5. The Trend in Regional Integrations (FTAs)
5.3 ASEAN International Trade Structure
In accordance with ASEAN statistics, ASEAN trade with the Plus Three countries seems strong. In 2010, total trade recorded an increased 28.9 per cent amounting to 533.3 billion U.S.
dollar – which was higher than prior to the decline in 2009 – with exports and imports grew by 34.9 per cent and 23.5 per cent, respectively. Total trade with Plus Three countries accounted for 26.1 per cent share of ASEAN’s total trade in 2010. The total foreign direct investment (FDI) flow from the Plus Three countries into ASEAN consistently on an upward trend, recording a surge of 62.4 percent, from 9.2 billionU.S. dollar in 2009 to 14.9 billionU.S. dollar in 2010.
Foreign direct investment flow from the Plus Three countries accounted for one fifth of the total foreign direct investment flows into ASEAN in 2010 [34].
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Nevertheless, according to Statistical Table 23, the trading structure of the ASEAN states tells another story. Majority of ASEAN states are extra-ASEAN trade or export oriented instead of being intra-ASEAN trade oriented. The weighting of extra-ASEAN trade averaged 74.6%.
While Lao and Myanmar depend much of their trade on intra-ASEAN, which are 57.1% and 48.6% respectively, other eight ASEAN states depend fewer than 25.4% on intra-ASEAN trade.
According to Statistical Table 24, the combined import and export trade with all ASEAN Plus One(s) countries were 31.0% and 32.4% and as with the ASEAN Plus Three countries, the combined import and export trade are 28.4% and 24.4% respectively. Further, by historical record, as according to Statistical Table 25, intra ASEAN trade remained relatively stable at 21.89% in 1999 and 27.58% in 2008. Even in the year 2010, the intra ASEAN trade remained at 25.86%.
Figure 7, Extra Export and Intra Exports of ASEAN
Source: ASEAN Statistical Year Book 2008, 2009, 2010.
$100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000
/通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式 /通用格式
US$ million
Extra Exports and Intra Exports of ASEAN
Extra ASEAN Exports Intra ASEAN Exports
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Figure, 8 Ratios of Extra Export and Intra Exports of ASEAN
Source: ASEAN Statistical Year Book 2008, 2009, 2010.
In comparison with the intra and extra trade structure with the European and NAFTA that provided by the Eurostat from Statistical Table 26, trade structure of both European Union and NAFTA are import oriented economies with long term international trade deficits. An in European Union, the majority of trade activities are intra-EU oriented where import account for 38.2% of overall trade in EU and export accounts for 35.3% of overall trade in 2011 as show on Statistical Table 27 for import and Statistical Table 28 for export. Thus, in comparison with the EU trade structure, with an average of 25.4% on intra-trade and 74.6 on extra-trade as show on Statistical Table 25, the international trade structure in ASEAN FTA can clearly be qualify as export orientated trade block.
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% of Total Trade
Extra Exports and Intra Export of ASEAN
Extra ASEAN Exports (%) Intra ASEAN Exports (%)
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By definition, the term “Marginalization” generally describes the overt actions or
tendencies of human societies whereby those perceived as being without desirability or function are removed or excluded (i.e., are "marginalized"…) from the prevalent systems of protection and integration, so limiting their opportunities and means for survival [19]. And that is exactly what had seems happen to country such as Taiwan which was technically excluded in the East Asia regional economic integration. Although Taiwan is a major player in the East Asia trading arena, Taiwan was not participated in the East Asia regional integration much. The cause of difficulty is, of course, the emergence of China as a regional political and economic power and its effort to isolate Taiwan politically or marginalize Taiwan economically in any which way it can.
As mentioned in the earlier in this study that, China denies Taiwan being recognized by international organization as an independent state and therefore denies Taiwan’s accession to become member of any known internal organizations such as United Nation and Asia
Development Bank. Moreover, for the same reason, Taiwan was denied by China by political and economic influence in the international trading arena to conclude any FTA with its major trading partners. Subsequently Taiwan can only conclude FTA with its five political allies in the Central America.
