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Bureau of Foreign TradeMinistry of Economic Affairs

August 2003

Benefits to Bilateral Trade and Investment from the ROC-Panama FTA

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Contents The introduction of the ROC-Panama FTA

The economic benefits of the ROC-Panama FTA for goods

The economic benefits of the ROC-Panama FTA for services

The economic benefits of the ROC-Panama FTA for investment

Conclusion

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The Introduction of the ROC-Panama FTA

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Why the ROC choose Panama as its firstpartner for an FTA

The willingness of trading partners ,the FTA strategies of the ROC and the impact to our domestic industries

the geographical advantages of Panama

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The Bilateral trade of Panama and the ROC

ROC exports toPanama

123.96 -37.17 127.36 2.74 62.38 -24.68

ROC imports fromPanama

4.21 160.1 4.81 14.17 2.46 -18.971

Trade value 128.17 -35.56 132.17 3.11 64.85 -24.485

Year

2001 2002 2003 (1-7)

Amt(million)

Growth(%)

Growth(%)

Growth(%)

Amt(million)

Amt(million)

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The Negotiation of ROC- Panama FTA

first round : Oct.3-4, 2002 in Panama

second round : Jan.13-17, 2002 in Taipei

Third round : Mar. 17-21, 2003 in Panama

Fourth round : May 19-23 in Miami

special meeting for agriculture:

June 20, 2003 in San Francisco

Fifth round: Aug.1-10 in Taipei

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The ROC-Panama FTA is the ROC’s first

The presidents of both countries has signed the Agreement during the ROC and Central American countries summit on August 21, 2003 in Taipei

The ROC-Panama FTA

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The Content of the ROC-Panama Agreement(1)PreambleCh1. Initial ProvisionCh2. General DefinitionCh3. National Treatment and Market Access for GoodsCh4. Rules of OriginCh5. Customs ProceduresCh6. Safeguard measuresCh7. Unfair Trade PracticesCh8. Sanitary and Phytosanitary MeasuresCh9.Measures on Standards, Metrology and Authorization ProceduresCh10. Investment Services and Related Matters

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The Content of the ROC-Panama Agreement(2)

Ch11. Cross-border Trade in ServiceCh12. Financial ServiceCh13. TelecommunicationsCh14. Temporary Entry for Business PersonsCh15. Competition PolicyCh16. Intellectual PropertyCh17. TransparencyCh18. Administration of the AgreementCh19. Dispute SettlementCh20. ExceptionsCh21. Final Provisions

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The Economic Benefits of the R.O.C.-Panama FTA on Goods

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Present tariff rates on Panama imports to ROC: 3.46% (5.7% for agricultural products, 0.3% for industrial products )

Panama tariff rates on ROC exports: 6.37% (10.27% for agricultural products, 6.19% for industrial products )

In 2002, the ROC had a US$122 million trade surplus with Panama, 25 times the value of Panama exports to the ROC

Pre-ROC-Panama FTA Tariff Rates:

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Despite many industrial products manufactured in the ROC enjoy a comparative advantage, few are sold to Panama for the following reasons ：

Large geographical distance

Lack of familiarity with Panamanians consumption habits

Panama’s small domestic market

Pre-FTA ROC-Panama Trade in Goods

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Reduced tariffs and lower costs will increase interest of manufacturers.

Bilateral exchanges will increase manufacture’s familiarity with Panama market conditions and needs

Panama Products expected to export to the ROC: men’s and children’s underwear, jackets, suits, shirts, women’s blouses and men’s undershirts

Post-FTA Trade in industrial products :

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ROC Tariff Reduction Schedule

ImplemtationPeriod

Numberof Items

%Numberof Items

% Items %

A 6187 0.7121 670 0.4425 5517 0.769

B 1729 0.199 297 0.1962 1432 0.1996

C 532 0.0612 335 0.2213 197 0.0275

EXCL. 192 0.0221 164 0.1083 28 0.0039

Q 48 0.0055 48 0.0317 - -

Total items 8688 1 1514 1 7174 1

ROC

Total Agriculture Industry

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Panama Tariff Reduction Schedule

