Pact brings Taipei, Beijing closest since end of civil war

PUBLISHED : Wednesday, 30 June, 2010, 12:00am
UPDATED : Friday, 28 October, 2016, 9:17am

Beijing and Taipei have signed a landmark tariff-reduction trade pact, bringing the long-term political rivals to their closest point since the end of the Chinese civil war in 1949.

The signing of the Economic Co-operation Framework Agreement (ECFA) yesterday will give a major boost to two-way trade worth about US$110 billion at present.

Tariffs on 539 Taiwanese export items, worth US$13.84 billion, and 267 mainland export items, valued at US$2.86 billion, will be cut to zero within two years.

The deal will also grant Taiwanese banking, insurance and financial companies access to the mainland market. The ECFA is expected to take effect at the beginning of next year.

Both sides also signed an agreement on intellectual property rights protection and co-operation.

Chiang Pin-kung, chairman of Taiwan's semi-official Straits Exchange Foundation, said the trade pact was crucial in deepening cross-strait ties.

'It provides a foundation for more economic co-operation,' Chiang said after signing the agreements with his mainland counterpart, Chen Yunlin , chairman of the Association for Relations Across the Taiwan Strait. 'It leads us to tear down trade barriers, spur investment and create jobs.'

Chen said the pact was the result of 'equal consultation' and would bring 'mutual benefits'.

Taiwanese President Ma Ying-jeou, who has been pushing the pact since he took office two years ago, said the deal meant peace and prosperity across the strait was no longer a distant dream but a reality 'within our reach'.

'The signing of the ECFA signifies that cross-strait peace and prosperity are not a mirage in the air, but are something tangible,' he said.

'Everyone will be able to feel it. In particular, countries that previously had to pick sides between Taiwan and mainland China can now simultaneously develop peaceful and prosperous relations with both.'

But he also noted the ECFA, which his Kuomintang government hopes will keep Taiwanese businesses competitive with Southeast Asian countries, whose free-trade agreement with Beijing came into force on January 1, was not a wonder drug that could cure all ills.

'Therefore, Taiwan must continue to make innovative moves to create the environment for industrial development,' he said.

In what has been described as a historic moment in relations after decades of hostilities, the pact was signed in Chongqing , a venue of rich historical significance. The southwestern municipality was the wartime capital of China, then ruled by Chiang Kai-shek's Kuomintang. Chiang's government was driven from the mainland to Taiwan in 1949, after losing the civil war to Mao Zedong's Communist Party.

Despite protests from Taiwan's pro-independence forces fearing job losses and claiming the ECFA was a unification ploy by Beijing, polls show a majority of Taiwanese support the deal because of the economic boost it promises.

In spite of political tension, Taiwanese businesses are some of the most eager investors on the mainland, having poured at least US$83 billion into the mainland over the past two decades.

Douglas Hsu, chairman of the business conglomerate Far Eastern Group, said the ECFA would help attract foreign firms to invest in Taiwan. 'Without the ECFA, foreign firms would not come to Taiwan,' he said. But he also warned that some mainland enterprises were too big to deal with, making competition difficult.

Meanwhile, the pro-independence Democratic Progressive Party attacked the ECFA as the start of Taiwan following Hong Kong's footsteps and becoming a mainland territory.

'Taiwan's economy is bound to rely on China,' it said, adding that while it could be a golden decade for some business conglomerates, it would be a backward step for most workers, small and medium firms and young people in Taiwan. 'Seven years after Hong Kong signed the Closer Economic Partnership Arrangement with China, its manufacturing industry has been destroyed, while its wages have dropped and more people have become low- income earners,' DPP spokesman Lin Yu-chang said.

But Chu Yun-peng, professor of economics at National Taiwan University, said the ECFA's benefits outweighed its risks.

It gives Taiwan 'the window of opportunity for two to four years to further develop its competitiveness before the mainland signs the free-trade pact with South Korea,' he said.

Straits Exchange Foundation vice-chairman and secretary general Kao Koong-lian said Taiwanese farmers would become more competitive because Beijing had promised to scrap import tariffs on such agricultural products as dragonfruit, fish and tea. Dragonfruit, a key export, faced import tariffs of up to 20 per cent, but these would gradually be eliminated over two years.

Sliding scale

The number of years over which many tariffs will be cut to zero under the trade pact: 2