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High-tech industry less affected by China trade pact

High-tech industry less affected by China trade pact

By Fanny Liu CNA Staff Writer Taiwan's electronic industry -- the most competitive industry in the country -- might not be as severely affected by a proposed China trade pact as critics have said.
Some media have recently widely cited a study done by the Chung Hua Institution for Economic Research (CHIER) , a local research institute, as saying that the local electronic and electrical industries will suffer the most from signing a cross-Taiwan Strait economic cooperation framework agreement (ECFA) -- with a loss of annual production value estimated at around NT$250 billion, or 7 percent.
However, this may not be the whole picture.
Arthur Chiao, chairman of the Taiwan Electrical and Electronic Manufacturers' Association (TEEMA) , said that "the ECFA will have less impact on the local electronics industry, as most of our export-oriented electronics companies already have zero-tariff treatment in China." The trade association has more than 3,500 members from local electrical and electronic industries, with a combined capital of around NT$2 trillion and nearly 730,000 employees.
KGI Securities Senior Vice President Chu Yen-min agreed, saying that the electronics industry will not be affected much by the China trade pact "for the time being." "Because most major Taiwanese electronics companies have already set up plants in China, the ECFA will make no difference to them, " said Chu, adding that the market cares more about the further easing of restrictions for semiconductors and TFT-LCD panel makers' China-bound investments.
Chiao, who is also chairman of Winbond Electronics Inc, one of the nation's top manufacturers of memory chips, said the China trade pact will have a larger impact on the electric machinery, home appliances, and electric wire and cable industries, which rely heavily on domestic demand.
However, Chiao said Taiwanese electronics companies will inevitably have to deal with the impact from regional economic integration, as they not only need to compete with China, but also face tough competition from Japan and South Korea.
Signing the ECFA will offer a solution, Chiao said.
Taiwan needs a normalized economic and trade relationship with China first, which will open a door for Taiwan to sign the free trade agreements (FTAs) with other countries, he said.
He also said that signing the China trade pact one or two months late will not result in much difference. However, the prolonged disputes regarding the cross-strait pact makes corporate leaders worried about whether the trade pact can be signed at all.
On the other hand, electrical appliance companies that focus on domestic sales and demand will feel the pressure and face risks once the trade agreement is signed, Chiao said.
Although those companies account for less than 10 percent of the combined production value of the TEEMA members, they remain a concern of the association.
China's technological capabilities for producing electric machinery and home appliances are no worse than Taiwan's, said Chiao, adding that with lower labor costs and a larger market, Chinese manufacturers can use cheaper prices to beat Taiwanese companies.
TEEMA Vice Chairman Joseph Fu-hsiung Cheng said for his part that "more than 65 percent of Taiwanese electrical appliances have no competitiveness, " adding that even those with competitiveness still find it hard to enter the China market.
For Taiwanese home appliance manufacturers, the problem they face is not just a tariff issue but restrictions under their partnerships with Japanese appliances makers -- as this prevents them from investing in China.
"Taiwanese household appliances companies will take a beating if they cannot go to China, while Chinese companies can come to Taiwan, "Chiao said.
To help those home appliance manufacturers, Chiao said, TEEMA will also work with the government to encourage the public to buy more local products.
It is hoped that by establishing a "made in Taiwan" label and a sound quality control mechanism, a better image of Taiwanese products can be built to help them maintain their domestic market share in the face of Chinese competition.
"To survive, Taiwanese appliance makers need more support from local customers," Chiao said.
Chiao also urged other Taiwanese companies to build up their own brands and create unique characteristics to boost their competitiveness.
For those industries that will not be on the trade deal's "early harvest list" for tariff-free status, Chiao said they will have an adjustment period of five to 10 years and the government will help with their adjustment.





Updated : 2021-03-02 07:00 GMT+08:00