Cross strait ECFA OK

The Executive Yuan of Taiwan on July 1 approved the economic cooperation framework agreement (ECFA) and a copyright protection agreement signed by Taiwan’s Straits Exchange Foundation (SEF) and mainland China’s Association for Relations Across the Taiwan Strait (ARATS). As required by the Taiwan’s Act Governing Relations between Peoples of the Taiwan Area and the Mainland Area, the agreements will now be sent to the Legislative Yuan for approval.

After the Executive Yuan’s approval of the two agreements, Premier Wu Den-yih stressed that the ECFA was signed on the basis of equality and mutual benefit following step-by-step negotiations. The premier said that the agreement not only proves that the government has upheld its pledge of “putting Taiwan first for the benefit of the people” by protecting the interest of the island’s agriculture, traditional industries, and small- and medium-sized enterprises, but also paves the way for mutual benefit and a win-win situation for both sides of the strait. The ECFA marks a milestone in cross-strait trade relations, he added, and will help link Taiwan to the Asia-Pacific and the rest of the global economy.

Regarding the agreement on intellectual property rights (IPR) protection, Premier Wu said it reflects the universal value attached to the safeguarding of IPR. Both sides have established comprehensive protection measures that will foster innovation and R&D in the corporate sector. The two agreements, according to the premier, will enhance Taiwan’s economic development and strengthen its position in Asia with far-reaching impacts into the future.

The ECFA marks a significant stride toward “strengthening Taiwan, linking Taiwan to the Asia-Pacific, and creating a global presence,” the premier noted, and the first step toward liberalizing cross-strait trade. As the two sides will continue to negotiate deals on investment and other goods and services exchange, the premier expects all government agencies to continue working just as hard to build a framework for normalizing bilateral economic relations. Since the ECFA will promote an open and free environment, we must plan our global economic strategies for the post-ECFA era, he said, adding that the ROC must pursue mutually-beneficial free trade agreements with other important trading partners. This will help Taiwan to be even more in sync with the global economy, enabling the local economy to scale new heights, he said.

After these two agreements and their supplementary rules and measures pass the Executive Yuan, they will immediately be forwarded to the Legislative Yuan for deliberation. The premier urged the Mainland Affairs Council (MAC) and other related agencies to strengthen communications with lawmakers and convey to the public the benefits of the ECFA, helping people to have a correct understanding of the agreement’s significance. Meanwhile, government agencies must work diligently to review and amend related measures so that Taiwan can be completely prepared when ECFA takes effect, especially with regard to transforming and providing relief to the industries that will be impacted, the premier said. To upgrade Taiwan’s industries, Wu said the Ministry of Economic Affairs should actively push forward its plans on the 10-year, NT$95-billion relief package to boost the weaker sectors most likely affected by the ECFA.

According to the MAC, the two agreements signed between the SEF and ARATS on June 29 must be approved by the Executive Yuan and forwarded to the Legislative Yuan for approval within 30 days of signing. This procedure is required by Article 5 Paragraph 2 of the Act Governing Relations Between Peoples of the Taiwan Area and the Mainland Area.

The main points of the two agreements are as follows. First, the ECFA focuses on cross-strait trade in goods and services, investment, economic cooperation, early harvest, dispute settlement, regulations under which the agreement can take effect or be abolished, and follow-up negotiations. A special committee will be formed to oversee the ECFA’s implementation in order to boost administrative efficiency and expertise.

Second, the IPR protection agreement lays out collaboration goals and protection of priority rights and variety rights. This agreement will promote inspection cooperation, industrial cooperation and certification services. The agreement will also establish a joint mechanism to monitor cross-border criminal infringement, which will ultimately enhance economic, technological and cultural development on both sides of the strait.

President Ma Ying-jeou on the afternoon of July 1, in the company of Vice President Vincent C. Siew, also held a press conference at the Presidential Office to discuss the signing of the ECFA with mainland China. Several high-ranking government officials attended the press conference, entitled “New Inflection Point for Taiwan, New Era for Asia—Choosing Correctly at a Critical Juncture,” including Premier Wu Den-yih, Presidential Secretary-General Liouyi Liao, National Security Council Secretary-General Hu Wei-jen and SEF Chairman Chiang Pin-kung.

