China - South Korea free trade pact to affect Taiwan's prosperity

By Michelle Yeomans

- Last updated on GMT

China - South Korea free trade pact to affect Taiwan's prosperity

Related tags South korea Japan

Export-dependent island Taiwan could be hurt by a China-South Korea free trade pact, which will turn its complacency for a privileged position in China - granted by ECFA in '08 - on its head.

A visit by the Chinese President Xi Jinping to South Korea earlier in the month marked the 12th meeting of the authorities in making further progress towards the pact that had first started in May 2012.

One area of business that is expected to be pushed particularly hard by the South Korean representatives is the country’s cosmetics and personal sector.

South Korean beauty products have already proved to be a big hit with Chinese consumers, who see the products as cutting edge, fashionable and high quality; although good value for money does not really feature as a selling point.

With this in mind, the Taiwanese ministry will perhaps have to retool its negotiation strategy to get more out of China when later negotiating tariff cuts on consumer goods.

According to Ma Tieying, DBS economist covering Taiwan; "Korean and Taiwanese manufacturing firms have been competitors for a long time. Both of them have large exposure to the Chinese market and the product structure of their exports is also identical trade deal."

Pact will target lower trade tariffs

Under current trading regulations with China, South Korean beauty products are hit with a tariff as high as 130%, putting them very much in the luxury and prestige end of the retail spectrum.

However, if lobbying from the South Korean industry is successful, as part of the free trade pact, players such as Amore Pacific, The Face Shop and LG Household & Health Care, will be looking to ensure that their products can be marketed in China without a far lower tariff, possibly even zero.

In recent years a huge influx of tourism from mainland China to South Korea has helped to raise the profile of many of the country’s consumer brands amongst Chinese consumers, with many putting shopping for cosmetics and other consumers goods at the top of their to do list.

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