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Taiwanese petrochemicals need China trade pact to survive

Taiwanese petrochemicals need China trade pact to survive

CNA Photo No. 36 By Fanny Liu CNA Staff Writer About a year ago, the Taiwan Synthetic Resins Manufacturers Association (TSRMA) held a press conference for the first time in 20 years to ask the government to save the local petrochemical industry from "a life or death situation." TSRMA Chairman F.Y. Hong described at the time Taiwan's export-oriented industries as being "hospitalized in intensive care" and said that without government rescue, the industries would "end up in the mortuary." In a move to support a proposed economic cooperation framework agreement (ECFA) with China, Hong said that if Taiwan's petrochemical industry does not receive zero-tariff treatment under the trade pact, it will not be able to survive.
One year later, after petrochemicals were included on the ECFA early harvest list, Hong still has concerns about the progress of signing the trade deal.
"If Korea and Japan -- Taiwan's two biggest competitors -- sign free trade agreements with China ahead of us, China will no longer need to place their orders in Taiwan, so there will be no room for us to survive," Hong said in a recent interview.
At present, Taiwan's petrochemical exports to China are subject to a 6.5 percent import duty -- already higher than the 5.5 percent import duty for Korea and Japan. However, the latter two will be granted zero-duty treatment from 2012.
"If we cannot grab the moment to secure the market, we are sending ourselves to the mortuary," said Hong.
Although a free trade area comprising China and six of the 10 members of the Association of Southeast Asian Nations (ASEAN) took effect Jan. 1 offering tariff-free treatment to the vast majority of products shipped within the bloc, it did not cause much impact on Taiwanese manufacturers, as those countries are not considered Taiwan's main competitors.
However, when the ASEAN Plus Three -- China, Japan and South Korea -- comes into effect in 2012, it will have a negative effect on the local industry.
Hong, who has also served as president of the Formosa Chemicals & Fibre Corp., pointed out that while China's imports of petrochemicals were up to about 25 million tons a year, the country was also developing its own petrochemical industry to meet its growing domestic demand.
China's demand will remain strong in the next few years, said Hong, explaining that the per capita consumption of plastic materials in the country is only a few kilograms but is expected to grow to about 20 kg in the future, compared to Taiwan's per capita consumption of around 100 kg.
However, he predicted that China will slowly reduce its dependency on imports. "We don't have much time left," Hong said.
China is the most important export market for Taiwan, with more than 60 percent of Taiwanese petrochemical products exported to China, according to the Ministry of Economic Affairs.
Among China's imports, around 23 percent of the petrochemicals come from Korea, 22 percent for Taiwan, 15 percent from Japan and about 4 percent from Singapore.
In 2008, the total production value from 58 Taiwanese petrochemical manufacturers reached NT$1.6 trillion, with a combined export value of NT$538 billion and an import value of NT$328 billion.
If the local petrochemical industry loses competitiveness, it will inevitably lead to a reduction in production and then a ceasing of production, Hong said.
Without zero tariffs for Taiwanese manufacturers, many will consider investing in China, Singapore or Vietnam, said Hong.
But for now, he went on, the most important thing is to get the trade pact signed as soon as possible.
To pave the way for this, Hong has traveled to China to communicate with his counterparts there, and has tried to persuade them with Chinese nationalism.
He said he told the Chinese that because the quality and price of Korean and Japanese products are almost the same as Taiwanese products, "since we are all Chinese, why do you want to buy Japanese or Korean products instead of ours?" Saying that most Chinese petrochemical companies agreed with his point, Hong expressed hope that his trip will help facilitate the cross-strait negotiations, as these companies will be less likely to oppose the trade deal when they are consulted by the Chinese government.
However, he also voiced concern over domestic disputes about the trade pact, saying that China might not be willing to see the trade pact sent to the Legislative Yuan for approval.
"I think the possibility of negotiating the deal in May is slim," he said.
If the trade pact cannot be signed this year, Hong went on, it will be hard to estimate the losses in export orders and the impact on the local unemployment situation.
He said it would be acceptable for the pact to be delayed for another two or three months, because Taiwanese companies would still be able to bring back some of the lost orders.
But if it takes another year, those clients might not come back, Hong said, adding that "Taiwan will be beaten to the ground if the ECFA cannot be signed by 2012."




Updated : 2021-05-08 19:26 GMT+08:00