Oficina Económica y Cultural de Taipei en Chile

Results of Implementing Provisions of the Cross-Straits Economic Cooperation Framework Agreement’s Early Harvest Program

Bureau of Foreign Trade, Ministry of Economic Affairs
February 13, 2012

The early harvest program under the Cross-Straits Economic Cooperation Framework Agreement (ECFA) came into effect on January 1, 2011. As a result, import tariffs on goods named in the ECFA’s Annex I: Product List and Tariff Reduction Arrangements Under the Early Harvest for Trade in Goods (hereinafter “early harvest list/early harvest goods”) will be reduced to zero in three stages over two years. What follows is a report on the results of implementing tariff-reducing measures in 2011.

I. Taiwan’s businesses have saved more than US$122 million in tariffs
A. According to mainland China’s customs data on tariffs and trade for all of 2011, imports from Taiwan were valued at US$124.9 billion, a figure 8 percent higher than that of 2010. About US$19.85 billion worth of these imports were early harvest goods, 9.88 percent higher than the previous year. Some US$4.12 billion worth of goods had reduced tariffs applied. Taiwan’s exporters have enjoyed tariff savings of US$122.62 million.
B. According to Taiwan’s customs data on tariffs and trade for all of 2011, imports from mainland China were valued at US$43.38 billion, 21.29 percent higher than 2010. Early harvest goods accounted for US$5.04 billion, a 28.14-percent jump over the previous year. About US$1.04 billion of mainland Chinese imports had reduced tariffs applied. Tariffs saved on goods imported from mainland China in 2011 amounted to US$22.76 million.

II. Industrial and agricultural products accounted for in the early harvest program did particularly well
A. Industrial products
The five categories of products with the fastest growth in 2011 coming from the nine industries affected by the early harvest program are:
1. “Other” (including such items as artificial joints; other objective lenses for cameras, projectors or photographic enlargers or reducers; and other processed glass) grew 55.39 percent. For instance “Glass of heading 70.03, 70.04 or 70.05, bent, edge-worked, engraved, drilled, enameled or otherwise worked, but not framed or fitted with other materials” (HS: 70060000) registered growth of 128 percent.
2. “Transportation equipment” registered growth of 46.11 percent, of which “lighting of a kind used for motor vehicles” (HS: 85122010) saw growth of 279 percent.
3. “Machinery and components” registered growth of 29.17 percent, of which “Cermets and articles thereof” (HS: 81130000) saw growth of 300 percent.
4. “Petrochemicals” registered growth of 8.16 percent, of which p-Xylene (HS: 29024300) saw growth of 125 percent.
5. “Textiles” registered growth of 8.03 percent, of which “combed single cotton yarn, with 52mn but ≤80mn” (HS: 52062400) grew 364 percent.

B. Agricultural products
According to data from the Council of Agriculture, in 2011, agricultural products on the early harvest list exported to mainland China were valued at US$125.64 million, registering growth of 127 percent over the previous year. Among them, chilled saury amounted to nearly US$7.37 million, a jump of 355 percent; live grouper were at US$102.05 million, up 143 percent; tea was at US$10.20 million, up 63 percent; and Oncidium orchids were at US$54,000, growth of 709 percent.

III. Taiwan enterprises increasingly making use of the early harvest program’s provisions
An analysis of businesses that applied for certificates of origin between January and December 2011 shows that 4,976 certificates were issued. Of these, 2,147 were issued to enterprises that had exported to mainland China within the three years (2008-2010) prior to the implementation of the ECFA’s early harvest program. The remaining 2,829—a number far larger than the figure for existing exporters—were issued to enterprises that had not previously exported to the mainland.

A further look at the statistics shows that, in several industries, more than half of firms did not previously have experience exporting ECFA early-harvest items to mainland China. These include agricultural products, machinery and components, textiles, dyes, electronic machinery and petrochemicals.