Excerpts of the president’s speech are below:

At the fifth meeting between Taiwan’s SEF Chairman Chiang Pin-kung and mainland China’s ARATS Chairman Chen Yunlin, held on June 29 in Chongqing, the SEF and the ARATS signed the ECFA. This morning, the Executive Yuan approved the agreement and forwarded it immediately to the Legislative Yuan for review and approval. If the agreement is approved there, it is expected that the ECFA will take effect on January 1 of next year. This agreement may significantly impact the future of Taiwan. While some here support the agreement and others oppose it, everyone places great importance on this development. In particular, the international community is closely following this issue because in addition to having far-reaching effect on cross-strait relations and further solidifying peace and prosperity on both sides of the Taiwan Strait, the ECFA will also lead to changes in the structure of cross-strait economic ties. Consequently, I would like to take this opportunity to explain my personal observations and thoughts on this matter.

I believe that the signing of the ECFA is extremely important for Taiwan, for cross-strait relations, for the Asia-Pacific region, and even for the entire world. This agreement enables Taiwan to take three major steps forward, and also fulfills four promises my administration made. First, the ECFA is a major step for Taiwan in overcoming economic isolation, as it heads off the threat of economic marginalization. Second, the ECFA is a major step forward for the two sides of the Taiwan Strait in economic reciprocity and cooperation. Under a systematized framework, the agreement will help Taiwan generate more business opportunities and increase the number of jobs here. Third, the ECFA constitutes a major step in hastening economic integration in Asia. In the future, the value of Taiwan will become more important in the eyes of the Asia-Pacific region and the global community. Taiwan has a strong chance of becoming a springboard for companies from throughout the world seeking to enter the mainland market.

The signing of this agreement also enables us to fulfill four promises that we previously made to the public. Firstly, nothing in the content of the ECFA relates to the opening of Taiwan’s doors to laborers from mainland China, nor does it further liberalize imports of mainland agricultural products. There will be no reduction or elimination of tariffs on the 1,415 agricultural imports from mainland China that are already allowed. This constitutes an important pledge made by our administration that was explained to the public in early April. Secondly, the content of the agreement proves that it was not signed with only the interests of major enterprises in mind. The ECFA focuses broadly on the interests of the Taiwan economy as a whole, including small- and medium-sized enterprises (SMEs), vulnerable industries, laborers, and farmers. The government forecasts that over 23,000 SMEs and over 420,000 laborers will benefit from the ECFA. In addition, the agreement will enable 18 more agricultural products from Taiwan to be sold to mainland China, including bananas, oranges, tea, grouper fish, and milkfish. Of course, not all of the products hoped for by the public and industry are included in the early harvest list. Within the first six months after the ECFA takes effect, the government will seek to include other items. Third, this agreement has forged tariff concessions on various goods and services, and has also liberalized markets. The two sides have also signed a cross-strait cooperative agreement on the protection of intellectual property rights. This is an extremely important step, for it will create more opportunities for Taiwan’s cultural and creative industries to develop in mainland China. Meanwhile, the government has included investment guarantees as a topic for discussion in the next round of negotiations. This topic was not discussed on a concrete basis in the most recent round of talks, but it will be broached in the next round. This is extremely important with regard to our investments in mainland China, as Taiwan firms are estimated to have invested nearly US$200 billion in the mainland. Fourth, this agreement was negotiated and signed under the principles of equality and reciprocity, as well as “putting Taiwan first for the benefit of the people.” The ECFA has not damaged the nation’s sovereignty, nor has it compromised Taiwan’s dignity.

We need to understand that the ECFA, while not a panacea, is the correct path for us at this critical juncture. We needed to consider various factors regarding the ECFA when we were mulling whether or not to sign the agreement and, before that, whether or not to work for signing of the agreement. The first questions were, would this agreement enhance the export competitiveness of our products? Would it promote regional integration? Would it help us sign free trade agreements with other nations? Also, we needed to consider whether it would protect the interests of Taiwan companies, whether it would attract foreign companies to invest in Taiwan, and whether it would help us export agricultural and fisheries products to mainland China. These were the factors we needed to consider.

