ECFA – Economic Cooperation Framework Agreement
ECFA – Economic Cooperation Framework Agreement. BUSI 3001 SBLC Week 7(9) , Spring 2010. Charles Mo & Company April 19, 2010. ECFA. Why both sides need ECFA History and background of the modern China in Beijing and Taipei Taiwan’s economy after the 50’s China’s economy after 70’s
ECFA – Economic Cooperation Framework Agreement
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ECFA – Economic Cooperation Framework Agreement BUSI 3001 SBLC Week 7(9), Spring 2010 Charles Mo & Company April 19, 2010
ECFA • Why both sides need ECFA • History and background of the modern China in Beijing and Taipei • Taiwan’s economy after the 50’s • China’s economy after 70’s • Relationship between cross-Taiwan-straight during • Deng’s era • Jiang’s era • Hu’s approach • Potential ECFA economic impact on Taiwan • BJ and Taipei set stage for ECFA • Three agreements signed under ECFA • Future potential for the two sides
China’s modern history • In 1950, the Nationalistic Party (KMT) led by Chiang Kai-shek was driven off the mainland by the Communist Party to the island of Taiwan with two million soldiers and civil servants. • Chiang fled to Taiwan and hung on to two island clusters near the province of Xiamen, Kinmen and Matsu. • Why?
The two sides shut off all communications and were at war until 1978 when the artillery shelling stopped to Kimen islands. • Why? February 21, 1972
In 1978, China’s second generation leaders led by Deng Xiao Ping embarked on market reform and economic development • "One country, two systems" is an idea originally proposed by Deng Xiaoping
In 1996, US dispatched two aircraft carriers after Chinese missile tests over the island. • What happened and why? • What was the result of this action?
In 1998, Hu Jing Tao became the president and during his rein, • Chen Shui Bian was arrested for corruption in 2008 • Ma Yin Jeou was elected president of Taiwan in 2008 • ECFA discussion was resumed in May 2008
Rapprochement between the two sides • May 2008: China and Taiwan resumed trade talks, first of the ECFA four meeting began. • June 2008: Taiwan and China reach agreements for direct flights and Chinese tourists’ visits to Taiwan • July: First Chinese tourist group lands in Taiwan • April 2009: Both sides sign agreements for regular passenger and cargo flights, financial cooperation and mutual assistance in cracking down on crimes. • April: Taiwan introduces a cross-Straight industrial exchange project to promote cooperation in 15 industries • June: Taiwan opens 100 industries to Chinese investments • June: resumed ECFA talks following a suspension of some 10 years • June: China sends the first procurement delegation to Taiwan • November: The two sides sign memorandum of understanding for financial investment
Founding father of the current China • Market reform and economic boom • Negotiated return of Hong Kong and Macau • During his time, Hong Kong and Macau returned to China • Possible signing of landmark ECFP
Taiwan’s economy • Technology industry • Taiwan firms make world’s many Personal Computers and related products • Taiwan is part of the global high tech value chain • Both sides have staked personal prestige on this pact • China is Taiwan’s largest export destination • 1/3 Taiwan export destined to China • Bilateral trade amounting to US$130 b in 2008
Taiwan opens tourism to China • Tourists from China arrive in Taiwan from a cruise ship this year amid loosened restrictions on visitors from the mainland
China and Taiwan are launching key talks toward a trade pact that would mark the biggest step forward in a détente that is reshaping East Asia’s economics and politics. • The talks are expected to result in the signing of 2011 free trade deal between the onetime enemies • This new pact includes opening: • Business, travel, and political contacts. • If successful • Bind Taiwan to its giant neighbor • Erase decades old barriers in Taiwan to investments from China
Jiang’s era • Pressure for reunification • Taiwan’s new democratic party pushing for independence • Missile tests in the Taiwan Straight • China had 1500 missiles pointing at Taiwan
Hu’s approach • Abandoned the sort of fiery threats toward Taiwan • Instead signing a series of free-trade deals with its Asian neighbors including one with Taiwan’s major competitors • When the pacts take effect next year, Taiwan’s exports to China will become much more expensive. • Forbid its regional partners from making similar deals with Taiwan