Even though the marginalization sounds with much intimidation, Taiwan’s trade figure in recent years tells another story. First of all, as mentioned earlier in this case study, domestic Taiwan market is too small and thus Taiwan depends on export for economic development as well as growth. Secondly, although the East Asian regional integration trend was first initiated by the formation ASEAN FTA in 1992, most of the FTAs in East Asia were singed and went into effect from November 30, 2002, when Japan-Singapore FTA went in to effect, and January 1, 2010, when ASEAN-South Korea FTA, ASEA-Australia, and ASEAN-India FTA went into effect.
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According to Statistical Table 24, Taiwan accounts for 1.5% of ASEAN export and 1.9%
of ASEAN export on the year 2010, also according to Statistical Table 19 where six major ASEAN states together accounts for 13.7% or 30.7 billion U.S. dollar of Taiwan export in 2006, nevertheless, the export volume had grown to 16.5% or 50.7 billion U.S. dollar of Taiwan export in 2010. That is 20 billionU.S. dollar or 65.15% more in trade expansion within five years. The imports from 6 major ASEAN states to Taiwan, on the other hand, according to Statistical Table 20, although the volume had grown through the years, from 23.3 billion U.S. dollar in 2006 to 32.6 billion U.S. dollar in 2011, a 9.3 billion U.S. dollar or 39.9% in trade expansion over five years, their share to Taiwan imports stays relatively stable at around 10.5% throughout the five years period.
The story of other two major trade partners in the East Asia region Japan and South Korea can also be toll. Taiwan’s export to Japan although had grown from 16.3 billion U.S. dollar in 2006 to 18.2 billion U.S. dollar in 2011, the share of Taiwan export had declined from 7.3% to 5.9%, an evidence of slower growth that is lower than annual overall growth rate. Taiwan’s export to South Korea also had grown from 7.2 billion U.S. dollar in 2006 to 12.4 billion U.S.
dollar in 2011, a 72.2% growth over the five years, but the share of Taiwan export only grown from 3.2% to 4.0%, an evidence of growth rate that is higher than of annual overall growth rate.
Taiwan’s only trade partner in the East Asia region that had both growth on import and export on volume as well as relative total share is China. Export from Taiwan to China had grown from 51.8 billion U.S. dollar in 2006 to 84.0 billion U.S. dollar in 2011, a 62.16% growth, and the relative total share to Taiwan’s export grown from 23.1% to 27.2%.
When considering the trade statistics from ASEAN side, as according to Statistical Table 30 and Statistical Table 31, which represent import and export trade data from 2009 and 2010 respectively, where trade with Taiwan was below 1.3% for export and below 1.7% for export in 2009, in 2010 export clime up to 1.5% for export and 1.9% for import, a clear evidence that
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Taiwan is making trade expansion in ASEAN market even without the FTA with ASEAN or any one of the ASEAN member state.
In the case with South Korea, prior to South Korea-ASEAN FTA had become effective, South Korea accounts for 4.2% or 34,292.9 million U.S. dollar of export destination and 5.6% or 40,447.4 million U.S. dollar of import source in the 2009. As with the FTA become effective in 2010, South Korea accounts for 4.2% or 44,980.1 million U.S. dollar of export destination and 5.5% or 53,648.2 million U.S. dollar of import source. Although the trade volume had increased 32.73% for import and 31.16% for export, the overall share of trade are similar after the FTA went on effect.
In the case with Australia, prior to Australia-ASEAN FTA had become effective, Australia accounts for 3.6% or 29,039.3 million U.S. dollar of export destination and 5.6% or 14,810.8 million U.S. dollar of import source in the year 2009. After the FTA become effective in 2010, Australia accounts for 2.1% of or 20,175.4 million U.S. dollar of export destination and 3.3% or 35,250.8 million U.S. dollar of import source. Both import and export trade volume had increased, 36.22% for import and 21.39% for export, the relative share of overall trade did not significantly change after the FTA went on effect.