The ECFA will eliminate some barriers facing Taiwan in its economic development, and enable us to compete on a more level playing field with other countries, and especially with our major competitors. However, the ECFA is just one among many measures we are taking to further boost Taiwan’s economy. I want to specially remind everyone that signing of the ECFA does not mean that we can sit back and relax, and that there is nothing but clear sailing ahead. That is not the case. We need to move quickly to take advantage of this opportunity—this hard-won chance—by re-examining long-standing policies and methods that have already served their purpose, and by finding new ways to spark the economy. I would like to ask everyone to consider the following—Taiwan has an extremely advantageous geographical location in East Asia. We are also a nation with lots of outstanding and enterprising people. We are an open society that emphasizes the values of democracy and freedom. Meanwhile, Taiwan features outstanding and diverse educational opportunities. Based on these factors, we should have had many opportunities to move forward at a relatively early stage, just like our competitors did. However, in the years prior to our administration taking office, we failed to capitalize on Taiwan’s strengths. We became stuck, making it impossible for us to fulfill our potential. It was as if Taiwan in those years had been placed in shackles. After our administration took office, however, we adopted policies that emphasized deregulation and re-construction. In principle, we have moved in the direction of liberalization. We have amended hundreds of laws and regulations in order to deregulate. We have reduced the inheritance tax and business income tax, and expanded public investment. In addition, we have liberalized direct transportation between the two sides of the strait, initiated the “three links,” and opened our doors to mainland Chinese tourists. At the same time, we have signed an agreement with mainland China for direct flights between Taipei’s Songshan Airport and Shanghai’s Hongqiao Airport, and we’ve signed another agreement with Japan for direct flights between Songshan Airport and Tokyo’s Haneda Airport. So you see, we are not relying on one or two measures, for it takes a comprehensive approach to truly help Taiwan break through the barriers facing it and free us of the various restrictions that have been placed around our neck.

Amid these circumstances, there are several things we must do to keep Taiwan’s economy moving forward. The first key task is to find a way to strengthen Taiwan’s economy. If we want to strengthen the nation’s economy, we must promote investment, but the question is, do we have investment opportunities? In fact, we have many. For instance, there are the “i-Taiwan 12 Projects” and the six major emerging industries—biotechnology, tourism, green energy, health care, high-end agriculture, and cultural and creative industries. These are all ideas that we put forward last year. After Premier Wu took office last September, he unveiled four “intelligent industries” including cloud computing, intelligent electric vehicles, intelligent green buildings, and the industrialization of inventions and patents. Vice President Siew has also carried out research with regard to 10 key service industries. So, all together, we have pinpointed over 30 sectors that are ripe for investment. Prior to signing the ECFA, there was not much incentive to invest. After signing the ECFA, however, we will have much better opportunities, because investors from other countries will see Taiwan as a place to produce items that can be sold to mainland China tariff-free.

In addition, we are using laws and regulations as a means to strengthen innovation. We must use innovation and the measures I just mentioned to promote investment. The Legislative Yuan passed the Industrial Innovation Act last April. This is about more than just tax cuts. More importantly, our national policy must encourage innovation among all sectors, not just in high technology. Bearing this principle in mind, we must have a clear plan, and work effectively to integrate the work of our government-related R&D institutions, such as the Industrial Technology Research Institute, the Institute for Information Industry, the Development Center for Biotechnology, and the Ministry of National Defense’s Chung-Shan Institute of Science and Technology. These large-scale research organizations must collaborate to boost the ability of Taiwan industry to innovate, develop name brands, and provide greater added-value in the service sector. At the same time, we must develop a green energy economy and help the ICT industry, which is already very developed, to find new applications.

It is also very important that we strengthen the basic building blocks of our economy. The Ministry of Economic Affairs recently identified 10 extremely fundamental industrial technologies that we will rely on over the next five to 10 years to enable us to become an industrial powerhouse. The development and promotion of these critical technologies will be vital in paving the way for Taiwan to transform. To be sure, the ECFA will play an important role in fueling this work. Without a doubt, this effort to transform the economy is extremely difficult and immense, and in the process of transformation, some industries may not be able to adapt well. Some may even experience setbacks. The government must make necessary preparations. Everyone probably recalls that recently we mentioned that the Ministry of Economic Affairs and the Council of Labor Affairs are budgeting NT$95 billion to be used over a 10-year period to provide assistance to 17 industries that could be especially vulnerable to negative impact from the ECFA, including garments, shoes, ceramic tiles, and bedding. We said that these sectors could be affected by mainland products on the early harvest list that could be exported to Taiwan. Ultimately, however, no products from these 17 industries were included on the early harvest list. Preliminary forecasts indicate that the 267 items included on the early harvest list will have a very limited impact on industries here. The reason for this is that most of those items are products in which Taiwan already exhibits a competitive edge. For some of the other items, imports from the mainland are beneficial to both sides, while some other items are raw materials that we do not even produce here. If it does so happen that any product does end up having a negative impact on industries here, we will still have access to the NT$95 billion budgeted by the Ministry of Economic Affairs. These are the preparations we have made to counter the impact of free trade. In other words, this is not only a problem we will face in dealing with goods from mainland China. In the future, we will face similar challenges as well when we sign free trade agreements or economic cooperation agreements with other nations.