ECFA Potetial Economic impact on Taiwan • 1.65-1.72% to Taiwan’s gross domestic product • Create 263,000 jobs • Taiwan has in the past prevented multinationals from integrating Taiwan into their global operations, driving many to Shanghai • Limits on banking and investment in China set back in companies Taiwan government study
Beijing, Taipei set stage for landmark pact • Rapid improvement in relations with China since Taiwanese President Ma Ying Jeou took office. • Taiwan-China tension is the greatest security concern in East Asia
What may be accomplished in the week Dec 21, 2009 • No formal trade talks • Setting a frame work for the free-trade deal • Set a time frame for trade talks • An agreement is expected in the first half in 2010 • A list of zero-tariff products • Including financial, machinery, and petro chemical industries • Something will come out during the week of Dec. 21, 2009 • Agreement on fishing-industry cooperation • Quality checks of agricultural products, • Cooperation in inspection and certification • Prevention of double taxation • Ease visits by Chinese professionals • Offer scholarships to Chinese students
On going talks • Enabling Chinese banks to enter Taiwan • Worry by the Taiwanese • Chinese banks market capitalization is often 10 times of the Taiwanese banks. • Control by Chinese banks • Financial regulators will bar from buying stakes in Taiwanese banks
Talking points/key issues in Taiwan-China trade negotiations • Tariffs on machinery, textile, and petrochemical – Taiwan seeks tariff-free sales in these industries • Ban on agricultural products – Taiwan vows not to open its market more than 800 Chinese agricultural products • Ban on industrial products – China urges Taiwan to open its market to some 1300 industrial Chinese products • Local currency service – Taiwan seeks right for Taiwanese banks to provide local currency • Chinese investments to Taiwan • Investment Protection Agreement
Taiwan, China signed 3 agreements • Tuesday, December 22, 2009 signed 3 agreements • Industrial standards • Food quarantine • Fishery cooperation • Effective in 90 days after the signing • Taiwan would like to sign the trade pact with China and set in motion the negotiations ASAP • China’s position is that in light of the importance and complexity involved, it is not wise to set a timetable for the signing of ECFA • Expected to hurt makers of shoes, socks, towels, garments, automobile parts, and petrochemical products
Industrial standards • Taiwan and China will work together to establish joint standards and specifications on products for which there are not international standards yet • Bureau of Standards, Metrology and Inspection under the Ministry of Economic Affairs • Exporters would have to ensure the products complied with these standards • Related companies may collect royalties if they register patents on them • Profit involved is huge given the size of the Chinese market • Benefit Taiwan’s light-emitting diode, solar-cell and flat panel makers because international standards aren’t available
Other discussions • Trade talks will also settle which sectors will be included in the list of the first industries to be allowed to sell their goods at lower or zero tariffs • Taiwan hopes to indlude • Banking, • Textile • Auto parts • Machinery • Increase cross straight flights during lunar year • Taiwan and China currently operate 270 passenger flights a week
Export countries in the world Rank Country Exports Year World $12,461,000,000,000 2009 est. European Union $1,525,000,000,000 2009 est. 1 PR China $1,202,000,000,000 2009 est. 2 Germany $1,121,000,000,000 2009 est. 3 United States $1,057,700,000,000 2009 est. 4 Japan $ 581,000,000,000 2009 est. 5 Netherlands $ 499,000,000,000 2009 est. 6 France $ 475,000,000,000 2009 est. 7 Italy $ 405,000,000,000 2009 est. 8 Belgium $ 370,000,000,000 2009 est. 9 South Korea $ 364,000,000,000 2009 est. 10 United Kingdom $ 351,000,000,000 2009 est. — Hong Kong $ 330,000,000,000 2009 est. • Canada $ 316,000,000,000 2009 est. 12 Russia $ 304,000,000,000 2009 est. 13 Singapore $ 270,000,000,000 2009 est. 14 Mexico $ 230,000,000,000 2009 est. 15 Spain $ 218,000,000,000 2009 est. 16 Taiwan $ 204,000,000,000 2009 est
