ECFA Expects to Be Signed

Amid optimism for greater economic prosperity and concerns over the worsening of income disparity in Taiwan, and following over a year's intense, internal debate in Taiwan, the final round of preparatory negotiations between Taiwan and China concluded on Thursday, June 24, 2010, with the finalized versions of the early harvest list (Early Harvest List) of each side and the main agreement text of the Economic Cooperation Framework Agreement (ECFA) scheduled to be signed on Tuesday, June 29, 2010. According to many, the type of bilateral trade agreement such as ECFA has the advantage of time which many free trade agreements fail to provide, i.e., there is no promise of the opening of the domestic market to foreign competition within a definite timeframe or the ratio of the goods and/or services to be opened up for non-tariff treatment. The result of the negotiation is seen by many as a positive step to normalizing the trade relationship between two major trading partners Taiwan and China, and to avoid the marginalization of Taiwan due to increasing regional integration among the many of the southeastern Asian nations. As far as Taiwan is concerned, the Early Harvest List is unprecedentedly favorable to it, and China has promised not to pursue the opening of Taiwan's weak sectors such as agricultural products, although some are concerned Taiwan will become more dependent on China economically and it is inevitable that some of Taiwan's weaker sectors will be hurt.

According to the finalized version, Taiwan's Early Harvest List consist of 539 items of goods and services (representing US$13.8 billion in export value to China) while China's consists of 267 items (representing US$2.86 billion in export value to Taiwan), of which the tariff rates will be lowered to zero within two years and in three stages following the signing of the ECFA. Of the Taiwanese items on its Early Harvest List, 108 will enjoy non-tariff treatment as soon as the ECFA is signed and takes effect, with the remaining given zero-tariff treatment within the following two (2) years. Categorically speaking, Taiwan's list consist of 18 agricultural items, 88 petrochemical items, 107 machinery items, 136 textile items, 50 transport equipment items and 140 items in various other categories while China's list consists of 42 petrochemical items, 69 machinery products, 22 textile items, 17 transport equipment items and 117 items in other categories.

With respect to financial services, China promises to allow Taiwan's banks to deal in RMB if its branch in China has turned a profit in one of the latest two years of operations. In addition to the Early Harvest List, the two sides have reached an agreement to strengthen the protection of intellectual property.