MOEA to provide aid to firms affected by China's suspension of tariff cuts

Taipei, Dec. 23 (CNA) The Ministry of Economic Affairs (MOEA) said Saturday it will provide NT$18 billion (US$577 million) in aid to help petrochemical exporters after China suspended preferential tariffs established under the Economic Cooperation Framework Agreement (ECFA) signed in 2010.

An MOEA source told CNA that the ministry decided to offer the assistance after Economics Minister Wang Mei-hua (王美花) met with about 50 representatives from the local petrochemical industry a day earlier.

On Thursday, China's Customs Tariff Commission announced that it was suspending preferential tariffs for 12 petrochemical products, including propylene and paraxylene, citing trade barriers imposed by Taiwan on similar products.

Taiwan's government, however, has described the move as a "politically motivated" attempt to pressure the country ahead of the Jan. 13, 2024 presidential election.

According to the MOEA source, the ministry will assign NT$6 billion from the Industrial Development Administration to help petrochemical firms produce value-added products and an additional NT$2 billion from the International Trade Administration to explore foreign markets.

The ministry will also allocate NT$10 billion from its special budget to aid industries in the post-COVID-19 era to make up the rest of the NT$18 billion, the source said.

Citing the representatives attending the meeting, the MOEA source said the suspension of preferential tariffs was unlikely to have an immediate material impact on the local petrochemical industry.

However, the effects of the reinstated tariffs are likely to be felt up and down the supply chain in the long run because much of the local petrochemical industry consists of joint products, those generated within a single production process, the source said.

According to the MOEA, Taiwanese petrochemical exporters selling products to China will now have to shoulder tariffs of 1-6.5 percent.

Wang told reporters on Friday that Taiwan's exports of petrochemical products to China totaled about US$1.8 billion in the first 11 months of this year.

This is just a small fraction of the country's total exports of US$392.56 billion during the same period.

Some of the industrial representatives attending the meeting with Wang said they were concerned about the effects on Taiwanese exporters of China's intensified efforts to expand petrochemical production and exports amid an economic slowdown in the country.

However, other representatives appeared calm, stating that many petrochemical exporters had started diversifying markets from China to other markets such as Southeast Asian countries, India, the United States and Europe.

Responding during the meeting, Wang said that the government would accelerate help for the local petrochemical industry to find its market niche.

Wang added that the government would also support Taiwanese firms to roll out differential products from those made by their foreign counterparts while continuing to push for intelligent and low-carbon production to boost global competitiveness.

The MOEA said the ministry will apply more efforts to assist local petrochemical exporters to explore foreign markets by holding economic forums, which are expected to allow them to meet foreign buyers face to face and seek business opportunities.

In addition, the ministry will work with Taiwan's representative offices, the government-sponsored Taiwan External Trade Development Council and industrial associations to send delegates overseas to promote Taiwan-made petrochemical items.

While many exporters in the petrochemical industry have seen no immediate impact from China's actions, Yueh Chun-hao (岳俊豪), a section chief of the government-funded Industrial Technology Research Institute, expressed concerns that Beijing would also suspend preferential tariffs for Taiwanese machine tools and auto parts, hitting small- and medium-sized enterprises.

Through November, China has accounted for around 35 percent of Taiwan's total 2023 exports, down from 40 percent in recent years, the ministry said.