China-Taiwan ECFA deal excludes PVC from list of 88 petchems

25 June 2010 09:01  [Source: ICIS news]

By Judith Wang and Nurluqman Suratman

SHANGHAI (ICIS news)--Taiwan and China have excluded polyvinyl chloride (PVC) from a list of 88 petrochemical items under a trade agreement that is expected to be signed on 29 June, industry sources said on Friday.

The wide-ranging Economic Cooperation Framework Agreement, or ECFA, announced on Thursday, would lower tariffs on goods in the textile, auto parts, machinery and petrochemical sectors.

China and Taiwan will hold the fifth round of cross-strait talks in Chongqing, China, from 28–30 June and sign the trade pact on 29 June, a source from Taipei's semi-official Straits Exchange Foundation (SEF) said.

A total of 88 petrochemical items, including aviation kerosene, lubricant oil, propylene, vinyl chloride monomer (VCM), polypropylene (PP), polystyrene (PS), xylene and polycarbonate (PC), were included in an “early-harvest list” for duty reductions once the agreement is signed next week.

While the official list of petrochemical items had not been officially released by the two sides, sources said that details of the finalised list had already been leaked out to the media.

An official announcement on a detailed list was expected by Friday or early next week, the sources said.

The items on the list account for 16.1% of Taiwan's total exports to China, in terms of value, SEF said earlier in a statement.

The Taiwanese petrochemical industry would be very disappointed with the “early-harvest list” as it excluded some critical export items, such as PVC, said Jack Shieh, spokesman for the Petrochemical Industry Association of Taiwan.

“The export volume of these [items] to China is huge,” he added.

“While PVC is not included, its feedstock, VCM, is included in the list. However, linear low density polyethylene (LLDPE) had not been included,” said Danny Ho, a petrochemical analyst at brokerage firm Yuanta Securities in Taiwan.

Epoxy resin and its feedstock, epichlorohydrin (ECH), had also been included in the list, according to Ho.

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

PVC and LLDPE might still be included in a later list, as the two countries were expected to go through another round of negotiations six months later, said Ho.

“[But] the Chinese authorities are unlikely to exclude them from tariffs as it would mean that their ASEAN (Association of Southeast Asian Nations) partners would not be able to compete,” he added.

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

The China-ASEAN FTA could reduce Taiwan’s petrochemical exports to the mainland and trim Taiwan’s competiveness in that area unless it inks a similar deal with China, industry sources said.

Around 80% of the items in the "early-harvest list" would enjoy zero duty within two years, Zheng Lizhong, vice president of Association for Relations Across the Taiwan Straits (ARATS), said on Thursday.

Taiwan’s petrochemical exports to China will rise sharply once the tariff is lifted, as China needs to import a large volume of petrochemicals to meet the fast-growing domestic demand, industry analysts said.

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By: Nurluqman Suratman

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