South Korea’s biggest business lobby group on Wednesday asked the government to move fast to restore trade and investment relationship with Taiwan, which has become a new tech hub in place of China amid friction with the United States.
The Federation of Korean Industries (FKI) said on Wednesday that it submitted a policy proposal to the Ministry of Foreign Affairs and Ministry of Economy and Financed to stimulate Korea-Taiwan trade and investment ties. The proposal recommended the government to sign a double taxation avoidance agreement with Taiwan, Korea’s 6th largest trading partner, as well as an investment guarantee pact.
Taiwan has ascended as an important strategic partner globally with U.S. tech giant Google setting up a $100 million data center in Taiwan and free trade agreement talks reignited between the U.S. and Taiwan, the FKI said. Major countries including China are putting out efforts to enhance economic partnership with the East Asian country, it added.
In 2010, China signed an Economic Cooperation Framework Agreement (ECFA) with Taiwan. Japan also signed an investment guarantee agreement in 2011 and a double taxation voidance agreement in 2015 to account for more than 10 percent of Taiwan’s import market.
Korea’s share, however, has remained at 6 percent level since 2010.
The FKI called for an agreement to be signed between Korea and Taiwan in the first half of this year that calls for investment promotion and free trade. The Korean government should also put out efforts to resolve activity restrictions imposed by its counterpart on Korean shipping companies.
Following the termination of diplomatic relations between Korea and Taiwan in 1992, the Taiwanese government banned Korean vessels from operating in the Taiwan-Japan route, making it impossible for Korean shippers to collect and ship cargos of Taiwan-Japan imports and exports.
China, on the other hand, has eliminated taxation on major export items of Taiwan after the signing of ECFA in 2010, allowing its market share in the Taiwanese import market to go up from 14.8 percent in 2010 to 20.4 percent in 2019.
The FKI urged that Korea should move fast and sign economic agreements with Taiwan to boost its exports at a time when emerging countries like China and India, as well as Association of Southeast Asian Nations are beefing up protectionism measures after Covid-19 outbreak.
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