FocusTaiwan’s petchem exporters eye FTA with China in 2010 - sources

10 February 2010 07:37  [Source: ICIS news]

By Judith Wang

SHANGHAI (ICIS news)--Taiwan may have missed the free trade agreement bus with China in January but petrochemical firms expect the fifth round of talks in May will help the country clinch the deal, industry sources said on Wednesday.

In January, China’s free trade agreement (FTA) with the 10-member Association of South East Asian Nations (ASEAN) came into force, allowing for zero tariffs on a large number of products including petrochemicals in China-ASEAN trade.

Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam comprise the ASEAN.

The China-ASEAN FTA could reduce Taiwan’s petrochemical exports to the mainland unless it inks a similar deal with China soon, industry sources said.

Taiwan and Beijing held their first round of official negotiations on an economic cooperation framework agreement (ECFA) in Beijing in January, domestic media reports said.

The Taiwanese government hopes to ink the proposed free trade agreement with China in May during the fifth round of talks, reports added.

“I hope the ECFA could be signed by the end of this year, making parts of products to enjoy zero duty from 2011, and finally extending to all the products in the next few years,” said Jack Shieh, executive manager of the Petrochemicals Industry Association of Taiwan (PIAT).

Currently, Taiwan exports about two-thirds of its petrochemical output to China – its nearest neighbour.

On an annual basis, a total of 10m tonnes of petrochemical raw materials are shipped from Taiwan to China, on which an average of 6.5% import duties apply.

Post-FTA, regional rivals in southeast Asia had an unfavourable advantage over Taiwanese petrochemical companies in the China market, said Wang Ching-Hua, secretary-general of Taiwan Synthetic Resins Manufacturers Association (TSRMA).

Moreover, China’s anti-dumping duties, like the recent one on butanediol (BDO) imports, could hamper business further, he added.

“If anti-dumping duties were still imposed by the mainlaind on some materials it would be even more difficult to export those products there,” Wang said.

This could force Taiwan-based firms to explore new markets, which would not be as lucrative as the huge China market, he added.

“We don’t want to lose China’s big market. As we know, to explore a new market is not easy, but it is very easy to lose an old one,” he added.

A zero-tariff agreement between China and Taiwan could be advantageous for both countries, market players said.

China also needs to import our products. So we hope the FTA could be inked as soon as possible. It is a win-win deal,” said Wang

While the FTA agreement with ASEAN countries may reduce China’s dependence on Taiwan to some extent, imports would not fall very sharply, sources said. 

“In my opinion, the margins of companies will be trimmed but export volumes will not likely fall sharply as the self-sufficiency ratio of the mainland’s petrochemical industry is only 70%,” Shieh said.

To discuss issues facing the chemical industry go to ICIS connect


By: Judith Wang
+65 6780 4359



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