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Progress in the Taiwan Strait

China-Taiwan Trade Agreement Could Help Re-Integrate Taiwan in Asia
30 June 2010

by Daniel Michaeli

Taiwan's president Ma Ying-jeou campaigned on the idea that economic growth depends upon better relations with the mainland (Photo by Daniel Michaeli, Taipei, March 2008)

An Economic Cooperation Framework Agreement (ECFA) between China and Taiwan was signed yesterday in Chongqing, promising a substantial boost to Taiwan’s export industry. (A Taiwan government-sponsored study claims the deal will create 260,000 jobs and add 1.7 percentage points to Taiwan’s GDP growth each year over the next seven years.) This agreement has been called a “game changer” by both proponents and opponents, though it still requires the approval of Taiwan’s legislature.

In 2003, China became Taiwan’s largest trading partner, replacing the United States. This is a good thing–it reflects the role China’s economy has in lifting the other economies of the region. But a proliferating alphabet soup of regional trade agreements has left Taiwan (and the United States) out of the picture. So it makes sense for Taiwan to cut a deal with China.

China’s goal is, of course, political rather than economic. After learning in the 1990s that launching missiles won’t sway Taiwan public opinion in its favor, this deal is part of a larger charm offensive of cross-strait human and economic links. China hopes this will lead to eventual unification; so Beijing has been careful so far. Given the tumultuous nature of politics on Taiwan, Beijing was wise to accept a somewhat skewed deal, widely seen as benefiting Taiwan more than China. A more even-handed agreement could have produced a backlash from workers in affected industries in Taiwan.

But for a Chinese charm offensive to succeed, Taiwan’s people must feel the island is not overly dependent on China and that their leaders make decisions free of pressure from the mainland. To this end, China should stop interfering in Taiwan’s free trade negotiations with other Asian countries.

President Ma and others have claimed that the ECFA deal will open the door for Taiwan to negotiate free trade agreements with other Asian countries, yet China has not sent a clear signal either way. Such agreements could help reduce Taiwan’s economic dependence on the mainland and improve its economic prospects–both of which are likely to increase domestic support for leaders in Taiwan with moderate views towards China. Beijing: take note.

Author’s Note: Professional activities have kept me away from the blog in recent weeks, but I expect to return to a more normal blogging schedule going forward. Thanks for your patience!

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