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China-South Korea trade pact will hurt Taiwan's manufacturers: center

TAIPEI, Taiwan -- Taiwan's manufacturing sector will be dealt a severe blow when a free trade agreement (FTA) expected to be signed by China and South Korea later this year takes effect, a local research institute warned Wednesday.

The Industrial Economics and Knowledge Center (IEK,工研院產經中心) under the government-sponsored Industrial Technology Research Institute (工業技術研究院) urged the government to speed up cross-strait trade talks and the private sector to do more to innovate and develop to counter the blow.

Once all South Korean manufactured products enjoy zero-tariff treatment under the free trade deal, the output value of Taiwan's manufacturing sector will fall 3.85 percent, or NT$650 billion (US$21.57 billion), over the following three to five years, Cheng Chih-chiang (陳志強), a manager at the IEK, said at a press conference.

Taiwan's chemical and petroleum sectors will be the hardest hit, with combined output declining 4.63 percent, or NT$227.6 billion, while the metals and electric machinery sectors should see a combined slide of 4.23 percent, or NT$195.6 billion, over the period, Cheng said.

ICT Output to Decline 3.35%

The output value of the information and communications technology and electronics sectors will experience a combined 3.35 percent decline of NT$179.3 billion, mostly in products not covered by the Information Technology Agreement, according to Cheng.

China is Taiwan's major trade partner, but that market will be imperiled by the competitive edge given to South Korean exports through the free trade pact because of the large overlap between the goods Taiwan and South Korea export to China, Cheng said.

The government should move to create a more favorable business environment and try to sign more FTAs with other countries to remove trade barriers and help domestic businesses embrace globalization, he said.

In addition, the private sector should enhance its competitiveness by aggressively investing in research and development to come up with more value-added products, according to Cheng.

Taiwan's government has tried to liberalize trade with China and signed a trade-in-services agreement with Beijing in June 2013.

The pact has yet to be ratified by the Legislative Yuan, however, because of strong resistance from opposition parties fearful that it would give China too much influence over Taiwan's economy.

Student protesters who occupied the Legislature for three weeks starting on March 18 received a pledge from Legislative Speaker Wang Jin-pyng (王金平) that a bill on overseeing cross-Taiwan Strait pacts would be passed before the services pact would be considered.

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