159

How Should
Taiwan Hand Tool Industry
React to BRICS
by Arthur Hsu, Industrial Analyst of MIRDC

For the past few years, the global

political and economic conditions have
been in a procedure of re-integration. Global Economic Environment Faced by
The developed countries face many Taiwan Hand Tool Industry
economic issues, so their domestic
industries can no longer take the lead With the fast development of China, China has replaced Taiwan
like they did in the past. However, some to become the largest hand tool export origin in 2003. Additionally,
emerging countries gradually stand the financial crisis in 2009 and the European sovereign debt crisis
out and have made contributions to the in 2012 imposed an impact on Taiwan hand tool industry, yet it still
global economic development. The demonstrated a brilliant performance in 2012. The export value of
most well-known emerging countries powerless hand tools reached NT$ 73.7 billion and its production
are “BRIC”, which stands for Brazil, value ranked the 2nd place over the years, amounting to NT$ 61.5
Russia, India, and China. They agreed billion. The performance of powerless hand tools in 2012 indicated
to include South Africa into the group that Taiwan hand tool industry is equipped with excellent and robust
in 2012, called BRICS, which takes up structure. Confronting rapid changes in the global environment and
43% of the global population and 17% the emergence of developing countries, Taiwan hand tool industry
of the global trade volume. To consider should consider the transformation to face uncertain market variables.
the purchasing power, BRICS accounts The article is focused on BRICS as target to analyze bilateral trades
for 25% of the global GDP. When a new between Taiwan and BRICS in recent years as well as to realize the
international order is formed, BRICS
business opportunities to serve as reference for adjusting the future
will become a pivotal force to affect the
direction.
global economy.

