The views presented here are of Justin Huang, Secretary General,Taiwan Textile Federation


For the past decades, Taiwan and China were important trade partners with surplus in Taiwan side. In the latest four years, China not only is Taiwan's biggest export market, but also the largest import supplier of textile and apparel products(Table 1). In this regards, to sign a free trade agreement with China had been a most important issue for Taiwan government and industry. After several rounds of negotiations, Taiwan and China finally signed the "Cross-Straits Economic Cooperation Framework Agreement" (ECFA) on June 29th, 2010.The Agreement took effect on September 21st, 2010 after the governments of both sides completed the legislatorial procedures. The scope of the agreement composes a text and five annexes dealing with trade of goods,trade of services, provisional rule of origin, trade remedy measures and the most important part-the "Early Harvest" list which specifies items for which both sides will extend reductions of tariff and openings in the services at an early date.


Since China is the biggest export market for Taiwan textile and apparel with the export value of US$2.542 billion in 2010, taking the share of 23% of total value of textile and apparel exports, the items included in the Early Harvest list will enhance the competitiveness of Taiwan products in the Chinese market,and therefore the Early Harvest list is most concerned in Taiwan textile and apparel industry.

According to the Early Harvest list, China will reduce tariffs on 539 items of products from Taiwan while Taiwan will reduce tariffs on 267 items of products from China. 136 items of the 539 items offered by China are textiles and apparel products, and Taiwan offers 21 textile products among the 267 items. The tariff rate of the products listed in the Early Harvest list will be phased out in three stages within 2 years. The first tariff concession for both sides was effected starting from January 1, 2011, and the second and third ones will take place on the first day of 2012 and 2013 respectively (as Table 2).

The Implication of Early Harvest to Taiwan's Textiles and Apparel Industry


The concession of tariff will benefit the export country right away. In the meantime, because of the tariff reduction there is also the opportunity to boost the trade and increase the revenues of China and Taiwan entrepreneurs.


The benefit of trade growth-The most obvious benefit created by the tariff concession will be the growth of bilateral trade, especially for the competitive industries. Taking the "ASEAN plus one" as an example, after the implementation of tariff reduction in July 2005, the trade value of China to ASEAN countries surges greatly. The growth rate is 24.1% in 2005, 26.3% in 2006, and even reaches 53.6% in 2007, 36% in 2010. While reviewing the Early Harvest list offered by China, it is estimated that Taiwan textile industry shall be benefited by the Early Harvest provisions based on the analysis of the export performance of the textile products and the evaluation of the high quality of Taiwan textile products. Therefore, it is anticipated that the growth rate of textiles trade could reach up to 20% in the coming years.

The benefit of tariff reduction- In the Early Harvest list offered by China, there are 18 items for tariff rate under 5%, 107 items for rate between 5% and 15%, and 11 items for rate above 15%. The export values of these items from Taiwan to China are US$307.6 million, US$1551.5 million, and US$14.86 million respectively. Based on the tariff reduction schedule mentioned above, in year 2011 the benefit created by the tariff reduction will be 95.62 million US dollars. Moreover, considering the likely growth of export value as stimulated by tariff concession, the benefit is estimated to be US$120 million.


The utilization of tariff reduction benefit-According to the statistics from the Bureau of Foreign Trade, for the past 3 months 6,469 cases benefited by the preference of tariff with export amount of USD1.14 billion for all merchandises included in Early Harvest List, and for textile and apparel products 657 cases and USD40 million. The benefit of tariff reduction is expected to be growing in the future.


The win-win for Chinese, Taiwan and foreign companies-


  • The inclusion of textile sector in the Early Harvest List puts Taiwan textile industry on a level playing field with their counterparts in ASEAN while enabling the Taiwan enterprises to keep their production in Taiwan.
  • With the implementation of ECFA, Taiwan is anticipated to attract multinational corporations to invest in Taiwan and create more employment opportunities in Taiwan.
  • The ECFA will allow Taiwan companies to position themselves more competitively in China compared to their vigorous Japanese and Korean competitors.
  • With duty-free concessions Taiwan textiles companies could enhance product competitiveness, increase the will of keeping their production in Taiwan and expand exports. Furthermore, it will increase the amount of sourcing from Taiwan for Taiwanese and foreign traders in China.
  • If Taiwan textile companies can seize the opportunity to enter China, upgrade production, develop their own brands and distribution channels there, they will create a healthy environment for market leadership in China.
  • Taiwans companies have also established supply chain networks in China and Southeast Asia. The ECFA will help link these Chinese and Southeast Asian networks together, putting Taiwan at the center of a new Asia-Pacific product manufacturing and innovation chain. Taiwan will be the hub for foreign business to expand into Asia-Pacific markets, and Taiwan surly will become the gate for global enterprises to enter the huge China market.


As the Secretary of General of Taiwan Textile Federation, I wish international buyers, brands, and trade partners understand the signing of ECFA is a milestone in the history of textile and apparel industry between both sides of Taiwan Strait. For the time being, Taiwan and China play an important role in production and marketing supply chain. With the implementation of ECFA, I wish the agreement can be well known and fully utilized by the enterprises and help them creating more business opportunities.

 

As the Secretary of General of Taiwan Textile Federation, I wish international buyers, brands, and trade partners understand the signing of ECFA is a milestone in the history of textile and apparel industry between both sides of Taiwan Strait. For the time being, Taiwan and China play an important role in production and marketing supply chain. With the implementation of ECFA, I wish the agreement can be well known and fully utilized by the enterprises and help them creating more business opportunities.