In the case with India, prior to India-ASEAN FTA become effective, during the year 2009, India accounts for 3.3% or 26,520.3 million U.S. dollar of export destination and 1.7% or
12,595.5 million U.S. dollar of import source. As with the FTA become effective in 2010, India accounts for 3.4% of or 36,028.7 million U.S. dollar of export destination and 2.0% or 19144.7 million U.S. dollar of import source. Just like the case with South Korea, the trade volume also had increased, 32.73% for import and 31.16% for export, but the relative shares of trade are similar after the FTA went on effect.
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With above trade statistical analysis between Taiwan and ASEAN, it is clear Taiwan manage to expand its trade with ASEAN states without the benefit of signing FTA with ASEAN, and ASEAN’s Taiwan import growth rate is higher than the overall growth import rate.
Figure 9, Share of ASEAN Import and After FTA become Effective
Source: ASEAN Statistical Year Book 2009, 2010.
Figure 10, Share of ASEAN Export Before and After FTA becomes Effective
Source: ASEAN Statistical Year Book 2009, 2010.
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South Korea India Australia Taiwan
% Share of ASEAN Import
Before and After Sign FTA with ASEAN
2009 2010
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South Korea India Australia Taiwan
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Before and After Sign FTA with ASEAN
2009 2010
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In contrast to three other countries, Australia, India, and South Korea, which had just signed FTA with ASEAN and went on effect on January 1, 2010, their formation of FTA with ASEAN did facilitate or encourage more trade. However, as according to the trade record, the rate of trade facilitation and growth do not necessary match up with the overall import and export growth rate of ASEAN. Therefore, the notion that Taiwan is being marginalized on East Asian economic integration is difficult to withstand. The trade data displays a different story as well as different trend. Indeed, that most of the East Asian economies, including the ASEAN states, are export oriented, and they are depending on other import oriented economy such as United States and European Union for growth. Consequently, even though Taiwan was not participated in the East Asian economic integration, the marginalization effect is yet to have significant influence on for Taiwan’s international trade.
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6. Concluding Remarks
6.1 CEPA, the Hong Kong Experience
In the case of Hong Kong, CEPA includes trade in goods, services and trade and investment facilitation. The categories of goods covered are wide and tariff reduction rate are wide and fast. Included are wide field of trade in services, trade and investment facilitation, multifaceted cooperation on the bilateral economic and trade fields to develop the institutional measures, expanding the field of a free trade agreement. After CEPA went on effect on July 1, 2003, according to statistical data, it was the sustained growth from service industry that saved Hong Kong from decline of economic development. In another word the tread creation is solely on the service industry while trade diversion occurs on the manufacturing industry of Hong Kong.
As stated in section 4.1 that in the year 2000, only 4.8% of Hong Kong GDP was
contributed by manufacturing industry whereas 87.2% of was contributed by the service industry when the CEPA was sign in 2003. Despite the fact that all exports of products of Hong Kong origin were exempted from import duties since January 1, 2006, and the local content rule that stipulated in CEPA was aimed to bust the development of manufacturing industry sector in Hong Kong, the manufacturing industry in Hong Kong only persisted until 2006 and then continues to decline from 4.8% to 1.8% in 2010. Not to mention at 30% of the FOB export price on rule of origin that including local labor cost and cost on product development, which is consider very low and very liberal.
What CEPA have benefit to Hong Kong was that China liberates trade in service to business firms in Hong Kong to capture market in China in relatively short time. Even though CEPA only initially liberate only 17 service sectors to Hong Kong service providers, over the 8 years period and additional 8 supplements of CEPA, China liberates total of 301service under 47 service sectors. Furthermore, liberation of trade in service to Hong Kong likely to continually to
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negotiate later by the additional supplements as trade in service between Hong Kong and China are still not fully liberated as though they are within a single custom union. There should be more supplements to CEPA in the future.
On the other hand, CEPA may bust economy to grow since it deeply integrates Hong Kong economy within China. Then, what will happen to Hong Kong if China economy can no longer sustain rapid growth as it was since the reform and opening up? In such case, will Hong Kong economy continue to grow or decline in parallel with China economy? Further, what will happen to Hong Kong when the Western firms began to bypass Hong Kong and utilize other major city such Shanghai as the gateway to further cultivate China as an international market?
More statistical observation and data required to evaluate the outcome as such.
