Sunday, 1 March 2009

Trade Agreement between China and Taiwan

My comments on Taiwan's proposed economic agreement with China:
1. The new name unveiled by Ma today seems to mirror the agreement between ASEAN and China, which is called "Framework Agreement on Comprehensive Economic Co-Operation Between ASEAN and PRC".
2. However, as the pact will not deal with political designations, one wonders what will be the respective names for China and Taiwan in the agreements. Will Taiwan be referred to by its official name in the WTO, i.e., "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu", or "The Republic of China"?
3. Ma said that Taiwan would seek to sign FTAs with other countries in addition to signing an ECFA with China. I think it is more accurate to say that Taiwan can only negotiate FTAs with other countries after it agrees to negotiate something with China first. This seems to be the "gentleman's agreement" adopted by China and Taiwan in the WTO setting, under which both sides agree to support the proposal of the other. See my earlier post on the appointments of Chinese and Taiwanese candidates to WTO committees.
4. Minister of Economic Affairs (MOEA) Yiin Chii-ming said the ECFA would not be an FTA. What is it then? The WTO only allows FTAs and CUs for goods and EIAs for services. Apparently this is not a CU or EIA. If it is not an FTA, how could it be allowed under the WTO framework?
5. Unlike HK and Macau, Taiwan is not a free port. But I doubt Taiwan would make substantial tariff reductions to China due to domestic political concerns. In that case it would run afoul of the requirements under GATT Art XXIV, unless, of course, they decides to invoke the enabling clause.  

For further info on the ECFA, see the report below in the Taipei Times

Ma seeks to settle disputes over economic agreement
WHAT’S IN A NAME?: The president said that changing the name of the economic agreement to include the word ‘framework’ would establish a clear range of issues
By Mo Yan-chih, Flora Wang and Shih Hsiu-chuan
Saturday, Feb 28, 2009, Page 1

President Ma Ying-jeou (馬英九) yesterday sought to settle disputes over the government’s plan to sign a cross-strait comprehensive economic cooperation agreement (CECA) with China by changing the name to “cross-strait economic cooperation framework agreement [ECFA].”

Renaming the agreement an ECFA, Ma said in an interview with Era TV that the term “framework” would help set a clear range of issues.

This would make it possible for the two sides to sign certain parts of the agreement first and seek consensus on other parts later, he said.

“We are not only signing economic agreements with China. It’s part of our global strategy. It’s very important. If we do not start doing it today, we will regret it tomorrow,” Ma said.

Signing an economic pact with China was part of Ma’s election campaign that aimed to strengthen cross-strait economic and trade cooperation. However, the government’s plan to sign an agreement has sparked concern over its possible impact on national interests.

Ma said last week that his ­administration would push for the implementation of an agreement, but would seek public opinion on the title, content and form of the agreement.

He said that signing an ECFA should help push normalization of cross-strait economic and trade relations and prevent the nation from being marginalized as East Asia integrates economically.

The two sides can reach a consensus on tariff cuts for major industries including petroleum and textiles first, and discuss other areas of cooperation such as investment protection and intellectual property rights in the future, he said.

The government will seek to sign free trade agreements (FTA) or similar economic agreements with other major trading partners in addition to signing an ECFA with China, he added.

“The agreement will be signed based on the principle of reciprocity, equality and dignity between the two sides,” Ma said.

In response to Legislative Speaker Wang Jin-pyng’s (王金平) opposition to signing an economic pact without prior legislative oversight, Ma said that the agreement should be sent to the legislature for review after a draft was signed.

“What would the Legislative Yuan review if the two sides haven’t first negotiated an agreement?” Ma said.

The president said that the government would present a report to the legislature on the direction and some details of the plan before negotiating with China, while holding public forums over the next few months to seek public opinion on the issue.

Ma brushed off opposition criticism that the pact would belittle Taiwan’s sovereignty and said that no country’s sovereignty had been belittled by signing an FTA or similar agreement.

Taiwan’s sovereignty was not belittled when signing cross-strait direct flight agreements with China, and an ECFA was not a political agreement as no sovereignty issues would be addressed, he said.

Meanwhile in the legislature, Premier Liu Chao-shiuan (劉兆玄) said the Legislative Yuan would enjoy the absolute authority to approve or reject an ECFA with China if the government signed such a pact.

“It is very clear that [the agreement] would not take effect if the legislature disapproves it,” Liu said when fielding questions from Democratic Progressive Party (DPP) Legislator Gao Jyh-peng (高志鵬).

“We will fully communicate not only with lawmakers but also withthe public. We will also report [the contents of the agreement] to the Legislative Yuan before [we] negotiate [the agreement with China],” Liu added.

Mainland Affairs Council Chairwoman Lai Shin-yuan (賴幸媛) also vowed during the question-and-answer session to safeguard the nation’s sovereignty when negotiating.

“There is a special relationship between both sides of the Taiwan Strait. [Any cross-strait agreements] involving a legal amendment must be submitted to the Legislative Yuan [for review] in accordance with the Act Governing Relations Between People of the Taiwan Area and the Mainland Area [兩岸人民關係條例],” she said.

Meanwhile, Minister of Economic Affairs (MOEA) Yiin Chii-ming (尹啟銘) and Mainland Affairs Council Vice Chairman Fu Dong-cheng (傅棟成) last night attended a press conference at the Government Information Office to state the government’s position on the pact.

Yiin said that the pact was provisionally called an ECFA. When asked whether it sounded like an auspicious name as pronounced in Hoklo (also known as Taiwanese) — the acronym ECFA sounds like “the country will get richer” (A擱發) — Yiin said he agreed.

Pronunciation of the acronym CECA sounds like “washing feet” in Hoklo.

He said the official name of the pact in Chinese and English would not be finalized until after negotiations with China.

Yinn said that the government would not deal with political designations in the pact.

The pact will not be signed on the Closer Economic Partnership Agreement (CEPA) model used by China and Hong Kong, under which Hong Kong was regarded as a special administrative region of China, Yiin said, adding that it would not be an FTA either.

In related news, Chinese Nationalist Party (KMT) caucus secretary-general Yang Chiung-ying (楊瓊瓔) urged the DPP caucus to drop its plan to boycott the government’s special budget requests to boost infrastructure investment.

The DPP caucus said on Thursday it would refuse to review the budget proposal if the government failed to refer the content of the agreement to the legislature before signing it.

DPP Chairperson Tsai Ing-wen (蔡英文) said it would be arrogant and disrespectful to the public for the government to refer any agreement to the legislature for review after signing it.

“Any agreement with China should be made public prior to signing,” she said yesterday.

Tsai said Taiwan’s sovereignty would be concerned no matter what the agreement was called.

Any important policy like this should be decided upon by the public and the process of it should be transparent as well, she added.

“The government is now saying that the agreement will be signed before it is submitted to the legislature for review. Well, this is not democracy,” she said. “What the government is planning to do will damage Taiwan’s democracy for sure.”

Taiwan Solidarity Union Chairman Huang Kun-huei (黃昆輝) said the government should listen to its people before officials make any further moves. Huang expressed concern that signing an ECFA with China would impact on Taiwan’s manufacturing industry.


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