Signing a free trade agreement with India is a preferable alternative for Taiwan’s semiconductor industry


Due to the labor shortage in Taiwan and the search for a manufacturing partner to relocate Taiwanese companies based in China, India and Taiwan seem to be ideal partners for each other. Accordingly, the signing of an FTA (Free Trade Agreement) is expected to be a valid step towards removing all avoidable barriers to trade and investment and leading to a paradigm shift in the tariff scheme. Taiwan’s new southbound policy and India’s “Act East” initiative serve as a common thread to encourage and deepen bilateral interaction. India is pushing more Taiwanese semiconductor companies to choose India as a manufacturing partner due to high demand for a steady supply of chips. India’s proactive approach to attracting investment has paid off. India is committed to creating a manufacturing hub by encouraging more inward investment. And the Production Linked Incentive Scheme (PLI) is a lucrative offer to make this idea a reality. Through this scheme, the Indian government offers incentives linked to manufacturing performance. The Indian government has identified 14 sectors, such as automotive, electronics, aviation, textiles, and many more for these performance awards.

In 2021, two Taiwanese companies, Foxconn and Wistron, have been chosen for the PLI program and it is expected that many more Taiwanese companies will have this eligibility to receive PLI benefits. With an increasing number of such investments and business collaborations, India and Taiwan plan to secure this ecosystem by signing an FTA. In fact, the FTA will ensure a certain degree of liberalization of commercial and manufacturing operations by eliminating the maximum possible tariffs, trade barriers, quotas and subsidies from both jurisdictions. The main objective of the FTA is to create more value-added platforms for long-term investment opportunities by ensuring international standards. Both countries need to remember a fact that the FTA will only be able to stimulate minimum levels of protection in some sensitive countries and therefore they need to investigate their national inequalities and establish a basic safeguard framework for businesses.

For example, intellectual property acts as a shield for a company during technology transfer and regional marketing, but such intellectual property could be problematic for both countries due to the national inequalities of India and Taiwan. India’s compulsory licensing and Taiwan’s patent coupling system are highly contested intellectual property mechanisms. Taiwan’s intellectual property law prevents generic drug marketing approvals until patents expire, while India’s patent law allows a third party to produce a patented product during the life of a patent. a patent through a compulsory license. Therefore, companies may need the vigilance of both governments during the drafting of the FTA. To ensure the most achievable outcome of this FTA, a thorough discussion with the company’s general counsel and legal and intellectual property attorneys from both jurisdictions should be crucial before the whole process is launched.

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  • Signing a free trade agreement with India is a preferable alternative for Taiwan’s semiconductor industry
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