Taiwan and the mainland are set to sign a controversial trade agreement today that is being hailed as the most important deal between the two sides since the end of the civil war 60 years ago.
The ruling Kuomintang says the Economic Co-operation Framework Agreement (ECFA), which will be signed in Chongqing, will boost annual two-way trade by US$100 billion by knocking down tariffs on more than 800 items.
Critics fear the agreement will result in cheap mainland goods flooding the island, a huge loss in jobs on Taiwan, an exodus of experienced managers, engineers and scientists to the mainland, and a growing dependence on Beijing, which claims sovereignty over the island.
According to the agreement, 'early harvest' tariff cuts have been agreed on for 539 Taiwanese products going to the mainland and 267 products heading the opposite way, as well as open markets for banking and other services. The reductions on the Taiwanese items are said to amount to US$13.84 billion while those from mainland are valued at US$2.86 billion.
The tariff cuts will affect about 15 per cent of Taiwan's exports to the mainland, including petrochemicals and plastics, cars and parts, textiles, machine tools and medical equipment. (The list does not include PVC products, one of Taiwan's top exports, or completely-assembled automobiles). In addition, the mainland's computer services, airline maintenance and medical sectors will open their doors to Taiwanese investment.
In return, Taiwan will slash tariffs on mainland products, from toothbrushes to wristwatches, to bicycle tyres and industrial oils, as well as allow mainland investment to pour into the island's service industries.
Taiwan's banks will be one of the main beneficiaries of the agreement, being permitted to deal in the yuan a year earlier than current rules allow. They will also be able to turn their representative offices on the mainland into branches after just one year, rather than two, giving them privileges not enjoyed by foreign banks.