On June 29, it will be two years since Taipei and Beijing signed the Cross-Straits Economic Cooperation Framework Agreement (ECFA) in the mainland Chinese city of Chongqing. The landmark pact, which enabled both sides to turn a new page in bilateral relations, is an essential step forward in the ROC’s economic development.
This fact was highlighted by the Bureau of Foreign Trade under the Ministry of Economic Affairs during a news conference reviewing the ECFA May 8 in Taipei City. Bureau officials proudly announced that the pact has paid handsome dividends in terms of inbound investment and employment opportunities for Taiwan, with additional benefits expected before year-end.
Bureau Director-General Cho Shih-chao told the assembled media throng that in the first quarter, Taiwan attracted US$2.43 billion in foreign investment, 24.3 percent of the US$10 billion annual target. In addition, Taiwan businesses operating abroad poured NT$14.5 billion (US$496 million) into the local economy, helping create a sizeable number of new jobs.
Cho’s statements are backed up by the latest statistics from the Directorate-General of Budget, Accounting and Statistics, which show that the manufacturing industry employed 2.63 million workers in the first two months of 2012, up 2.37 percent year on year. Within this industry, the chemical materials sector did especially well, hiring 5.56 percent more employees than the same period last year.
In terms of inbound investment, Japanese firms such as camera-maker Canon Inc. and machine tool manufacturer Fanuc Corp. were major players. They find the Taiwan business climate increasingly attractive because the ECFA has eliminated tariffs on more than 500 kinds of exports from Taiwan to mainland China.
The pact lowered customs duties on 72 types of Taiwan-made goods to zero at the beginning of last year, with tariffs on an additional 437 commodities reduced at the start of 2012. Tariff savings on exports across the strait total US$225 million to date, ensuring Taiwan-based firms enjoy a competitive edge in that market.
For Taiwan, there is little doubt that the ECFA has reduced tariffs and opened the mainland China for services and a host of cooperative economic projects. It has also played a key role in further integrating Taiwan into the regional and global economies.
But that does not translate into an overdependence on the mainland Chinese economy—far from it. This is because the ROC government has maintained a balanced approach to trade that positions Beijing as just another major trading partner the nation enjoys close economic ties with.
Studies by Taipei-based Brookings Institution scholar Mignonne Man-jung Chan believes the ECFA is benefiting Taiwan and mainland China while fast-tracking regional economic integration.
Chung-Hua Institution for Economic Research reveal that Taiwan investment in mainland China has not reduced domestic investment. Businesses no longer competitive in Taiwan have simply moved across the strait in search of new opportunities.
Greater competitiveness and productivity are flowing from utilization of mainland Chinese resources and the internal market. Similarly, the development of Taiwan industry clusters across the strait has contributed significantly to the upgrading of the island’s industrial sectors.
This bevy of benefits brought about by the ECFA is also allowing Taiwan to enhance its luster as a destination for direct foreign investment. Cross-strait transportation links, along with formidable manufacturing clout, leading-edge R&D capabilities, world-class intellectual property rights protection regime and strong rule of law, are proving irresistible to foreign companies, as Canon and Fanuc can testify.
But more importantly the ECFA has helped stave off the threat of economic marginalization posed by regional integration carried out under the auspices of the Association of Southeast Asian Nations. Even after mainland China concludes free trade agreements with Japan and South Korea, goods produced in Taiwan will still retain their competitiveness in the mainland market.
An added benefit of the pact is that economies around the world can now clearly see Taipei and Beijing putting aside their differences and working together for shared benefit. This means they will be more willing to enter into economic cooperation agreements with Taiwan, further bringing the island into the international economy.
The government should capitalize on this good will by pushing to initiate ECA talks with more of Taiwan’s major trading partners in an effort to strengthen trade relations and increase export volume. Entering into or fast-tracking negotiations with India, Indonesia, New Zealand and Singapore must be given top priority.
Of course under any trade agreement, some homegrown industries will be impacted detrimentally, but for Taiwan the benefits of accessing the larger mainland Chinese market far outweigh any possible negative effects of the ECFA. The government has ensured that these effects will be kept to a bare minimum, and that vulnerable industries receive generous support through well-targeted development programs.
As the ECFA’s second anniversary approaches, the pact stands as a glittering example of how the normalization of cross-strait relations has created a win-win situation for Taiwan and mainland China. The opportunity-laden agreement is ushering in a golden decade for the ROC and a new era of prosperity for the people of Taiwan.
John Wren is a freelance writer based in Keelung. These views are the author’s and not necessarily those of Taiwan Today. Copyright © 2012 by John Wren
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