China-Taiwan trade deal poses threat for South Korea

30-Jun-10

The Economic Cooperation Framework Agreement - a trade agreement has been signed between Chin and Taiwan, helping lift tariffs on 539 products from Taiwan and 267 products from China. This pact is likely to pose a threat to Korean exports, as it will give Taiwanese companies, particularly in the information technology sector, an advantage over Korean competitors in exporting to China. Once China ratifies the trade deal, tariffs for 108 Taiwanese products will be immediately lifted, while tariffs for another 431 items will be phased out over two years. About 14 of the top 20 export items from Korea and Taiwan overlap and affect 60% of total Korean exports to China. South Korea and Taiwan constitute 10.2% and 8.6% of China’s imports, respectively. S Korea has overtaken Taiwan as an exporter to China since 2005, and the two have competed closely in such products as petrochemicals and liquid crystal displays.