China, Taiwan Free Trade Pact Talks

A free-trade agreement between China and Taiwan could boost China’s gross domestic product growth by 0.36-0.4 percentage point and by 0.63-0.67 percentage point after the members of the Asean +3 trade bloc begin removing import tariffs as soon as 2010.

Taiwan’s annual gross domestic product (GDP) will increase by an estimated 1.72 percent if Taiwan and China sign an economic cooperation framework agreement (ECFA), the Ministry of Economic Affairs.

The Ministry of Economic Affairs used the standard GTAP Model, a global computable general equilibrium model that is widely used by major countries around the world in measuring the impact of forming a free trade area with major trading partners.

Taiwan hopes to sign an economic cooperation framework agreement (ECFA) , similar to a free trade agreement, with China as soon as possible, Minister of Economic Affairs Shih Yen-shiang said Thursday, Oct 15, 2009.

“We expect the proposed ECFA accord can be signed next year, but if the goal can be reached earlier, it would be more than welcome, ” Shih said, while fielding questions at a Legislative Yuan committee meeting.

Officials from both sides of the Taiwan Strait will hold a fourth round of informal talks on the ECFA deal late this month and formal talks are expected to get underway later this year.

Taiwan has been pushing for the trade agreement with China, its largest export market, fearing it could be marginalized when the Asean +3 start removing the tariffs.

Taiwan’s Ministry of Economic Affairs (MOEA) will handle the issue of naming the economic cooperation agreement which the island hopes to sign with China, Mainland Affairs Council Deputy Chairman Liu Te-shun

Taiwan has called it an “economic cooperation framework agreement (ECFA) ” while China has called it a “cross-strait economic cooperation agreement” without the word framework.

The Washington Post reported in Feb, 2009 on the beginning of free trade talks between China and Taiwan

If Taiwan fails to strike an ECFA deal with China, its economic growth rate could fall by 0.176 percentage points after the free trade agreement between China and ASEAN countries takes effect next year.

Once “ASEAN plus 3” becomes a reality, with which China, Japan and South Korea forming a free trade area with ASEAN countries, Taiwan’s annual GDP growth rate might see an even bigger drop of 0.836 percent, the CIER report conjectured.

As to how the ministry will promote the ECFA project, Yiin said the proposed pact will only outline negotiation goals and timeframes for reaching each policy goal or cooperation project in a gradual manner in order to minimize any possible negative impact on local industries.