Secondly, we need to strengthen cross-strait cooperation. Mainland China is also in transition, from the world’s factory to the world’s market. In other words, the products that we sell to mainland China in the future may not simply be processed there and then sold to North American or European markets. On the contrary, even now, some of the products that we sell to the mainland are already ending up in the hands of mainland Chinese consumers, so domestic demand there does present us with opportunities. We plan to instruct our trade promotion agencies, such as the Taiwan External Trade Development Council, to assist Taiwan enterprises in developing markets in the mainland.

Thirdly, we need to establish a global presence. Taiwan’s development absolutely cannot and will not solely rely on mainland China. Therefore, we must diversify and manage risks, and seek a global presence. Our geographic advantage attracts foreign companies to invest in Taiwan. Ever since I began talking about signing an ECFA with mainland China, the American Chamber of Commerce in Taipei, the European Chamber of Commerce Taipei, the Japanese Chamber of Commerce and Industry, and many foreign companies have become more interested in investing in Taiwan. Among these, interest among Japanese firms is the greatest. Japan and Taiwan have 40 years of experience in cooperation and the Japanese realize that it is more effective to work with others in investing in mainland China than going in solely on their own. Consequently, we can become a platform for multinational enterprises seeking to invest in mainland China. In the same manner, mainland Chinese companies can invest in Taiwan and use Taiwan as a platform to embark upon the world market. These efforts can help Taiwan to become a global center for innovation, an economic and trade hub in the Asia-Pacific, an operations headquarters for Taiwan companies, and a regional headquarters for foreign companies. These are all things that we talked about when we were running for office. Meanwhile, we also want to sign free trade agreements or economic cooperation agreements with our trading partners. In this process, however, we must consider the complementary nature of the economic relationships. The more complementary any two economies are, the greater the benefits and opportunities such agreements can afford. At the same time, we also need to take advantage of the mainland Chinese market. In the future, each year there will be new items that will see reduced tariffs and items on which tariffs will be abolished. We will have enormous opportunities to sell products to the mainland. How to make the best use of these opportunities to further develop markets in emerging nations is another issue that we must consider.

In principle, our vision is to welcome the world to Taiwan and to send Taiwan out into the world. As for the concrete methods to achieve this, the Executive Yuan will establish a “task force for the promotion of global business” that within three months will formulate a global business promotion plan. Agencies that supervise various industries, such as the Ministry of Economic Affairs, the Ministry of Finance, the Financial Supervisory Commission, and others will work together to launch an all-out effort. Besides recruiting companies from the United States, Europe, and Japan, we also hope that Taiwan companies operating in mainland China will come back and invest in Taiwan. The task force will also regularly examine the results of the recruitment efforts.

In addition, I am preparing to establish a “task force on global economic strategy” under the National Security Council to supervise and follow various work, such as innovation, overtures to foreign firms, and investment. The task force will first hold consultations with related agencies under the Executive Yuan, after which the Executive Yuan will propose concrete projects. These initiatives will be promoted step by step. I am confident that this mechanism will coordinate and integrate our efforts, maximizing the results of this work.

At this point, I would like to urge the Legislative Yuan to speedily screen and pass the ECFA. The Office of the President, the Executive Yuan, and the ruling Kuomintang all concur that the ECFA should be subject to review and approval in the Legislative Yuan, firstly because the ECFA requires the amendment of various laws, and secondly because it is a policy of material significance. A policy that fundamentally redefines how our enterprises will deploy their resources— in mainland China, Asia, and the entire world—needs to be reviewed by the legislature, which represents the will of the people. We plan to arrange for Premier Wu to go to the Legislative Yuan to report on the ECFA. He will clearly explain to everyone how we plan to proceed and what the benefits will be for us. We hope that this arrangement will enable our parliamentarians to fully understand that the moves we are making to integrate into the global economy are beneficial to Taiwan, and that this is the correct decision at this critical point in time. We also hope that legislators will fully support the ECFA. I especially hope and welcome lawmakers from the opposition parties to exercise rational oversight, and welcome them to offer their opinions on the ECFA. We hope that during the course of the review special attention will be given to the method of the review, as this will impact the willingness of our trading partners to work with us to forge free trade agreements or economic cooperation agreements in the future. I hope that the legislature will review the ECFA in a speedy manner, enabling this agreement to be an important first step in creating a golden decade for Taiwan.




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  1. Pingback: Table of Contents of July 2010 « GOLD MONEY TALK

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