Is “ECFA” a good idea?

On June 26th, 2010 in Chongqing, China, a crucial trade agreement called “ECFA” was signed between the People’s Republic of China (Mainland China) and the Republic of China (Taiwan). The general public in both countries believed that this agreement carried historical significance, being that the Chinese Civil War in 1949 had strained their relationship.

“ECFA” stands for “Economic Cooperation Framework Agreement”. According to the agreement, 539 categories of Taiwanese exports to China and 267 categories of Chinese exports to Taiwan will receive tax cuts in the following year. The agreement is expected to increase Taiwan’s GDP by 1.72%, which is more than 7 billion U.S dollars, in addition to creating more than 263,000 jobs.

Another important aspect of “ECFA” is the “Three No” negotiation principle that the Taiwanese government has brought into the trade agreement. The agreements outlined in the “Three No” negotiation are as follows: saying no to downgrading Taiwan’s sovereignty, importing China’s agriculture products, and China’s labor workers. The Taiwanese government looks forward to achieving economic development between Mainland China and Taiwan under one condition- Taiwan’s benefit must be protected.

The “ECFA” trade agreement has been a controversial issue since it was introduced to the public. President Ying-Jeou Ma, current President of the Republic of China, and his administration believe that signing “ECFA” with Mainland China will provide advantages and affect Taiwan’s market in a positive way. Compared to other Asian countries, Taiwan will gain its advantages and priority to enter China’s market. Due to the tax cut on Taiwan’s exports to China, more companies in the United States and Europe tend to utilize Taiwan as its entry point to China’s market, thus helping Taiwan transform economically.

Four years have passed since the enactment of the trade agreement. Although the initial results showed that the total value of Taiwan’s exports to China increased 35%, many still cast doubts on whether “ECFA” has brought more benefits than harm to Taiwan’s market and economy. Looking at the data provided in the initial report, Taiwan’s exports to Mainland China have continued to lose their market share even when those exports received tax cuts benefits; on the other hand, Mainland China’s exports to Taiwan have increased their market share from 24% to 30%. According to the spokesperson, Ying-Chen Wang, “For the past few years, Mainland China has vastly developed its iron and steel industry and sold its products to Taiwan in a very low price.” In the years 2011 and 2012, Mainland China and Korea sold a particular stainless product that is used to produce elevators, windows, and electronics for a price that is lower than 30% of the market price.

From a BBC news article, several Taiwanese with various occupations were interviewed and gave their opinions on the trade agreement “ECFA”. Some favored the agreement and look forward to connecting with the global economy. “It’s good for Taiwan to sign trade deals with other countries because that’s the trend nowadays – economic integration, and Taiwan needs to be integrated with the global economy”, said Yao-Ting Lin, a building manager. Others cast their doubts on the actual execution of the agreement, and are concerned about intense competitions within local markets. “Chinese flowers might come here too. They say now they will keep out agricultural products, but I don’t think they will do that forever”, said Su-Chung Liu, the owner of a flower shop.

Every coin has two sides, and so does “ECFA”. Whether “ECFA” has proven itself to boost or decrease Taiwan’s competitiveness, as it relates to global economy the outcome is still a tossup. However, what can be said for sure is that “ECFA” has served as the first step in economic cooperation between Mainland China and Taiwan.

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