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Date: 2010-11-15
Council for Economic Planning and Development: Groundbreaking cross-strait economic agreement

October 21st, 2010
(Taken from Invest in Taiwan,
The Economic Cooperation Framework Agreement (ECFA) formally took effect on September 12, and the Legislative Yuan quickly passed a relevant revision of the Customs Import Tariff as well as other accompanying measures. The implementation of ECFA marks a milestone in the normalization of economic relations between Taiwan and mainland China, not only representing a giant step for Taiwan toward Asia-Pacific regional economic integration but also providing the government with a powerful incentive to use in its current global push for investment. In fact, it lays the foundation for a “Golden Decade of Development” for the island.
Attention focuses on early harvest list
The deepening of cross-strait economic relations is an inevitable trend, and ECFA raises the curtain on the systemization and liberalization of cross-strait economic ties. The agreement contains the following key points: cooperation in intellectual property rights protection, cooperation in financial matters, trade promotion and facilitation, the Early Harvest plan, and establishment of a cross-strait economic cooperation committee. With the implementation of the agreement, the two sides will promote the establishment of offices on the opposite sides of the Taiwan Strait by trade and industry associations and by semi-governmental economic groups.
Since the Early Harvest list contained in ECFA entails the adjustment of huge amounts of customs tariffs, the list is the focus of widespread attention. China has proposed Early Harvest tariff reductions on 539 items of Taiwan goods, including machine tools, bicycles, auto parts, and Oolong tea.
Calculating on the basis of 2009 imports of Taiwanese goods into China, these items accounted for US$13.8 billion worth of imports, or 16.1% of the mainland’s total purchases from Taiwan that year. Taiwan’s Early Harvest list of tariff cuts on Chinese goods totals 267 items, including tires and textile products; imports of these Chinese goods into Taiwan in 2009 amounted to US$2.9 billion, accounting for 10.5% of all Taiwan imports from the mainland.
The Legislative Yuan passed the revision of the Customs Import Tariff to fulfill Taiwan’s Early Harvest commitments. On the basis of the most-favored-nation tariff rates that Taiwan afforded WTO members last year, the elimination of customs tariffs on Early Harvest Chinese goods are to be carried out from 2011 to 2013 in three progressive stages: immediate, first year, and second year. For Taiwanese products that are exported to China, tariffs will be reduced first on those items that face a tariff of 5% or lower.
In the area of services, Taiwan is opening nine items: R&D, conference, exhibition, specialty design (not including interior design), Chinese-language motion pictures and motion pictures jointly produced, commission agency (live animals excluded), sporting and other recreational services, computerized airline reservation, and banking. Mainland China is opening accounting, auditing, and bookkeeping, computer and related services, natural sciences and engineering R&D, conference, specialty design, hospital, aircraft repair and maintenance, insurance, banking, and securities and futures; in addition, China is eliminating quota restrictions on imports of Taiwan-made Chinese-language films.
Investment protection agreement coming soon
Following the implementation of ECFA, the two sides of the Taiwan Strait will complete negotiations on an investment protection agreement, dispute settlement mechanism agreement, cross-strait commodity trade agreement, and service trade agreement within six months. The cross-strait economic cooperation committee, which will be tasked with negotiation, oversight, and review of the implementation of ECFA as well as the resolution of related disputes, will soon be organized as well.
Since China is Taiwan’s biggest investment destination and there are no WTO rules that cover them, investment protection and dispute settlement will be given priority in the negotiation of these agreements. The investment protection agreement will likely take the lead in the negotiations, since both sides agree on the urgent necessity of such an agreement.
The agreement on trade in goods and agreement on trade in services involve issues of market access and tariff reduction, so the two sides will have to reach a consensus on them. However, since their implementation can be based on the existing WTO framework and the ECFA Early Harvest list, the need to sign these two agreements is not pressing.

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