Implemtationperiod

Numberof Items

%Number of

Items%

Numberof Items

%

A 4181 0.4874 570 0.4045 3611 0.5036

B 1934 0.2253 186 0.132 1748 0.2437

C 2042 0.238 337 0.2392 1705 0.2378

EXCL. 423 0.0493 316 0.2243 107 0.0149

Q - - - - - -

Total items 8580 1 1409 1 7171 1

Panama

Total Agriculture Industry

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The Percentage of Zero-tariff items of ROC

ImplemtationPeriod

Numberof Items

%Numberof Items

%Numberof Items

%

Zero-tariff 6187 0.7121 670 0.4425 5517 0.769

Zero-tariffafter Ten Years

8448 0.9723 1302 0.86 7146 0.9961

Total Items 8688 1 1514 1 7174 1

ROC

Total Agriculture Industry

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The Percentage of Zero-Tariff items of Panama

ImplemtationPeriod

NumberofItems

%Numberof Items

%Numberof Items

%

Zero-tariff 4181 0.4874 570 0.4045 3611 0.5036

Zero-tariffafter ten years

8156 0.9507 1093 0.7757 7063 0.9851

Total Items 8580 1 1409 1 7171 1

Panama

Total Agriculture Industry

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Reductions will go into effect immediately for tariffs on some live animals and fish (chapters 1 and 3), coffee (chapter 9), oil seeds and fruits (chapter 12), gums and resin (chapter 13), plant materials (chapter 14), and plant and animal oils (chapter 15).

The ROC open up tariff quotas for certain Panamanian products (pork belly,mackerel, sardine and herring, carangid, liquid milk, bananas, pineapples, meat of fowls, meat offal of fowls, and refined sugar) at a rate equivalent to between 2 and 14 % of the ROC’s WTO tariff quotas for 2004.

The ROC’s Tariff Reduction on Panamanian Agricultural Products :

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The Panama’s Tariff Reduction on ROC Agricultural Products :

Panama will open up its markets to ROC agricultural products such as fish and other aquatic invertebrates (chapter 3), products of animal origin (chapter 5), live trees and other plants (chapter 6), grains (chapter 10), oilseeds and fruits (chapter 12), and gums and resins (chapter 13).

Certain agricultural products from the ROC, including eels, benito, beans and vegetables, and fruits, should see increased exports after Panama opens up its markets.

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The ROC’s Tariff Reduction on Panamanian

Industrial Products :

Reductions will go into effect immediately for tariffs on dyes, cosmetic, photographic goods (chapters 29 to 38), plastics (chapter 39), paper products (chapter 48), man-made fabrics, cotton and fabrics (chapter 54 and 58), shoes (chapter 64), steel products (chapter 73), base metals (chapter 82 and 83), machinery (chapter 84), electrical equipment (chapter 85), optical instruments (chapter 90), and miscellaneous manufactured articles (chapter 96).

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The Panama’s Tariff Reduction on ROC

Industrial Products :

The ROC enjoys advantage in terms of industrial products, especially in areas such as textiles, dyes, machinery and mechanical appliances, printed circuits assemblies, monitors, automobile parts, and motorcycle parts.

The ROC can expect to see a considerable increase in export opportunities after the FTA goes into effect.

Given the complementarities of the industrial structures of the two countries, the agreement will be sure to create a win-win situation for both countries once it goes into effect

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Ten years after the agreement goes into effect, the ROC will allow 97% of all Panamanian products to enter its market tariff-free, with Panama allowing 95% of all ROC products to enter its market tariff-free.

In the first year after the FTA goes into effect, the ROC will save an estimated US$500,000 in tariff payments on exports to Panama, with savings expected to grow to at least US$1.3 million after ten years. Likewise, Panama can expect to see substantial tariff savings on its exports to the ROC.

