Taiwan Wants To Sign ECFA With China In First Half Of 2010

by Mary Swire, Tax-News.com, Hong Kong

19 January 2010

Although there appears to be some doubt about the timing of the initial formal meeting between Taiwan and China on the proposed economic cooperation framework agreement (ECFA), which should still be held later this month, Taiwan’s government still hopes that the agreement itself will be signed before the end of the first half of 2010.

It was reported that Taiwan’s Straits Exchange Foundation and China’s Association for Relations Across the Taiwan Straits were still discussing the details of their first meeting on the ECFA. Until the date of that meeting is confirmed, the possible details and timing of any subsequent agreement are impossible to define.

In particular, it is believed that an "early harvest" list of items eligible for lower tariffs to be included in the ECFA has yet to be agreed. It has been confirmed that negotiations on ECFA will be complicated, and will involve long preparation, because of the sensitivity and complexity of the issues involved.

Therefore, reports in Taiwan that the ECFA would contain provisions whereby 90% of each country’s goods would be tariff-free within 10 years (the usual World Trade Organization’s free trade agreement benchmark) would appear to be premature in this period before proper negotiations begin.

However, its government continues to work towards the agreement in order, it says, that Taiwan can maintain its export competitiveness, avoid being marginalized in its foreign markets, attract new foreign investment, and stimulate its economic growth and boost employment. With the ECFA as a starting point, Taiwan will actively pursue free trade agreements with other major trading partners.

A survey of Taiwanese CEOs by the Commonwealth Magazine showed that 88.5% of those who participated in the survey said they support signing the ECFA. They reason, in agreement with the government, that signing an ECFA will help Taiwanese-invested companies in China be more competitive, particularly after the entry into force of the Association of Southeast Asian Nations-China free trade agreement on January 1.

The survey said that the five sectors that have been mentioned as candidates for preferential treatment under the ECFA's "early harvest" program – financial services, textiles, petrochemicals, machinery and auto parts – accounted for TWD2 trillion (USD63bn) in exports in 2008, with one-third of that total directed to China, reflecting their considerable influence.

However, although the CEOs widely support President Ma Ying-jeou's initiative to sign an ECFA, 45% are not confident that his administration will successfully protect Taiwan's interests. They also believe the measures proposed by the government to help vulnerable industries and workers cushion the blow of any subsequent trade pact – investments of TWD95bn over the next 10 years – are inadequate.

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