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The policy is expected to be implemented as soon as the first half of 2014, and could be applied to products including sheets, bars and galvanized steel, according to the island’s Economic Daily News.

“We are not surprised to hear this news since Taiwan is making an effort to accelerate the Economic Cooperation Framework Agreement (Ecfa) negotiations,” a Kaohsiung-based Chinese mill representative said.

Taiwan and China signed the Ecfa in June 2010. Under the agreement, the two sides agreed to "gradually reduce and remove trade and investment barriers and create a fair environment" and provide protection for investments to boost two-way capital flows.

In response to the possible removal of the import tax, steel market participants in Taiwan urged the government to fight for a level playing field.

The Taiwan Steel & Iron Industries Assn urged the government to look into several matters before deciding on opening up Taiwan’s market to Chinese steel products. Among the matters it highlighted were the taxation of Taiwanese steel exports to China and Beijing’s tax rebates for its own steel exports.

A total of 34 Taiwanese steel products shipped to China enjoy lower import taxes of 3-8% after the signing of the Ecfa, but 100 Chinese steel products are not taxed when exported to Taiwan, the association pointed out.

It also urged the government to undertake measures similar to that of other Southeast Asian countries to counter China’s tax rebates for its steel exports.

China relies on the export market because of its serious domestic overcapacity, and its steel exports get tax rebates of 5-13%. This disrupts the international market, the association said.

Southeast Asian countries including Thailand, Vietnam and Malaysia have all undertaken anti-dumping measures against certain steel products from China.

China exported 1.24 million tonnes of steel products to Taiwan in 2012, accounting for 33% of the island’s total imports.