Pact eyed as Taiwan trade thrives
Korea severed diplomatic ties with Taiwan 20 years ago in order to appease China, which views the island as a renegade province, but economic relations between the two remain intact.
Burgeoning bilateral trade may soon get another shot in the arm as officials from Seoul and Taipei in June to discuss a two-way investment treaty.
“As private companies have worked hard to continue trade [in the absence of diplomatic ties], it has been possible for the two to stay economically connected.” said Min Jeong-gi, an official at the Ministry of Knowledge Economy.
Bilateral trade between Taiwan and Korea stood at $3.45 billion in 1992, when ties were officially severed, compared to $3.03 billion one year earlier - highlighting the lack of impact the changing political tide had on trade.
Trade volume has grown consistently ever since, peaking at $33 billion in 2011 despite the global economic slowdown, according to Korea Trade-Investment Promotion Agency (Kotra).
Taiwan now ranks as Korea’s seventh-largest trading partner, and the fifth-biggest consumer of Korean exports, according to the Ministry of Knowledge Economy.
Chips for assembly in electronic goods are a major source of revenue for exporters from both countries, with Korea sending $5.4 billion worth of semiconductors to Taiwan last year and receiving $7.2 billion of chips in return.
“As the two countries have similar strengths, their major trading items tend to cross paths, including semiconductors, steel, computers and chemicals,” Kotra said in an annual report released last month. As such, most trade is concentrated on a few core items.
However, the absence of diplomatic ties has presented a few roadblocks for Korean companies, such as there being no state-supported push for a trade pact to erase double taxation.
Taiwan has signed treaties with 20 countries including the U.K. and France exempting their businesses that invest in Taiwan from being taxed by both governments. However, Korean companies enjoy no such privilege.
Yet to attract more direct investment, Taiwan has now opened talks on inking a bilateral investment treaty for the first time in two decades as the ghosts of the past slowly melt away.
Representatives from the two sides met earlier this summer in Taipei to exchange information on the terms of such a treaty at Taiwan’s request, the Ministry of Foreign Affairs and Trade said last month. Negotiations are set to begin in October, it added.
Such a treaty would protect Korean companies or individuals investing in Taiwan by guaranteeing the protection of their business activities.
Taiwan opened a trade center in Korea in 2003 and holds regular business conventions to drum up more investment from Korean companies.
By Lee Sun-min [email@example.com]