MOFA: China-Japan-Korea FTA Likely to Erode 1.49% of Taiwan's GDP

Taipei, Jun. 6, 2012 (CENS)--With China, Japan and Korea beginning tri-party talks on the signing of a free trade agreement, Timothy C.T. Yang, Minister of Foreign Affairs, admitted that the FTA will likely erode 1.49% of Taiwan's GDP to heavily impact the export-driven economy in the future when it is signed and effective.

Yang indicated that Korea initiated the tri-party FTA in 2001 when holding a leadership summit with China and Japan, but the negotiation hadn't moved any step forward until the three nations began talks on the issue this May.

Yang said the three nations resumed negotiation over the tri-party FTA mainly because the two Northeast Asian countries are increasingly alarmed over dumping of agricultural products and low-priced industrial goods from China into their domestic markets, while China also tries to keep local industries such as automobiles and machinery away from threats of imports from the two foreign nations. Based on the observation, Yang stated that the initial negotiation among the three nations is supposed to be centered on how much their domestic markets are liberated.

No matter how the FTA will take shape, Taiwan's manufacturing industries, including machinery, chemical and rubber plastics, will be certainly impacted in the long run.

For reasons, Yang said that over a half of Taiwan's exports to China, such as auto parts, steel products, processed food, footwear, textile and glass, are overlapped with competitors from Japan and Korea for the time being. If the China-Japan-Korea FTA is effective, it will be difficult for Taiwanese exporters to level competitors from the three nations in the Northeast Asian market in the future.

The latest survey report released by Taiwan's market researcher shows that in case the FTA is inaugurated, Taiwan's GDP is estimated to decline by US$4.5 billion, or 1.49%, with social spending to decrease nearly US$6.2 billion. Among the industries hit the most will be chemical and plastic, whose output value is expected to sharply shrink by US$13.9 billion due to the FTA. Also, the industry of petroleum and coal products will see its production value decline by US$2.7 billion.

The 6 Industries in Taiwan to be Hit the Most by China-Japan-Korea FTA
Industry	Decline in Output Value
Chemical and Rubber Plastic	US$13.9 B.
Petroleum and Coal Products	US$2.7 B.
Textile	US$1.2 B.
Food	US$142 M.
Clothing	US$80 M.
Leather and Related Products	US$50 M.

Source: Ministry of Economic Affairs