6.2 Suggestion for Future Cross-Strait Negotiations
Singing ECFA with China is probably the most important trade agreement ever to conclude between Taiwan and China. Although the agreement was sign by the semiofficial representatives from both Taiwan and China, ECFA is a milestone as it provides the basis for further liberalization in goods and services trade across the Taiwan Strait and signifies the start of preferential trade relation between Taiwan and China.
Over the context of ECFA, apparently, it is China that liberates more trade in goods and trade in services to Taiwan, in which China is offering Taiwan more and better preferential trade terms. Actually, Taiwan was and still bans most China made products and services from China for national security reasons. Nevertheless, with the progress of liberation of trade in good and trade in service, actually it is Taiwan offering China preferential trade terms. In this point of view, Taiwan not just reduce tariff but also has to open new territory for trade to Chinese imports, whereas China only has to reduce trade tariffs. Therefore, as reflection from the CEPA, should there are more supplements to ECFA negotiated in the future, it is likely Taiwan will ease more
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the import restrictions and tariffs on Chinese imports, and ultimately to all imports of goods and majority of services trade from China like that of the CEPA.
Even though under the ECFA, only 267 items export from China to Taiwan and 539 items export items from Taiwan to China on trade in goods were listed for tariff reduction over the three years period, majority of traded goods are still facing tariffs and restrictions. Likewise mentioned in section 3.6 that Taiwan will continue its ban on the importation of 865 Chinese agricultural products and still post did not lower tariffs on 1,377 industrial products.
Consequently, as mentioned earlier in the section 4.5.1, that the change in trade figure after ECFA went into effect is not exactly exciting or strong enough to justify that sign of ECFA with China significantly enhanced or better facilitation of trade with China. Therefore the initial influence of ECFA to Taiwan economy cannot be evaluated overly positively for Taiwan export or negatively for import. The long term influence is worth observing.
Another issue in ECFA is the Rule of Origin under the Early Harvest of Trade in Goods.
It is questionable how much industry in Taiwan or China maybe benefited from it. The Regional Value Content from Annex II, Article 6, require that VNM, the value of all non-originating materials, adjusted based on CIF, may not exceed ten percent (X ≤ 10%) of the FOB value of the given good to consider local content. Consequently, it is a form of discouragement of foreign direct investments to invest either in Taiwan or China to become as gateway to access other side’s market, as it takes more time and resource to satisfy the above 90% requirement on rule of origin. Thus, the rule of origin is not necessary beneficial to industries in Taiwan and even install a road block on foreign direct investments that wish to produce goods in China and export their products to Taiwan and vice versa. Also the subsequent effect of foreign direct investments can only be measured and evaluated years after, the actual effect should be measure from the long term observation like the situation CEPA with Hong Kong.
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The liberation of trade in services trade is unprecedented in cross-strait trade relation, and the service industry in Taiwan is not as globalized or in competitive standard as to that of Hong Kong. Both sides are eager to cultivate each other’s market and learn the local tactics as Taiwan regulations as well as service industries had just begun to adjust themselves to face competition from China. ECFA initially only liberate limited number of 8 business service and one financial service sector from Taiwan and 8 business services and three financial services sectors from China.
Just like the influence of foreign direct investment, it will take some more years as bank from had just recently satisfy the local regulation requirement to noting that the one year representative office to formal establishment requirement from Taiwan side and one year
representative office and at least two years of operation with profitable operation in the preceding year before application from China side,the sector related data are yet to be released. Thus, it is still early to make a fair estimate of impact as well as implication on services industries on Taiwan over ECFA. The implications are worth observing.
Further, although the market size in Taiwan is not exactly large, and the production of industrial goods in Taiwan is usually lack of economy of scale, therefore there is an implicit danger if Chinese firms were to practice of dumping in cross-strait trade. For instance, China has been world's largest target country for global countervailing related trade disputes (Wang 2012) and already, the importation of cement and related materials from China are being imposed of anti-dumping tariffs by International Trade Commission of Ministry of Economic Affairs [35].
Therefore, the effectiveness and efficiency of trade dispute settlement mechanism under the
Therefore, the effectiveness and efficiency of trade dispute settlement mechanism under the