP countries is already tariff-free.

What Taiwan should monitor closely is the competition in the China and Japan markets, as the Japanese and South Koreans tussle for market share in the former, and Chinese and South Koreans make a bigger bid for the latter, he said.

Currently, Japan does not have bilateral free trade agreements with China or South Korea, noted Lee, whose center is part of the Chung-Hua Institution for Economic Research, Taiwan's major think tank.

With the signing of the RCEP, however, trade relations among Japan, China, and South Korea would be enhanced, giving them an edge over Taiwan in each other's markets, he said.

The Taiwan government, therefore, should speed up its efforts to join the Japan-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which took effect in late 2018, Lee said.

The CPTPP, which grew out of the Trans-Pacific Partnership (TPP) after the United States left the pact in January 2017, represents a market of 500 million people and accounts for 13.5 percent of global trade.

The 11 signatories are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

Tan Ching-Yu (譚瑾瑜), head of Division IX at the Taiwan Institution of Economic Research, told CNA that the RCEP is expected to solidify China's broader regional influence.

China's rivalry with the U.S. meanwhile, is expected to continue, although American President-elect Joe Biden is likely to take a slightly softer stance toward China than the incumbent president, Tan said.

Expressing similar views, Lee said the Biden administration will seek to reduce the U.S.' dependence on trade with China, given the rivalry between the two countries.

In a reconstruction of the U.S. supply chain, lower tariffs would be less important than having trustworthy partners like Taiwan, Lee said.

For example, he said, the U.S. is building a "Clean 5G" network that includes Taiwan, but not China, while many European countries are developing 5G guidelines and best practices, which include a ban on telecommunication devices developed by Chinese companies, he said.

The anti-China sentiment among democratic countries around the globe could also work in Taiwan's favor, Lee said.

Several Taiwan entrepreneurs have expressed concerns about the RCEP, saying it would leave Taiwan at a disadvantage in world trade.

Chen Bao-lang (陳寶郎), chairman of Formosa Petrochemical Corp., said the RCEP will wipe out the competitiveness of Taiwan's petrochemical products in the ASEAN markets, because its two main competitors in that sector, South Korea and Japan, will gain tariff reductions.

Jimmy Chu (朱志洋), chairman of Fair Friend Enterprise Group, one of the largest machine tool makers in Taiwan, also expressed worry about lower tariffs under the RCEP.

If South Korea, Taiwan's major competitor in the field, gains a tariff reduction of 3-5 percent, Taiwanese machine tool companies would be able to manage, but they would suffer a serious blow if the reduction is 10 percent under the RCEP, he warned.

(By Pan Tzu-yu, Liang Pei-ching and Joseph Yeh)

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