Hand Tool Import & Export Between Taiwan and BRICS

CHINA
Among BRICS, Taiwan hand tool industry demonstrates a high trade volume toward China. The largest
factor affecting the bilateral trade is the industrial status after ECFA is signed. Customs Import & Export Statistics
indicate that ECFA presents a positive growth on GDP, import & export, trade conditions, and social benefits for Taiwan.
ECFA significantly exhibits positive benefits on the macro economy. The early harvest list includes 5 items of hand tools
that are free from tariffs. Since ECFA becomes effective, these 5 items have saved NT$ 519 million of tariff till the end
of 2012 for Taiwan hand tool industry. The benefits of ECFA also include- “Taiwan has the advantage to enter Chinese
market after comparing with other leading opponents; Taiwan becomes the priority cooperative partner and portal for
foreign investors to enter Chinese market; industrial supply chain will be kept in Taiwan; Taiwan speeds
up to develop as an industrial logistics center. Three direct links provide the convenience for circulation
of cargo and personnel, reduction of bilateral goods tariff as well as elimination of non-tariff barriers that
will give an opportunity for Taiwan to become a multi-purpose logistics center of re-exportation, logistics,
distribution and processing of end products. Additionally, the government initiates many incentives,
such as government’s easing restrictions for Taiwanese industries to invest in China and encouragement
of returning to Taiwan that will facilitate Taiwan to become the operational headquarters of Taiwanese
industries.
160 Table 1 displays the import & export
value of Taiwanese powerless hand tools to
Table 1. Import & Export Value of Taiwanese Powerless China. Overall speaking, Taiwan hand tools
Hand Tools to China (Unit: NT$ 100 million)
present the trade surplus toward China. In
2012, trade surplus reached NT$ 3.66 billion,
2007 2008 2009 2010 2011 2012
presenting a gradual growth. Main export
Table 1. Import
Tools used & Export
in agriculture, forestry Value
or of Taiwanese
0.25 0.23 Powerless
0.46 0.47 0.77 0.83 products included extruding metal & rock
horticulture
Hand Tools to China (Unit: NT$ 100 million) drilling tools, wrenches as well as other hand
Saws 0.41 0.40 0.26 0.53 0.35 0.43
tools, and the amount was about NT$ 7.23
Files, pliers and knives 1.57 1.76 1.32 1.94 1.95 2.06
billion. Taiwan imported hand tools from
Wrenches 11.70 11.57 10.10 13.48 13.30 14.12 China including extruding metal & rock
Other hand tools 16.81 15.81 12.13 17.16 17.86 14.20 drilling tools, wrenches, other hand tools,
Hand tool sets 0.61 0.56 0.47 0.64 0.58 0.50 saws, files and pliers, the import amount was
Extruding metal & rock drilling tools 24.86 17.98 12.61 21.68 32.94 38.47 about NT$ 3.57 billion.
Knives with blades (pruning knives) 1.31 1.49 1.66 2.21 1.22 0.98
Razors and razor blades 0.03 0.01 0.00 0.01 0.00 0.00
RUSSIA
Scissors & Sewing Scissors 0.22 0.17 0.19 0.13 0.25 0.45
I n 2 01 2 , R u s s i a wa s
Paper knives, letter openers,
0.17 0.30 0.21 0.14 0.15 0.25 the 6th largest hand tool
erasing knives
export destination of Taiwan.
Total export value 57.94 50.27 39.40 58.40 69.37 72.30
Although the bilateral
Tools used in agriculture, forestry
0.61 0.49 0.36 0.51 0.58 0.48 trade amount of hand tools
or horticulture
between Taiwan and Russia is not high,
Saws 5.20 4.93 2.66 3.45 3.64 3.57
the demand for hand tools in Russia
Files, pliers and knives 3.58 4.05 2.07 2.54 2.50 2.69 shows a fast growing trend. Since Taiwan
Wrench 4.35 4.06 2.69 4.09 5.06 4.75 imports rather small amount of hand tools
Other hand tools 5.56 6.08 3.36 4.49 5.06 4.76 from Russia, hand tool trade between Taiwan
Hand tool sets 0.23 0.21 0.17 0.13 0.13 0.19 and Russia presents a surplus, amounting to
NT$ 2.73 billion, up 3 times over 2007. Main
Extruding metal & rock drilling tools 16.92 15.14 11.99 13.97 13.83 14.05
export products include other hand tools,
Knives with blades (pruning knives) 0.58 0.73 0.80 0.87 1.14 1.02 wrenches and hand tool sets, among which
Razors and razor blades 1.55 1.58 1.15 1.19 1.75 1.92 wrenches experience a rapid growth. Overall
Scissors & Sewing Scissors 0.65 0.71 0.64 0.83 1.09 1.05 export amount is almost a surplus, about NT$
Paper knives, letter openers, 2.72 billion. Import & export value of Taiwan
1.13 1.12 0.91 1.07 1.20 1.25
erasing knives powerless hand tools to Russia is shown as
Total import value 40.34 39.10 26.78 33.14 35.99 35.74 Table 2.
Surplus or deficit between Taiwan and
17.59 11.18 12.62 25.26 33.39 36.56 Excessive regulation, insufficient
China
transparency, high transaction cost and
Table 2. Import & Export Value of Taiwanese Powerless administration burden placed on business
Hand Tools to Russia (Unit: NT$ 100 million) operation and investment activities exist in
Russian economy. These negative factors must
2007 2008 2009 2010 2011 2012
be corrected in the long-term stable economic
Tools used in agriculture, forestry or
1.46 0.39 0.31 0.68 0.79 1.19 development. Russian economy is still in
horticulture
Saws 0.18 0.14 0.06 0.20 0.28 0.30 the state of highly non-commercial risk,
mainly originating from the government’s
Files, pliers and knives 0.34 0.35 0.17 0.33 0.56 1.21
c o n f l i c t i n g p o l i c y, s u c h a s c o r p o r a t e
Wrench 0.44 0.72 0.34 1.61 4.61 8.69
governance, execution, outdated judicial and
Other hand tools 5.29 5.97 4.02 8.06 10.12 12.28
official system that causes the investment
Hand tool sets 0.43 0.39 0.20 0.89 2.37 2.54 risk. Accordingly, though Taiwan hand tool
Extruding metal & rock drilling tools 0.47 0.08 0.03 0.16 0.22 0.52 makers regard the demand for hand tools in
Knives with blades (pruning knives) 0.03 0.02 0.00 0.03 0.04 0.03 Russia as being very potential, bureaucracy
Razors and razor blades 0.00 0.01 0.00 0.01 0.00 0.02 still affects policy formation and execution.
Scissors & Sewing Scissors 0.09 0.19 0.27 0.38 0.37 0.44 Meanwhile, poor efficiency and unreasonable
Paper knives, letter openers, erasing management impose pressure on business
0.00 0.00 0.00 0.01 0.02 0.19
knives operation, the government does not equally
Total export value 8.72 8.25 5.41 12.33 19.37 27.39 treat the enterprises, laws and decrees show
Total import value 0.00 0.00 0.00 0.00 0.02 0.10 unsteady and inconsistent, all resulting in poor
Surplus or deficit between Taiwan and effects for Taiwan hand tool makers to explore
8.72 8.25 5.41 12.33 19.35 27.29
China Russian market.
 161
Table3. Im port& ExportV alueofT aiwaneseP owerlessand
Tools to Brazil (Unit: NT$ 100 million)

