RCEP, ECFA Jointly Impact Taiwan's GDP By Over 4℅
China Times, October 9, 2023
Mainland China’s trade barrier investigation against Taiwan is expected to conclude on October 12, or, at the latest, may be extended until January 12 next year. Many scholars believe the investigation is likely to yield significant findings. There are growing concerns that, with the gradual effects of tariff reduction in the Regional Comprehensive Economic Partnership (RCEP) and the possible cancellation of the Cross-Strait Economic Cooperation Framework Agreement (ECFA), traditional industries may relocate, impacting the gross domestic product (GDP) growth by as much as over 0.4 percentage points.
Mainland China’s Ministry of Commerce initiated the trade barrier investigation against Taiwan in mid-April. The investigation initially involved 2,455 items, and has increased since then to 2,509 items. Preliminary investigations indicate that Taiwan’s trade restrictions on certain food and agricultural products from the mainland, without specific justification, may violate World Trade Organization (WTO) rules.
According to Wu Da-jen, a professor of economics at National Central University, there is a high possibility of the investigation yielding significant results because Taiwan does not have particular reasons for implementing restrictions on the import of certain mainland Chinese food and agricultural products. The ban on snail rice noodles, for example, was not for reasons of severe food safety issues but rather because it was produced in mainland China. This could be subject to scrutiny within the WTO framework of fair trade, which may easily categorize such issues as trade barriers. As the investigation concludes, mainland China might consider suspending ECFA, significantly affecting exports of petrochemicals, textiles, machinery, and other commodities. However, given Taiwan’s upcoming presidential election, even if the mainland confirms the existence of trade barriers to the WTO, actions may not be taken until after the election. It should be noted that, if the WTO likewise recognizes the existence of trade barriers, this may have adverse implications for Taiwan’s participation in international trade organizations in the future.
Darson Chiu, a researcher at the Taiwan Institute of Economic Research (TIER), reckons that mainland China’s trade investigations will likely result in accusing Taiwan of not complying with WTO regulations, and for enacting unfair trade measures against China. It is expected that the mainland may take retaliatory measures against Taiwan, such as further reviewing or canceling ECFA's concessions. But it is unlikely these measures will occur all at once since that would exhaust their bargaining chips.
Furthermore, Professor Wu points out that the current challenge, apart from ECFA, is the fact that under RCEP, 90 percent of products will have their tariffs reduced to zero within ten years. RCEP members (including China) have their shares of Taiwan’s total trade continuing to increase, reaching nearly 60% at present. Meanwhile, Taiwan has not joined or signed any free trade agreements with its member countries. Additionally, Taiwan has not joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). With the premature cessation of ECFA benefits, and the reduction of tariffs under RCEP, traditional domestic industries are likely to be affected. But RCEP will further significantly reduce tariffs in the coming years. If this coincides with the cancellation of ECFA, their impact could result in an outflow of traditional industries and impact Taiwan’s GDP in excess of 0.4 percentage points.
On how to mitigate these effects, Professor Wu believes that maintaining cross-strait relations and retaining the original ECFA benefits could soften the impact to some extent. According to Chiu, in the face of these challenges, industries must undergo transformation and enhance their profitability in order to avoid compromising their operations.
From: https://www.chinatimes.com/newspapers/20231009000259-260110