South Korean FTAs Take Effect, Taiwan Exports Threatened

South Korean FTAs Take Effect, Taiwan Exports Threatened
China Times editorial (Taipei, Taiwan, Republic of China)
A Translation
October 28, 2013

Summary: The Free Trade Island policy is a step in the right direction. What's missing is execution and implementation. Taiwan's exports have set off alarms. The government must move quickly. it must respond to short-term economic risks. It must carefully plan and implement mid and long term strategy. It must make hay while the sun shines. Only then can it revive Taiwan's economy.

Full text below:

Taiwan's exports in September were unexpectedly weak. They spelled an end to four consecutive months of positive growth. The annual growth rate declined 7%. The total amount in dollars decreased by 1.5% since August. Aggregate exports from January to September amounted to $ 226.64 billion. This spelled an increase of only 1.3% over last year. The lack of export momentum is worrisome. Imports in September increased 8.8% over August. But decreased 0.7% over the year. Cumulative January to September imports decreased by 0.9%. Overall, the foreign trade situation looks bad.

Consider the status of exports to different regions. Exports to Europe have accelerated significantly. Exports to the United States and Japan have remained steady. Mainland China and the ASEAN region account for nearly 60% of our exports. What is worrisome is that 3rd quarter growth is now negative. The future remains uncertain.

Consider the third quarter as it affects the global economy.  The United States, Europe, Japan, and Mainland China are the largest economies. Their manufacturing PMI has remained at 50 or more for three straight months. This means the economy is still growing. Theoretically Taiwan's export numbers should be improving. Yet the latest statistical data is unsatisfactory. September exports fell unexpectedly. This cannot be explained away as a short-term fluctuation. This may be due to long-term structural changes. If exports to the Chinese Mainland and the ASEAN region continue to underperform this month, it will be a major warning sign for Taiwan's economy.

Taiwan's exports and the international economic situation have diverged. This is something seldom seen in the past. Eurozone GDP growth rate in the second quarter ended a seven quarter long recession, the longest in postwar history. Growth resumed. It was the fastest since the first quarter of 2011. This was apparent in the increase in imports to Taiwan. The U.S. economy is back on track. Japan's Abenomics is beginning to take effect. The two economies are generally stable. Taiwan's exports to these two countries has remained steady. What is worrisome is Asian-Pacific region emerging markets. Mainland reforms are in full swing. Long-term economic uncertainties have been intensified. Sooner or later, the US must cease QE. When it does, Asian-Pacific emerging market funds will withdraw. This will impact the economic outlook for the Chinese Mainland and East Asian markets, exchange rates, and stock markets. These factors will all affect demand.

In short, concerns about the tapering off of QE, Mainland Region reforms, and the excessive concentration of export structures, may explain Taiwan's poor foreign trade numbers. But the question remains. How should Taiwan deal with them?

First, we must understand the changes in the global economic situation. Currently there are three major concerns. One. The Fed has yet to announce when and how it will end quantitative easing. Uncertainty remains. Past talk of QE unsettled the East Asian economy. Subsequent market reactions have moderated. But the damage done to the real economy remains unknown. Two. The U.S. government shut down in October for 16 days. U.S. GDP growth is expected to decrease 0.4% to 0.5%. Worse, the fiscal cliff has merely been postponed, not resolved. US economic risk remains. Three. The Chinese Mainland is undergoing reform. Economic growth has been downgraded from "high speed" to "medium speed." The economic structure has been changed from "factory" to "market." Dividends from reforms continue coming. But the attendant risk has increased. This will accelerate cross-Strait economic and trade coopetition.

In addition to short-term economic risks, Taiwan faces mid and long-term challenges. Taiwan requires other strategies. Put plainly, it requires FTAs and regional integration. Taiwan's main competitor is South Korea. It has been the most aggressive signer of FTAs. In recent years, its FTAs have begun to pay off. In July 2011 the Europe-Korean FTA took effect. In March 2012 the US-Korean FTA took effect. The Chinese Mainland-Korean FTA is expected to take effect in early 2014. The numbers tell the story. Take March 2012 to February 2013, and the US-Korea FTA trade situation. Taiwan's exports to the United States during this period to fell by a total of $1.9 billion, by 4.65%. South Korean exports to the U.S. grew by 3.87%. The US-Korean FTA changed the competitiveness of Taiwan and Korean products in the U.S. market. This happened after only one year. The gap in the growth rate will obviously widen. How can Taiwan companies not be concerned?

The government is aware of the increasingly harsh economic environment. In recent years, it has made efforts to promote ECFA, the Taiwan New Zealand Free Trade Agreement, GATS, and the soon to be signed Taiwan Singapore Economic Partnership Agreement. It has attempted to increase the international competitiveness of our companies. It has attempted to create more favorable conditions for them. It has sought to join the TPP, RCEP and other forms of regional cooperation, to seek equal economic status, to help Taiwan businesses break into international markets, and to expand their economic territory.

It has helped Taiwan businesses expand outward. It must also take advantage of Taiwan's geographical location and industrial structure. It must transform Taiwan into an Asian-Pacific international financial center, operating center, and capital-raising center. Its foreign policy must be to actively negotiate FTAs, while seeking to join the TPP, RCEP and other forms of regional cooperation. Its domestic policy must be to change its domestic environment. People flow, cash flow, business flow, and product flows must be liberalized. Market opening must be accelerated. This will attract a foreign presence, and create an international free trade environment. These two strategies complement each other. Implementation of a Free Trade Island is also the best strategy to revive Taiwan's stifled economy.

