TAIPEI: Taiwan's business and industrial sectors, particularly those operating on the mainland, will benefit from lower tariffs if Taiwan signs an economic cooperation framework agreement (ECFA) with the mainland, the "Ministry of Economic Affairs" (MOEA) forecast yesterday.

If the proposed ECFA is signed, the mainland, with its industrial import tariffs averaging 9 percent, will have to lower its duties to a much greater extent than Taiwan, where the average import tariff is 4 percent, the MOEA predicted.

With the greater beneficial effect of lower import tariffs as a result of the signing of an ECFA, Taiwanese companies operating on the mainland could not only stabilize their existing market outlets, but could also further explore mainland's domestic market, the MOEA said.

The MOEA made the forecast on the basis of a study it commissioned from the Chung-Hua Institution for Economic Research (CIER).

It noted the CIER analysis predicts that Taiwan's gross domestic product (GDP), its two-way trade and trade surplus will all be boosted if an ECFA is signed.

It also forecast in particular that an ECFA would benefit Taiwan's plastics, petrochemical, machinery and textile industries.

Because the mainland's import duties on these items are relatively high, an agreement that lowers mainland tariffs on goods imported from Taiwan would help domestic producers by making their goods relatively cheaper, thereby fueling greater demand for them on the mainland.

In contrast, the proposed ECFA would have a less beneficial effect on several domestic sectors, including electric and electronic products, lumber, fruit and vegetables, and vehicles, the MOEA said, citing the CIER.

Taiwan maintains about 8,500 categories of industrial products.

Imports from the mainland numbering about 1,300 categories are still banned, according to the MOEA.

Imports from the mainland of the remaining 7,200 categories will exert an adverse impact on various Taiwan industrial sectors, particularly the underwear, towel, footwear, bedlinen and hosiery manufacturing industries, if import tariffs are cut as a result of an ECFA, the MOEA said.

"The government will establish a NT$30 billion relief fund to help these industries to upgrade," said a MOEA official.

On Taiwan's strategy regarding the ECFA negotiations, the official said the MOEA will ask that some Taiwanese industries specifically be included for "early harvest" in the final agreement. These include petrochemicals, machinery, and auto parts manufacturing, three industries which will be hurt the most by regional free trade agreements. The concern refers to free trade agreements between the Association of Southeast Asian Nations (ASEAN) and the mainland (ASEAN plus one) and ASEAN plus mainland, Japan and South Korea (ASEAN plus three). The MOEA forecast that the ECFA will change once and for all the current mode among Taiwan industries operating on the mainland: orders are taken in Taiwan while manufacturing is completed on the mainland for export to the US and Europe.

Instead, it predicted, Taiwanese manufacturers will eventually enjoy the benefit of having mainland as their largest and ultimate market outlets.

China Daily/CNA

(HK Edition 07/30/2009 page2)