Display mode (Doesn't show in master page preview)

28 Oct 2010

International Economy

ECFA, A Great Step in Economic Cooperation between China and Taiwan: Opportunities and Challenges to Thailand (Current Issue No.2229)

The China and Taiwan Economic Cooperation Framework Agreement (ECFA) is an economic pact that offers tariff reductions, service sector liberalization and investment opportunities. Within the ECFA, tariff reductions coming into effect on January 1, 2011, will offer duty-free status on many product categories by 2013. Tariff rates will be gradually reduced from the level given to WTO members which was effective in 2009. Regarding liberalization of the service sector, both parties have agreed with the liberalization on some service business over the WTO framework. As for investment, both parties are in the process of crafting agreements on the details of investment promotion privileges that will be put into practice in the future.
KResearch views that ECFA tariff reductions may turn out to be a challenge for Thai businesses selling some product categories that are included in ECFA normal lists because the competition relative to them would intensify. In addition, Thailand could lose more competitiveness due to tariffs applicable to them in the Chinese market. Meanwhile, Taiwan would enjoy lower tariff rates on many products such as farm produce, petrochemical products, machinery and parts that have received gradual cuts already, moving downward eventually to duty-free status (since January 1, 2011), aside from obvious proximity advantages they have in logistic costs.

However, the ECFA pact will likely provide opportunities for Thai businesses intending to invest in China by establishing their business in Taiwan. The pact will minimize barriers about shareholding in China, because Taiwanese will be allowed to own businesses there. Also, the potential of the ECFA pact has driven Taiwan toward strengthening their trade relationships with other countries, including Thailand, because this ‘gateway' factor could benefit and help enhance value-added for many businesses between Thailand and Taiwan in the future. Our different strengths may be combined to aid competitiveness of many industries, such as food, alternative energy and automotive parts. This could help attract investment and develop the potential of both the Thai and Taiwanese economies. Moreover, Thailand and Taiwan could rely on each other to assist in the manufacturing and export of products to other markets. That is to say, Taiwan could help Thailand create trade networks within China, and we could facilitate Taiwanese products in entering into ASEAN.

International Economy