U.S.-Korea FTA Will Impact Taiwan's Exports

Taipei, Oct. 14, 2011 (CENS)--Scheduled to take effect on Jan. 1 next year, the Free Trade Agreement (FTA) between the U.S. and South Korea is expected to affect Taiwan's export to the tune of US$11.8 billion, especially in the fields of textile, garment, machinery, and plastics/rubber, as well as dampen investment willingness among foreign investors in Taiwan, due to the investment substitution effect, according to the Ministry of Economic Affairs (MOEA).

The U.S.-Korea FTA follows the FTA between the European Union and South Korea, which was implemented from July.

An MOEA official pointed out that the U.S. and the EU are Taiwan's third and fourth largest trade partner, respectively, and their FTA with Korea will produce considerable impact on Taiwan's export, due to the similarity between the industrial structure of Taiwan and Korea. In addition, FTA will prompt businesses in the U.S. and the EU to step up their investments in Korea, while reducing investments in other countries, including Taiwan.

Taiwan exported US$34.419 billion worth of products to the U.S. last year, including US$22.579 billion, or 65.9%, of information/communications technology products which enjoy free tariff for entry into the market, thanks to the Information Technology Agreement (ITA). The remaining US$11.839 billion, or 34.1%, will be subject to the effect of the U.S.-Korea FTA.

The major victims will be Taiwan-made textile products and garment, which are subject to average tariffs of 10-20% for the U.S. market. Other products, including machinery, plastics/rubber, chemical, optical products, and auto parts will also face various extents of impact.

As part of the effort to help local exporters cope with the impact, the Ministry of Finance has decided to provide tax rebates on 1,200 export items.