A worried Taiwanese government has declared that it will offer tax rebates to domestic firms amid fears over South Korea’s upcoming trade agreement with the US.
In a bid to give a leg up against competing foreign firms, the Ministry of Economic Affairs (MOEA) has announced that it will be offering tax rebates for imported industrial raw materials and components, writes CENS.
The announcement comes in response to the free trade agreement between the US and South Korea, with the news that the trade pact will come into effect by the end of the year.
Now, Taiwan casts on eye on its trade rival in South Korea, which will enjoy the ditching of tariffs on 95 percent of its products over the next five years.
Further tariffs will also be eliminated in the years to come, with Columbia and Panama also enjoying similar deals.
So we imagine Taiwan, a geopolitical ally of the US like South Korea, might be feeling a tad left out.
Not least because the US is Taiwan’s third largest export market, a multi-billion dollar industry in which much of what is produced is directly in competition with South Korean products.
According to Chuo Shi-chao, director general of the Bureau of Foreign Trade at MOEA, around “70 percent of Taiwan-made products” are forced to compete with Korean products in the US market.
Which is why it's, perhaps, understandable that MOEA is taking steps to ensure Taiwan is not edged out as a manufacturer and exporter to countries like the US.
Indeed, South Korea has also just signed a free trade agreement with the EU, though considering the powder-keg economy it is unlikely that Taiwan is overly concerned of missing out on Irish and Greek cash.
Of course, many Taiwanese products already enjoy tariff free status under the International Technology Agreement, but not all products are listed as part of the ITA, with, for example, large flat screen panels excluded from the deal. That can be a point of contention.
So, as well offering tax rebates on materials imported for domestic manufacturers, the MOEA will seek to help differentiate products and explore new markets.
Taiwan will also reportedly step up its own efforts to sign its own FTAs with major trade players.