Taiwan and China have been extending their economic relations, having a strong impact on European partners. At the same time Taiwan is urging the EU to start negotiating the Economic Cooperation Agreement, Cho Shih-chao, director-general in the Taiwanese ministry of economic affairs, told EurActiv Germany in an exclusive interview.
He was speaking with Ewald König, Editor-in-Chief of EurActiv Germany.
To read the full interview in the original German, please click here.
Taiwanese are eager to enter the Economic Cooperation Agreement (ECA) negotiations with the European Union. But on 1 July, the Free Trade Agreement (FTA) between the EU and South Korea, a competitor to Taiwan, became effective. What impact does this agreement have for Taiwan?
One of the most important things for Taiwan is entering the ECA negotiations with the European Union. ECA stands for Economic Cooperation Agreement, which is a sort of an FTA. The ECA is significant for the EU, especially for Germany, and for Taiwan. We hope that EU can start and at least put Taiwan on the priority list for the future ECA negotiations.
The FTA enables Korea to solicit orders from the EU at lower prices and encourages European companies to invest in Korea - at the expense of Taiwan’s interests?
Yes, we think this FTA between Korea and the EU will have a significant impact on our product exports to EU.
Our products and Korean products are in close competition with each other. The lines of business of Taiwan and Korea are very much the same.
Although 49% of our product exports to the EU market belong to the zero tariff categories, still 51% of our product exports to EU have to pay a tariff.
Since 1 July, Korea doesn't have to pay any tariff to this part of market, but we do. That will create a tremendous imbalance of preference.
For example textile products. The tariff rate for the EU is 12%. You can image, since 1 July it is almost impossible for our textile products to the EU to compete with Korean products.
We tried to talk to our people in the Taiwanese textile industry – we have a federation of textile industry in Taiwan – and tried to explain to them how things would be from 1 July. The only response we got from them was that it would have a catastrophic impact on their products and to their industry's exports to the European market.
That's the reason why we hope to end this kind of situation and hope that the EU can start ECA negotiations with Taiwan.
Why did the EU not include Taiwan in an FTA?
The reason why EU did not include Taiwan in a priority list – well, it might be because of the tariff rate in Taiwan. The average tariff in Taiwan is quite low. And basically there are not so many NTBs (Non-Tariff Barriers) existing in Taiwan. So there is no sense of urgency for the EU to negotiate the ECA with Taiwan. It seems there is not much advantage for the EU.
They see India as an example. The India tariff is high and with a lot of NTB, so it makes sense for the EU to have an FTA with India because the EU can make benefit.
Taiwan is a good model student. We are very liberalised in terms of international trades, and we follow the WTO and we try to eliminate the barriers to lowering the tariffs. And now they say, you are such a good student, we don't want to deal with you.
On the other hand Korea's tariff structure is almost the same with us. They are also a good student as far as EU is concerned. But now you have a deal with Korea.
We are in very, very unfair positions to compete in this market. The FTA between Korea and the EU will most severely hit the textile and machinery equipment industries of Taiwan.
What makes the European Union so important for Taiwan?
I say: the EU market is very important for us, especially because the EU is our fourth largest trading partners - and vice versa: the EU also exports a lot to Taiwan. We have a long good relationship. The EU has a representation office in Taiwan, and European countries have very large investments in Taiwan. As a matter of fact: The EU countries are our largest source of foreign direct investments (FDI).
We think given this long relationship the EU should really take a close look of what has happened since 1 July, and we hope that the EU can start negotiating the ECA with us.
Recently the Korean president was in Berlin – if you had met him what would you have told him?
If I had the chance I certainly would ask him - since there is a long relationship between Korea and Taiwan as well and I think it is a mutual benefit - if Korea can help us to persuade the EU to have a similar arrangement. That would be nice. But Korea won't do so.
But the Koreans are big competitors for Taiwan. Would they have any advantage in helping you?
Just let me give examples: A few years ago we had an argument with the EU regarding IT products. The IT Agreement (ITA) is a information technology products agreement.
Taiwan is a member of ITA, Korea as well, and also the EU. Under that agreement all IT products exports and imports for member countries is duty free in order to facilitate trade of high tech IT products.
