Taipei, Beijing seal landmark trade deal to be signed on Tuesday

PUBLISHED : Friday, 25 June, 2010, 12:00am
UPDATED : Friday, 25 June, 2010, 12:00am

Taiwan and the mainland yesterday finalised the details of a landmark pact that will abolish tariffs on hundreds of items traded across the Taiwan Strait.

They plan to sign the Economic Co-operation Framework Agreement (ECFA) - similar to a free trade pact - in Chongqing on Tuesday, marking a watershed in cross-strait relations. Taiwan and the mainland were bitter rivals before the Kuomintang's mainland-friendly Ma Ying-jeou became president two years ago.

The selection of Chongqing as the venue for the signing ceremony shows just how far ties have improved under Ma. It was China's capital under KMT rule during the war against Japan. The Nationalists fled to Taiwan in 1949 after the Communist Party won the civil war.

Officials and analysts said the ECFA was the most significant agreement between Taiwan and the mainland not just because it was a symbol of thawing cross-strait ties but also because of the economic benefits it would bring to the island.

'The mainland side has agreed to cut tariffs on 539 industrial items worth US$13.8 billion for us, while our side will slash tariffs on 267 items worth US$2.86 billion for the mainland,' Kao Koong-lian, vice-chairman of Taiwan's Straits Exchange Foundation (SEF), said after a day of talks in Taipei. The foundation represents the Taiwanese government in talks with the mainland in the absence of official ties.

He said the tariffs - ranging from below 5 per cent to more than 15 per cent - would be cut to zero in three stages over two years. Taiwan will enjoy zero tariffs on 108 items with tariffs of less than 5 per cent once the agreement takes effect, after ratification by the island's legislature.

Taiwanese items to be covered by the pact include petrochemicals, machinery, textiles and machine tools, with Beijing making a big economic sacrifice in pursuit of closer ties.

Both sides will also agree to open markets for some non-financial services, with the mainland opening up accounting, auditing, hospitals and aircraft maintenance and repair, and Taiwan removing restrictions on research and development, conferences and exhibitions, and computer bookings for air transport services.

On the financial services front, the mainland will allow Taiwanese banks to operate yuan currency services, including financing, for solely mainland-based Taiwanese firms, but Taiwan will only allow mainland banks to set up offices that could become branches after a year. The mainland will let Taiwanese insurance firms apply to enter the mainland market, based on current criteria applying to foreign firms, and will also allow Taiwanese securities professionals to get accreditation for practising on the mainland.

The mainland will not export any agricultural products or workers to Taiwan, but will offer zero tariffs on 18 farm products from Taiwan, an arrangement made to reduce the strong opposition from the pro-independence camp in Taiwan, which has expressed concern that the pact will hollow out Taiwanese industries and hurt the island's farmers.

The concessions prompted the pro-independence camp to fire shots at the mainland's political motives.

'Obviously such concessions - which violate the normal standards of regular free trade pacts - are carefully calculated to achieve a political interest,' said Democratic Progressive Party spokesman Lin Yu-chang.

Taiwan will also not be asked to cut tariffs on 17 items that could be threatened by mainland competition, including towels, garments, home electronic appliances, footwear and swimsuits.

The mainland's senior negotiator, Zheng Lizhong , vice- chairman of the Association for Relations Across the Taiwan Strait, said Beijing had agreed to the concessions 'for the sake of promoting the status and economic competitiveness of the Chinese race'.

He said the SEF, headed by Chiang Pin-kung, was scheduled to leave for Chongqing on Monday. Chiang and his mainland counterpart, Arats' Chen Yunlin , would review the ECFA details on Tuesday before signing the agreement in the afternoon. The two will also sign an agreement on protection of intellectual property rights.

It will be Chiang's fifth negotiation with Chen since the two sides broke the ice in June 2008 by staging a historic first round of talks in Beijing, a development that seemed impossible when the pro-independence Chen Shui-bian was Taiwan's president between 2000 and 2008. Ma succeeded Chen in May 2008.