Tags: AS | Taiwan | China | Pact

Taiwan Set to Open Key Trade Talks With China

Monday, 25 January 2010 11:10 AM

Taiwan and China open negotiations Tuesday in Beijing on a trade pact that seems destined to change the island's character in a way not seen since it split from the Chinese mainland amid civil war 60 years ago.

The accord seeks to add momentum to Taiwan's already improving relationship with China, reducing tariff barriers, liberalizing investment regulations and creating new structures for financial cooperation.

Debate on the accord has dominated political discourse on the island of 23 million people since the issue was broached by President Ma Ying-jeou's China-friendly government a year ago.

It goes right to the heart of Taiwan's future: Should it risk undermining its economic prospects by rejecting the embrace of China? Or should it cast its lot with the communist colossus, and increase the chances of losing its de facto independence and its hard-won democratic freedoms?

Ma and his ruling Nationalist Party don't see things so starkly. They say they can maintain Taiwan's sovereignty even while linking the island ever closer to China's lucrative markets and in the process dilute Beijing's long-standing objections to additional trade agreements between Taiwan and other Asian nations.

Ma says the deal must be sealed by May because a pending Chinese trade agreement with countries in Southeast Asia will soon price many Taiwanese exports out of the regional marketplace. He sees the China accord as the best way of counteracting an international commercial isolation that in recent years has seen Taiwan lag behind business rivals South Korea, Singapore and Hong Kong.

"We have already fallen behind in the process of regional economic integration among Asian countries," Ma told a Taiwanese newspaper last week. "And things will worsen if we don't change the situation."

Opponents of the proposed Economic Cooperation Framework Agreement, or ECFA, reject Ma's arguments out of hand. They say that with China fully committed to bringing Taiwan back under its control, what is needed is less economic contact with the mainland rather than more.

"You have to ask what is China's major purpose in signing ECFA," said international relations specialist Lo Chih-cheng of Taipei's Soochow University. "It is to increase Taiwan's political and economic dependence on Beijing."

Lo said the government's claims that the accord would add more than 1 percent to Taiwan's annual growth are badly misplaced, because the island will eventually have to let in Chinese exports like agricultural goods that will strongly undermine local markets.

Lo also ridiculed Ma's insistence that after the agreement is signed, other Asian countries will feel liberated from Chinese political pressure, and sign their own trade agreements with Taipei.

"It doesn't make any sense for China to let them do that," he said. "It won't allow anything that reduces Taiwan's dependence on the mainland. After all, the whole point of ECFA is to increase it."

Even before Ma assumed the presidency 20 months ago, Taiwan already was moving to leverage its natural advantages in the China market — a common language and similar culture — to increase commercial ties. Drawn by cheap land and labor, Taiwanese businesspeople established thousands of factories in Chinese coastal provinces and stepped up their exports of electronics components and other goods for mainland assembly.

By 2008, Taiwan's China investments exceeded $100 billion and annual trade was running at a similar amount — heavily in Taiwan's favor.

But since Ma took office in May 2008, the contacts have taken on new momentum — in stark opposition to the pro-independence policies of the main opposition Democratic Progressive Party, which ruled the island for eight years until Ma came to power.

Regular flights and shipping services across the 100-mile- (160-kilometer-) wide Taiwan Strait have been inaugurated, and regulations for cross-strait investment liberalized. Tuesday's start of trade accord negotiations in Beijing will further clear the way for the Taiwanese economy's integration into that of the mainland.

Ma has promised that Taiwan's Legislature will examine the pact after negotiations are completed, but with his Nationalist Party enjoying an overwhelming majority in the chamber, it is not expected to hold up its implementation for long.

Still, the anti-Ma opposition has made considerable gains in recent weeks and the strong showings in local and legislative by-elections are widely attributed to public disquiet over the trade accord.

DPP leader Tsai Ing-wen said the party feels confident it can leverage the matter again to make further electoral gains later this year.

Besides worries about greater Chinese influence over Taiwan, Tsai said that Taiwanese are concerned that the pact will force thousands of smaller enterprises to pull up stakes for the mainland, or risk being priced out of business.

She said the result would be job losses running into the hundreds of thousands, and a stepped-up erosion of Taiwan's relative income equality.

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Taiwan and China open negotiations Tuesday in Beijing on a trade pact that seems destined to change the island's character in a way not seen since it split from the Chinese mainland amid civil war 60 years ago.The accord seeks to add momentum to Taiwan's already improving...
Monday, 25 January 2010 11:10 AM
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