2007 2008 2009 2010 2011 2012 In the past years, Brazilian
Tools used in agriculture, forestry or government nurtured its industry
0.08 0.16 0.13 0.18 0.17 0.25
horticulture and adopted a discriminatory
Saws 0.01 0.01 0.00 0.04 0.08 0.10 policy toward foreign
Files, pliers and knives 0.19 0.22 0.26 0.45 0.37 0.48 i n v e s t m e n t s . S i n c e 1 9 9 0 ’s ,
Wrench 1.12 1.28 1.26 2.15 1.95 2.24 Brazilian government has gradually adopted open
Other hand tools 1.29 1.63 1.20 2.09 2.21 2.01 policy and revised its measures that discriminated
Hand tool sets 0.27 0.43 0.31 0.54 0.56 0.51 foreign investments in order to improve its
Extruding metal & rock drilling tools 0.51 0.80 0.88 1.67 1.93 1.72 economic structure and enhance industrial
Knives with blades (pruning knives) 0.03 0.03 0.02 0.02 0.07 0.05 competitiveness, Based on this background,
Razors and razor blades 0.03 0.00 0.03 0.27 0.00 0.00 Brazilian government does not provide finance or
Scissors & Sewing Scissors 0.12 0.11 0.08 0.11 0.11 0.07
tax incentives to all foreign investments, resulting
Paper knives, letter openers, in barriers to Taiwan hand tool industry wanting
0.04 0.04 0.03 0.02 0.01 0.01
erasing knives to enter Brazilian market. On the flipside, Brazil
Total export value 3.68 4.71 4.21 7.54 7.46 7.44 and MERCOSUR provide investors with a
Total import value 0.04 0.07 0.08 0.07 0.04 0.08 wide and protected domestic demand market. If
Surplus or deficit between Taiwan and Taiwan hand tool manufacturers wish to set up
3.64 4.64 4.13 7.47 7.43 7.36
China plants for production, their products will focus on
Brazilian domestic market.
Table 4. Import & Export Value of Taiwanese Powerless
Hand Tools to India (Unit: NT$ 100 million)
INDIA
Since 2003, India has begun
2007 2008 2009 2010 2011 2012
Tools used in agriculture, forestry or
to experience rapid economic
0.02 0.02 0.03 0.06 0.09 0.09
horticulture growth and its economic growth
Saws 0.03 0.01 0.02 0.02 0.02 0.01 rate lied between 8% and 9%
Files, pliers and knives 0.07 0.05 0.08 0.08 0.08 0.07 from 2011 to 2012. India adopted
Wrench 0.52 0.51 0.55 1.11 1.18 1.07 the socialist planned economy and
Other hand tools 1.15 1.24 1.15 1.49 1.42 1.46 the government dominated the economic and
Hand tool sets 0.03 0.07 0.08 0.12 0.19 0.20
industrial development to focus on state owned
enterprises, national defense and heavy industry.
Extruding metal & rock drilling tools 0.94 2.97 3.44 6.70 6.02 4.08
However, Indian government showed low
Knives with blades (pruning knives) 0.02 0.03 0.02 0.03 0.03 0.04
administrative efficiency and the civil industry
Razors and razor blades 0.00 0.00 0.00 0.00 0.00 0.00
suffered the domestic depression. In 1991, Indian
Scissors & Sewing Scissors 0.05 0.07 0.07 0.08 0.07 0.07
finance was on the verge of bankruptcy. Later,
Paper knives, letter openers, erasing
0.01 0.01 0.01 0.01 0.02 0.01 Indian government was engaged in open policy
knives
and proactively reformed its finance and trade
Total export value 2.82 4.99 5.45 9.71 9.10 7.10
investment environment to gradually move
Total import value 0.32 0.36 0.24 0.37 0.55 0.58
toward the market economy.
Surplus or deficit between Taiwan and
2.50 4.63 5.21 9.34 8.55 6.52
China Table 4 shows the import & export value
of Taiwanese powerless hand tools to India.
Bilateral trade amount of hand tools between
BRAZIL Taiwan and India is not high. Since Taiwan
Bilateral trade amount of hand tools between Taiwan and Brazil
imported a rather small amount of hand tools
is not high. However, Brazil is the main country in South America.
from India, hand tool trade between Taiwan and
Since Taiwan imports a rather small amount of hand tools from Brazil,
India presented a surplus, amounting to NT$
hand tool trade between Taiwan and Brazil presents a surplus, amounting
650 million, up 3 times over 2007. Main export
to NT$ 736 million, up 2 times over 2007. Main export products include
products included extruding and rock drilling
wrenches, other hand tools and extruding & rock drilling tools. The demand
hand tools, other hand tools and wrenches. The
for these 3 items is considerably steady, the export amount is almost a surplus,
demand for these 3 items was considerably
about NT$ 744 million. Import & export value of Taiwanese powerless hand
steady, overall export amount was about NT$
tools to Brazil is shown as Table 3.
710 million. IMF statistics indicated that India
162 Table 5 indicates the import & export
value of Taiwanese powerless hand tools to
GDP was US$ 1,264 in 2010, up 23% against 2009. The GDP shows South Africa. Bilateral trade amount of hand
that disposable income and purchasing power are gradually increasing tools between Taiwan and South Africa is not
for Indian people. The disposable income and purchasing power reflect high. Since Taiwan imported a rather small
the potential of India’s domestic demand market, especially when Indian amount of hand tools from South Africa
machine tool industry ranks the 17th place in the world. Meanwhile, for about NT$ 9 million. As a result, hand
India is the 12th machine tool consuming country. The related demand of tool trade between Taiwan and South Africa
India’s machine tool industry imposes a considerable effect on Taiwan’s presented a surplus, amounting to NT$ 570
pneumatic and power hand tools; therefore, it will be the direction of million and showing a decrease over 2007.
deployment for Taiwanese pneumatic and power hand tool makers in Main export products were other hand tools
Indian market. and wrenches. Overall export amount was
about NT$ 580 million.
Table 5. Import & Export Value of Taiwanese Powerless
Hand Tools to South Africa (Unit: NT$ 100 million)

