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Speculation on Beijing-Seoul FTA omits truth
By Lai Chung-chiang 賴中強
Chinese President Xi Jinping (習近平) and South Korean President Park Geun-hye on Monday announced the “substantial conclusion” of free-trade agreement (FTA) talks between the two nations.
However, a pact has still not been signed.
On Monday, Chinese Minister of Commerce Gao Hucheng (高虎城) and South Korean Minister of Trade, Industry and Energy Yoon Sang-jick signed the meeting minutes of the talks, confirming the agreement between Xi and Park, namely that the trade talks have reached a substantial conclusion and that the two parties would complete negotiations over remaining technical matters before the year’s end.
In other words, the two parties have not yet reached final agreement on the conditions for opening up the markets for trade in services and goods; they are planning to complete negotiations by the end of the year and sign a pact early next year.
Second, the trade deal has still not been approved by South Korea’s parliament, the National Assembly. Even if the agreement is signed early next year, Article 13 of the South Korean act regulating trade agreement negotiation procedures and implementation stipulates that an impact assessment, complementary measures for assisting domestic industry, a budget estimate and financing plan and complementary legal amendments must be submitted together with the agreement to the National Assembly for approval.
Third, the pact is a regional trade agreement with a low level of integration. In terms of trade in goods, both nations must remove import tariffs on 90 percent of product items within 20 years. China is to remove tariffs on 91 percent of products and on 85 percent of import trade, while South Korea is to remove tariffs on 92 percent of product items and on 85 percent of import trade.
When the agreement first takes effect, China will only remove tariffs on 44 percent of the import trade, while the same figure for South Korea will be 52 percent.
By comparison, even if pacts on cross-strait trade in goods and services are not ratified, 69 percent of Taiwanese exports to China last year were exempt from import tariffs.
Even without new cross-strait trade pacts being signed, the ratio of Taiwanese tariff-exempt exports to China will be 25 percentage points greater than South Korea’s during the first year of the Chinese-South Korean FTA, and it will continue to be higher than for South Korea for several years. Twenty years after the agreement takes effect, 16 percentage points more of South Korean products will be exempt from import tariffs than Taiwanese products.
Fourth, the China-South Korea deal is a regional trade agreement with a long adjustment period. According to the general agreement reached at the seventh round of talks, tariff on regular products should be removed within 10 years, tariffs on sensitive products should be removed within 10 to 20 years and tariffs on extraordinarily sensitive products should not be removed for a period of 20 years.
Taiwan’s Ministry of Economic Affairs’ estimate of the impact of the agreement on local industry assumes that all tariffs will be removed from 100 percent of Chinese and South Korean products on the day the agreement takes effect.
This is completely removed from reality.
Until the FTA talks are completed and until it has been announced whether and when tariffs are to be removed from particular industries, any conjecture about the impact of the FTA lacks substance.
Lai Chung-chiang is convener of the Economic Democracy Union.
Translated by Perry Svensson
source: Taipei Times
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