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The Economic Benefits of the R.O.C.-Panama FTA on Services

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Benefits of Legal Assurance (Investments)

National Treatment and Most-Favored-Nation Treatment

No Performance Requirement unless specified in the negative list

No Nationality Requirement of Senior Managers unless specified in the negative list

Investors Can Sue the Government to settle disputes

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Benefits of Legal Assurance (Cross-Border Trade in Services and others)

Cross-Border Provision of Services without Commercial Presence should be allowed unless specified in the negative list

Facilitate the Temporary Entry of Business Persons

Establish Committees to Monitor and Review the Enforcement of this Agreement

Telecom: access to networks, anti-competitive behaviors forbidden, laboratory test recognition

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Benefits of Market Access (1)

Negative list: Enabling bilateral commitments of larger extent of market access, with reservations made for the sectors by listing legal measures that do not conform to the articles of this FTA.

Exceptions(1): Measures beyond the scope of this FTA: such as government services, government procurement, air services under traffic rights.

Exceptions(2): Measures maintained by local or municipal governments.

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Benefits of Market Access (2)

WTO-plus (FTA>WTO) of this FTA

ROC Panama

Larger extent market access

Health and Social; Transport; Recreation, Cultural, and Sports Services

Business; Health and Social; Communications; Tourism; Recreation, Cultural, and Sports; Transport Services

Certain extent market access

Business; Financial; Communications; Tourism Services

Distribution; Education; Financial Services

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Benefits to Market Access (3)

Example- Multi-Modal Transport: ROC maritime and air transport investors are allowed to invest 100% in Panamanian road transportation companies.

Example- Financial: Panamanian banks without being ranked as top 500 or 1000 of the world’s banks are granted a waiver to establish branches in ROC.

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Benefits Market Access (4)

Example-Telecommunications: For Panamanian investors, they can invest up to 49% of telecom companies in ROC, not the 20% ceiling in ROC’s WTO commitments. For ROC investors, they can invest in value-added services in Panama.

Example- R&D, leasing, market survey, technical testing and analysis, advertising, equipment maintenance: these business-related services are opened for foreigners to provide services.

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ROC’s Advantage

Location: heart of east Asia economic zone.

high-tech industries and supporting services such as R&D, transportation, financial, and telecommunications.

ROC

JapanKorea

China

ASEAN countries

Benefits of Corporate Strategy (1)

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Panama’s Advantage

Location: heart of Americas and bridge of oceans.

Canal; Colon Free Zone ; No foreign exchange risk against US$

Member of future FTAA

Panama

NAFTA

Latin America

Atlantic OceanPacific Ocean

Benefits of Corporate Strategy (2)

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The Economic Benefits of the R.O.C.-Panama FTA on Investment

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The ROC investment in Panama

The Firms Amount（Unit:million）

58 932.76

The Main InvestorsEvergreen Group、ICBC 、Central Trust of China、YihsinPlastic Corporation、OECC

The Main IndustriesShipping, Finance, Management of export-processing zone,Plastic processing, construction, Import-export business,Restaurant, Retail

Resource: IDIC, MOEA

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The FTAA (free trade agreement of the Americas) will be completed by 2005.

Panama and the other American countries will combine with the North American Free Trade Area to form thebiggest economic entity in the world, a $13 trillion market of 34 countries and nearly 800 million people .

This will make Panama an even more attractive destination for investment from Taiwan.

Panama could serve as Gateway to FTAA

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Panama is located at the central point of Central America and serves as a link between North and South America, and between the Pacific and Atlantic ocean

It also offers high-quality manpower, and it has become a base for investment by Taiwanese companies.

Geographical Advantage of Panama

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The ROC signed an investment protection agreement with Panama in March, 1992, providing an extra level of assurance for investors.

Investment Protection Agreement

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Conclusion- benefits After the signing of the ROC-Panama FTA

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The Benefits After the Signing of the ROC-Panama FTA

the industries of ROC and Panama are complementaryExpanding the overseas marketIncreasing bilateral economic corporation and serving as the gateway for FTAAIncreasing the willingness of other trading partners to negotiate an FTA with ROC

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