2007 2008 2009 2010 2011 2012

Tools used in agriculture, forestry or
horticulture
0.80 0.82 0.56 0.69 0.72 0.72 Main Issues for Taiwan
Saws 0.03 0.02 0.01 0.01 0.03 0.05 Hand Tool Industry to
Files, pliers and knives 0.31 0.21 0.18 0.22 0.25 0.30
Make Deployment in
Wrench 1.41 1.33 0.81 0.92 1.13 0.98
Other hand tools 3.53 3.29 2.22 3.06 2.80 3.01
BRICS
Hand tool sets 0.25 0.09 0.12 0.17 0.21 0.27
Extruding metal & rock drilling tools
Knives with blades (pruning knives)
0.42
0.05
0.31
0.03
0.16
0.02
0.26
0.03
0.30
0.02
0.34
0.02
A ccelerate Footsteps for Taiwan and
BRICS to Sign Free Trade Agreement-
Currently, Taiwan signed ECFA with China
Razors and razor blades 0.00 0.00 0.00 0.00 0.00 0.00
and does not have any preferential tariff
Scissors & Sewing Scissors 0.03 0.01 0.01 0.03 0.02 0.02
of free trade agreement with the other 4
Paper knives, letter openers, erasing
0.03 0.02 0.02 0.02 0.03 0.02 BRICS countries. As a result, the government
knives
should speed up its action to sign free trade
Total export value 6.85 6.14 4.12 5.42 5.50 5.75
agreements with the others to accomplish
Total import value 0.19 0.18 0.07 0.10 0.10 0.09
complete deployment of Taiwan hand tool
Surplus or deficit between Taiwan and
6.65 5.96 4.04 5.32 5.40 5.66 industry in BRICS.
China

