The Economic Cooperation Framework Agreement (ECFA) between Taiwan and mainland China took effect in mid-September 2010. One year on, early results show that the trade pact is fulfilling its promises to help Taiwan access a greater part of the mainland Chinese market and consolidate the island’s position in the global economy.
ECFA delivers benefits to Taiwan’s economy on a number of fronts. There are the obvious tariff reductions for early harvest items and the opening up of mainland China’s huge domestic market, which are no small gains for Taiwanese businesses. Exports of agricultural products to mainland China, for example, grew nearly 33 percent from January to July this year compared with the same period of 2010. The pact has also facilitated the financial operations of Taiwan-based banks as they do business across the strait.
But the agreement also can be seen as the kind of confidence-building initiative that sends a powerful message to the international community of Taiwan’s commitment to peace and stability in the Taiwan Strait. This adds to the country’s attractiveness for investment and as a gateway to the mainland Chinese market. At the beginning of this year, Taiwan moved up one place to equal Norway as the world’s third-best destination for investment, according to US-based research firm Business Environment Risk Intelligence. In fact, Taiwan enjoyed the highest investment in Asia for 2010, according to the Council for Economic Planning and Development. Since the signing of ECFA, 27 multinational firms have signed letters of intent with the Ministry of Economic Affairs, with an estimated investment of NT$108 billion (US$3.7 billion). Taiwanese firms are also returning to invest locally. From January to June this year, Taiwanese firms pledged new investment worth NT$28.3 billion (US$976 million).
Since the government moved forward with ECFA, a number of economies including the European Union, India, Indonesia, the Philippines and Singapore have shown interest in strengthening economic ties with Taiwan. A recent World Economic Forum report ranked Taiwan 13th in the world for competitiveness. This validates Taiwan’s moves to open itself up to closer economic cooperation with mainland China, while development of such ties also contributes to regional economic integration.
Still, although these results are encouraging, it is early days for ECFA. Establishing reasonable investment protection measures, such as Taiwan’s proposal for a third-party dispute resolution mechanism, for example, is a serious challenge. Agreement is also needed on trade in commodities and services.
No one should expect such weighty issues to be resolved overnight. There is much good faith behind the talks that have brought the two sides of the Taiwan Strait this far, but a great deal more time and commitment are necessary to turn words into actions. The economies of Taiwan and mainland China are complex and affect the lives of citizens on the two sides of the strait in countless ways. Signing ECFA was never an end goal for either government. In many ways, Taiwan is at the beginning of a long-term process to foster closer economic ties with its giant neighbor.
While there is occasion for close observation and circumspection, there is also a need for continuity and progress in Taiwan-mainland China relations. It is a difficult balancing act to say the least. Nevertheless, the outlook for exchanges under ECFA is optimistic. Since 2008, cross-strait relations have proceeded in a systematic, step-by-step manner under the guidelines of putting easy matters before difficult ones and economic issues before political ones. This is a necessary and pragmatic approach that has the potential to reap big benefits for Taiwan as it strengthens economic ties with its neighbor across the strait, and indeed, with the world.