IV. Investment promotion and employment
A. Foreign investment:
According to the Ministry of Economic Affairs (MOEA) Department of Investment Services (DOIS), in 2011 the MOEA and related agencies attracted direct foreign investment totaling US$9.532 billion—nearly 106 percent of the targeted US$9 billion. This investment created 23,938 jobs in Taiwan.

Among the investment projects, 156 cases, totaling nearly US$6.42 billion, were handled by the DOIS. Japan, United States and the British Virgin Islands were the top three sources of investment by country/region, each accounting for 43, 27 and 14 projects, respectively. The top three sectors in terms of aggregate planned investment were finance/insurance, at US$1.42 billion; computers, electronics and optics at US$1.29 billion; and electronic components at US$552 million.

U.S. and Japanese businesses account for the bulk of direct foreign investment in Taiwan both in terms of the number of projects and aggregate amount. Eyeing the business opportunities created by ECFA and seeking to build extra capacity overseas in the wake of the March 2011 tsunami/nuclear accident, Japanese firms, such as Hokuto Corp. and Canon Inc., have dramatically increased their investment in Taiwan.

The fact that Taiwan’s products on the ECFA early harvest list enjoy tariff reductions or exemptions when exported to mainland China has also prompted Japanese manufacturers to invest in Taiwan. Among those that have done so is leading electromechanical manufacturer FANUC Corp., which is expected to help boost Taiwan’s machine tool industry.

B. Record-high investment by overseas Taiwanese firms
DOIS figures show that investment by overseas Taiwanese firms has grown annually from 2007 through 2011. In each of these years, investment exceeded targets, with that in 2011 amounting to a record NT$46.9 billion (about US$1.58 billion).

Reasons for such investment include:
1. Making the most of the ECFA’s early harvest provisions on trade in goods and the resulting cross-strait business opportunities:
Fair Friend Group and Swancor Industrial Co. Ltd. are examples of firms investing in Taiwan to benefit from ECFA early harvest provisions. Fair Friend Group has invested NT$1.2 billion in Miaoli and Taichung to expand machine-tool factories.
2. Tapping into Taiwan’s technical and R&D expertise to produce high value-added products:
Kuo Hsin Technology Co., Ltd. has announced plans to invest NT$1.5 billion into operations in the Pingtung Export Processing Zone in southern Taiwan. The firm is improving its competitiveness by developing key parts for membrane filters. Meanwhile, Capxon Electronic Industrial Co., Ltd. has purchased land in Taoyuan County’s Longtan Township to the tune of NT$1 billion to set up facilities for R&D and the manufacture of high-end solid-state capacitors.
3. Employing Taiwan’s advantages vis-à-vis integrating corporate groups’ resources:
Fulgent Sun, a manufacturer of performance footwear, has invested NT$630 million in facilities in Yunlin Science Park. Excellence Opto. Inc., a maker of LED parts and related products, has set up its operations headquarters in Jhunan Science Park in Miaoli.

V. Conclusion
Since the signing of the ECFA, Taiwan has emerged as an attractive investment destination. According to the December 2011 report “Business Risk Service” produced by U.S.-based Business Environment Risk Intelligence, of the 50 countries assessed, Taiwan tied with Norway for 3rd place in Profit Opportunity Recommendation, behind only Singapore and Switzerland and second in Asia. It received a high score of 73 in that category, in a year in which most nations saw their scores fall amid the ongoing European debt crisis and a recession in the U.S.

The ECFA early harvest program officially kicked in on January 1, 2011. During its first year, only 76 items were exempt from tariffs. When the program entered its second stage on January 1, 2012, 94.5 percent of listed goods became exempt. Tariffs on all remaining items will be eliminated in 2013. The ECFA’s benefits will become more evident as these measures gradually make themselves felt.

Looking ahead, the MOEA will continue to implement the terms of the ECFA and negotiate follow-up agreements and economic cooperation pacts to further expand the pact’s benefits. With the ECFA as a foundation, the MOEA will continuously strive to realize the economic goals of “strengthening Taiwan, linking with the Asia-Pacific and deploying globally.”