How Taiwan will benefit from economic cooperation deal with New Zealand

More access to cheaper costs of imports.

Citing the official Central News Agency, DBS said Taiwan and New Zealand will sign an economic cooperation agreement (ECA) today. As a quasi-free trade agreement, the ECA will phase outtariff and non-tariff trade barriers between the two economies over the coming years.

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This will allow Taiwanese manufacturers to boost their market share in New Zealand, and more importantly, allow Taiwanese consumers to benefit from cheaper costs of agricultural and food imports.

The major products Taiwan exports to New Zealand include not only electrical machinery and transport equipment (23% oftotal exports), but also refined fuels (26%), chemicals (12%) and manufactured goods(29%).

On the other hand, Taiwan’s imports from New Zealand are primarily comprised offood (76% oftotal imports) and crude materials(12%). Taiwan ran
a trade deficit of USD 169mn with New Zealand in 2012, with the deficit fully stemming from primary commodities trade.

Admittedly, the total trade volumes between these two economies are not large. As a percentage of Taiwan’stotal exports and total imports, New Zealand accountsfor only 0.2% and 0.3% respectively.

The impact ofthe TW-NZ ECA on Taiwan’s broad economy will be limited. The political significance is probably greaterthan the economic impact, as this will be the firstfree trade deal that Taiwan has achieved with a country that it doesn’t have diplomatic relations.

Since the KMT party took powerin 2008,the Taiwanese government has been attempting to improve economic and politicalties with China.

The cross-strait Economic Cooperation Framework Agreement wassigned in 2010. Thanksto the improvementin cross-straitrelations, China now appears content enough to provide Taiwan more internationalspace and allow Taiwan to conclude free trade agreements with other countries.

There is news that Taiwan’s negotiations with Singapore on a quasi-FTA pact are also close to being finalized.

Taiwan has been lagging behind major competitorslike South Korea in promoting the establishment of a free trade network. Accelerating the process of trade liberalization will help the economy to maintain competitiveness and sustainable growth in the long run, and to avoid being marginalized in the environment of regional economic integration and globalization.