The Free Trade Island policy is a step in the right direction. What's missing is execution and implementation. Taiwan's exports have set off alarms. The government must move quickly. it must respond to short-term economic risks. It must carefully plan and implement mid and long term strategy. It must make hay while the sun shines. Only then can it revive Taiwan's economy.
   
中時電子報 新聞
中國時報 　2013.10.28
社論－韓FTA成果發酵 台出口現危機
本報訊

    　台灣9月出口意外疲軟，終止連續4個月正成長，年成長率下滑7％，總金額亦較8月減少1.5％。1至9月出口累計總金額為2266.4億美元，僅較去年同期成長1.3％，出口動能堪慮。同時9月進口雖較8月份增加8.8％，但年減0.7％，且累計1至9月進口較去年同期減少0.9％，整體來看，外貿狀況真的不好。

    　檢視對各地區的出口狀況，出口至歐洲地區幅度明顯加快，對美、日兩國的出口表現持穩，令人擔心的是，占我國出口近60％的大陸及東協地區，第3季成長率掉落至負成長區，且未來動能仍不明朗。

    　綜觀第3季全球景氣，美、歐、日、中四大經濟體製造業PMI連3個月維持在50以上，代表景氣維持擴張，理論上台灣出口數據應該漸入佳境，但最新的統計數據卻不盡人意，9月份出口出現的意外衰退，似乎不是暫時性短期波動所能解釋，可能是長期性的結構轉變，如果本月對大陸及東協地區出口依然表現不佳，將是台灣經濟的大警訊。

    　台灣出口與國際經濟情勢趨勢呈背離現象，是過去少見的現象。歐元區第2季GDP成長率已擺脫戰後最長的連7季衰退困境，漲幅是2011年第1季以來最快，景氣回溫立即呈現在對台灣商品進口的增加上。美國經濟也回到正軌，日本安倍經濟學仍在發酵中，兩國經濟大體穩定，台灣對這兩個國家持穩的出口表現十分合理。令人擔心的則是亞太新興市場，尤其大陸改革如火如荼，長期的經濟不確性加劇，且美國QE遲早必須退場，退場將導致資金撤出亞太新興市場，造成對大陸及東亞各國市場、匯率、股市及對經濟前景衝擊的擔憂，這些因素都會影響實質需求。

    　簡言之，QE退場疑慮、大陸改革及過度集中的出口結構都可以做為台灣近期外貿數據不佳的解釋，但我們不免要問，台灣要如何應對？

    　首先，必須明白全球經濟局勢的變化，目前三大重點值得關注。第一，Fed仍未宣布量化寬鬆退場的時機與方式，使得不確定性延後，由過去幾次QE討論震盪東亞經濟，市場的反應雖已逐次遞減，但對於實體經濟的損傷仍是未知。第二，10月份美國政府停擺16日，市場預期將使美國GDP減少0.4％~0.5％的成長幅度，加上財政懸崖只是暫緩並未解決，美經濟風險仍存。第三，大陸進入改革時期，經濟成長目標已由「高速」轉為「中速」，經濟結構亦計畫由「工廠」轉為「市場」，改革紅利仍將持續釋放，但其背後必然伴隨著風險的提升，且將加速兩岸經貿的「競合」賽局。

    　其次，除了短期對於經濟風險的掌握，面對中、長期的挑戰，台灣必須還要有其他的戰略。明白的說，就是FTA及區域整合的布局，以台灣主要競爭對手韓國為例，其近年來最為積極簽談FTA，成果已經開始發酵了。2011年7月歐韓FTA生效，2012年3月美韓FTA生效，預計2014年初中韓FTA也將啟動，數據會說話，就2012年3月至2013年2月美韓FTA生效1年的貿易情況來看，這段期間台灣出口至美國總金額減少19億美元，衰退幅度達4.65％，但韓國對美國的出口成長了3.87％，顯示美韓FTA改變了台、韓產品在美國市場的競爭力，僅僅施行1年，成長率就明顯拉開了，台灣企業怎麼能不擔心？

    　政府也知道愈來愈惡劣的經貿環境，近年來努力推動ECFA、台紐貿協、服貿及即將簽訂的台星經濟夥伴協定等等FTA，盡力強化企業國際競爭力，創造有利的條件，同時積極爭取加入TPP與RCEP之區域合作，爭取平等經貿地位，協助台灣企業進入國際市場，更全面拓展經貿版圖。

    　此外，除了協助台灣企業走出去，未來也應把握地理位置及產業結構優勢，打造台灣成為亞太國際級的金融、營運、籌資中心。具體來說，對外策略是積極協商FTA，同時爭取加入TPP及RCEP等區域合作；再來就是要改變國內環境，透過人流、金流、商流、物流的鬆綁，加速市場開放、吸引外資進駐，創造國際化的自由經貿環境，兩大戰略相輔相成，落實「自由經濟島」的目標，這也是解救台灣「悶經濟」的最佳戰略。

    　「自由經濟島」的施政方向正確，缺的是執行與落實，台灣出口已拉警報，政府必須加速作為，短期經濟風險小心因應，中、長期戰略必須用心規畫、積極落實，晴天先備雨具，才能帶領台灣經濟再起飛。