Several years ago we had an EU case with particular LCD monitor products (for computer monitors). The EU said, no, it does not belong to IT products, and we had to pay a tariff for that: 14% of tariff. Of course we sued the EU at the WTO and finally we won the case. Now we can export the LCD monitor to the EU free of duty.
Also one product, LCD plasma modules which belongs to ITA categories, so it should have a 0% tariff. And Korea specifically asked that this module be excluded from the IT products. Which means that we have to pay tariff.
We were wondering why Korea wanted to do so, because it is not to their advantage because they also export to the EU. And finally we realised: the reason for Korea's request was that since 1 July they didn't need to pay duty. But Taiwan had to pay then, although originally we didn't have to pay!
What are your requests and wishes for the German government?
It is of both sides' interest to intensify the relationship. Concerning the ECA I hope that the German ministry of economic affairs can help us try to promote the EU to sign the ECA with Taiwan.
Do you think that the German government can be used as a vehicle, as an instrument to make some success in Brussels?
We hope so. We do think so. Germany is a great, key member of the EU. If Germany can help us in facilitating this kind of EC arrangement I think this will be a chance for us.
We are also satisfied with our relations with Brussels. We do have annual bilateral consultations between Taiwan and the EU. Last November it was held in Brussels, this year it will be held in Taipei. Each side can address the issue of concern and can help to get through all things that are to be done. This is a very good channel.
Due to effective lobbying by the Taiwanese delegation for the ECA between Taiwan and the EU, the European Parliament on 11 May passed a resolution favouring the ECA.
What is the relation between Taiwan and mainland China?
When I was in Berlin last time I introduced the ECFA. ECFA is the Economic Cooperation Framework Agreement which we signed with China in June last year.
Many people – especially the business people in Germany and in Europe - must be very much interested in what is happening between Taiwan and China and what this ECFA is about.
What does the ECFA include?
ECFA is a framework only, so still a lot of agreements need to be negotiated to complete the whole thing.
I am personally in charge of two agreements: one is an agreement of trading goods and one of trading services.
I lead a delegation almost every month, we meet our counterparts from China to discuss the contents and to try to facilitate the agreement.
So what is the current state relations with mainland China and the pressure China is still applying to European countries when they turn towards Taiwan?
The relationship between Taiwan and China has been improving a lot since our new president (Mr Ma Ying-jeou, took office in May 2008) has launched the so called Pro-China Policy and increased links to China.
Under his leadership we have direct air links between Taiwan and China. This was unthinkable before. For the past six decades it was not allowed to have any links. Now they can fly directly, eight airports in Taiwan and 33 airports in China have a daily flight now connecting, and every week there are more than 370 passenger flights and 28 cargo flights every week!
We also are opening up to tourism from China. Last year there were 1.5 million Chinese tourists coming to Taiwan, and in this year the number can increase to 1.8 million.
The 370 flights a week are already not enough, so we are negotiating to increase the flights because of interactions in all different fields.
But aren't there lots of risks?
The relationship is really improving a lot. When there were tensions before people all said this was a dangerous place, and there will be war in Taiwan and China with an unstable situation for the whole region. But no longer does this kind of risk exist!
Of course ECFA signing is very important for both sides. Currently we have huge investments in China, officially at 98 billion US dollars. This is an official statistical proofed record, but in reality the amount is much higher than that, maybe double or triple, may be several hundred billion US dollars of actual investments.
Also the trade between Taiwan and China has a very important position. Last year trade was worth 152 billion US dollars. China now is our largest export market. So this kind of relationship even further increased after the sign of ECFA.
That means there will be more and more interactions, more and more tourists coming back and forth, and also every year a lot of Taiwanese tourists go to China. Some 4 million Taiwanese go to China – to see family members, to go sightseeing, for business because we have huge investments there, also some people go to school there, some students from Taiwan go to China. We also open up for Chinese students coming to Taiwan to study. This is really good.
So European countries which have very good relationships to Taiwan and want to increase the economic relations do not need to be aware of sanctions coming from China?
We already are trading with China and invest in China in such a big amount; economically this kind of fear and this kind of pressure no longer exists. We think if we have the ECA with the European Union plus we have the ECFA with China – all together it will be a win-win-win-situation! For the EU, for Taiwan and for China!