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Taiwan government faces challenges after ECFA: scholars

Focus Taiwan News Channel, Taiwan

Taiwan government faces challenges after ECFA: scholars

14 August 2010

By Chris Wang

Taipei, Aug. 14 (CNA) The signing of a historic trade pact between Taiwan and China was just the start of a wide range of economic and political tasks for the Taiwanese government to overcome and cautiously review, scholars said.

The trade pact, known as the economic cooperation framework agreement (ECFA) , aims to liberalize cross-Taiwan Strait trade by eliminating tariffs and relaxing regulations. The two sides signed the agreement on June 29 and its screening by Taiwan’s legislature is pending.

Almost all discussions before the signing were focused on "the early-harvest list, " which pinpoints sectors that benefit or suffer from the agreement.

The pursuit for a bilateral investment agreement (BIA) and the implementation of the ECFA, however, are now two of the most important issues at hand, said Jack Lee, a professor of economics at National Open University.

The BIA is not a new issue, and it’s especially important for Taiwan because signing one with China would not only protect Taiwanese investors and businessmen in China, where laws and regulations are frequently not respected or implemented, but also attract foreign investment because the BIA would ensure foreign investors they are protected, Lee said.

Complaints of cross-strait business disputes filed to the Straits Exchange Foundation, a quasi-official organization that handles negotiations between Taiwan and China, increased from 291 in 2007 to 784 in 2009.

The issue of sovereignty — one of the most sensitive and controversial topics in Taiwan-China relations — would come into play if the sides tried to settle disputes through the World Trade Organization (WTO) , he said, adding that the method does not look feasible because it would take too much time.

Lee also said that Taiwan’s and China’s goals after the signing of the ECFA are different. While Taiwan is looking to protect its businesses with investment protection mechanisms, China is eyeing investment promotion, which means Taiwan would need to allow more Chinese investment flow.

"Current Chinese investment in Taiwan is less than US$100 million. China wants Taiwan to further open its door, " he said. "But Taiwan is not ready yet, fearing its national security would be jeopardized and its know-how would be ’stolen’ if more Chinese investment came in."

If these concerns can be resolved by putting every detail down in writing, Lee said Taiwan will be able to attract more foreign investors by allowing more Chinese investment.

William Lin, a professor of finance at Tamkang University, said that Taiwan’s intention to develop its service sectors in China will likely hit a snag in the financial and air transport industries.

"Financial service is such a sensitive and complicated sector that it’s difficult to open to foreigners in any country. And Taiwan’s businesses have been disappointed at China’s unwillingness to open its air transportation market so far," Lin said.

Chang Wu-yueh, a political scientist at Tamkang University, said that politically, the "success" in ECFA negotiations reduces cross-strait tension and lays the foundation for more exchange, but it doesn’t mean both sides are ready to engage in a comprehensive dialogue, especially a political one.

"In cross-strait negotiations, some see business opportunities and some see more than 1,300 missiles directed at Taiwan. The real answer probably lies somewhere in between," Chang said.

He advised the Taiwan government to assess China’s different mindsets and goals of bilateral exchanges in three stages — between June 2010, when the ECFA is signed; the time the deal is ratified and implemented leading up to the 2012 presidential election; and after 2013, when Chinese President Hu Jintao has retired and handed power to his successor.

Despite signs the people of Taiwan are generally happy with the current direction of cross-strait relations development, Taiwan’s China policy has always been controversial and partisan domestically. That is why support for bilateral political talks is far weaker than for trade talks, Chang said.

Moreover, he said, the results of more bilateral trade exchange have not yet trickled down to benefit the general public, nor have they boosted Taiwan’s national economy.

Chang said that with people growing impatient, key factors for the Taiwan government to win support for future negotiations include its success in landing more free trade agreements with major trading partners; boosting gross domestic product (GDP) growth; lowering the unemployment rate; and bridging the wealth gap.