SOUTH AFRICA
South African government promotes “South-South
E stablish Labor Division Within Hand
To o l I n d u s t r i e s B e t w e e n C h i n a
and Taiwan- Among BRICS, China has
Cooperation” to deal with changes of new economic and the highest correlation with Taiwan hand
trade environment as well as enhance its exploring trade tool industry in terms of its market scale
outside European countries. Therefore, South African and potential as well as cross-strait trade
government selects bread-winning products to export to key volume. Total export volume of cross-strait
countries in each region. In terms of introduction of foreign hardware almost reaches half of total global
capital and investment attraction, South African government also selects export volume. Facing the external impact,
the investment items that will attract some target countries to achieve the Taiwan hand tool industry should rely on
goal of high cost effect. Although Taiwan does not export too many hand its industrial advantages, such as excellent
tools to South Africa in terms of amount, the hand tools are one of bread- manpower, stable quality and flexible
winning products for export. Additionally, South Africa will continuously production efficiency to build Taiwan into
promote to establish free trade areas with other regions or countries, an international hand tool production and
including MERCOSUR, Turkey and India. However, South African development center.
government is short of manpower so that it does not proactively conduct
the agreement signing with above mentioned countries and regions.
Taiwan hand tool industry can use this opportunity to combine the force of
government, manufacturers and private sectors to facilitate the signing of
I ntegrate Industrial Demand of China’s
12th 5-Year Guidelines- Taiwan hand tool
industry can combine 7 strategic industries
free trade agreement between Taiwan and South Africa and to serve as an of China’s 12th 5-Year Guidelines, including
outpost for Taiwan hand tools to enter the related free trade areas.
 163

energy saving, environmental protection, new generation of information

technology, biology, high-end equipment, new energy technology, new
Conclusions and
materials, new energy automobiles and R&D of high professional hand tools Suggestions
to be in line with 6 key emerging industries (biotechnology, green energy, Taiwan hand tool industry faces many
high-end agriculture, tourism, medical care and cultural creative resources) challenges, including the global economic
promoted by Taiwan government and bring Taiwan’s soft strength, such slowdown during 2011-2012, European
as ICT advantage and cultural creativity into play to create a new market sovereign debt crisis, China’s rapid
demand. Taiwan hand tool industry can use China as a bridgehead to move emergence, the industry still maintains
toward the other 4 BRICS countries. a robust growth, indicating that Taiwan
hand tool industry is equipped with

P romote Hand Tool R&D Alliances and Co-Branding: Government or

research institutes should take actions to invite leading manufacturers
and associated factories to establish R&D alliances and integrate the
excellent industrial base and should speed
up its transformation to be in line with the
trend and demand of BRICS and should
upstream, midstream and downstream hand tool suppliers to create global eliminate the stereotype of consumers
competitiveness. Joint procurement and co-shared inventory can decrease toward the hand tool industry and injects
production lead time and inventory for manufacturers. In the meantime, R&D new vitality and elements. Taiwan hand
alliances can enhance supply chain integration, cost control and technical tool manufacturers still hold a cautious
upgrade and brand building to increase international competitiveness. In and optimistic attitude and firmly face
the aspect of brand promotion, there are more than 400 brands of Taiwan challenges and competition from the
hand tools, which cause a tough competition in the international market. global market in order to re-create the
Co-branding is thus promoted to march toward international market and to prosperity of Taiwan hand tool industry.
generate the opportunity to enter BRICS.