Taiwan, China in final talks on landmark trade deal likely to change island’s character

Taiwan, China finishing important trade pact

TAIPEI, Taiwan — Negotiators from China and Taiwan worked Thursday to finish a bilateral trade deal that seems destined to change the island’s character in a way not seen since it split from the Chinese mainland amid civil war 61 years ago.

In one sense, the Economic Cooperation and Framework Agreement is a simple tariff accord meant to protect Taiwanese companies from the punitive effects of a free trade agreement between China and Southeast Asian countries that went into effect earlier this year.

But the deal, which is expected to be signed next week in the Chinese city of Chongqing, ultimately ties Taiwan’s high-tech economy to China’s lucrative markets and paves the way for much closer political relations between the sides.

That serves China’s long-term goal of returning Taiwan to its control — by persuasion if possible, by force if necessary.

It also serves the interests of important sectors of Taiwan’s powerful business community, which over the past 20 years have leveraged a common language and similar culture to set up profitable mainland ventures and to ramp up their China exports to more than $80 billion annually.

Since taking office two years ago, Taiwanese President Ma Ying-jeou has made closer economic ties with China the centerpiece of his administration, and ECFA is the culmination of his efforts.

The deal provides Taiwanese companies tariff advantages on 539 categories of goods for China export, and Chinese companies will receive advantages on 267 categories in the Taiwan market. It also protects intellectual property rights for both sides — an important gain for Taiwan’s entertainment sector — and regulates cross-strait banking.

Meeting with reporters after Thursday’s talks, Taiwanese Premier Wu Den-yih acknowledged that the island had not been able to achieve tariff advantages for all the items it wanted, including on some petrochemical products, cited by Ma as a key ECFA objective.

“It’s impossible to get everything we wanted because China has to take care of its interests as well,” he said.

Ma and the Taiwanese business community see the pact as the only way of saving Taiwan from economic isolation amid the rapid development of regional trading blocs. But the island’s pro-independence opposition disputes its economic benefits and warns of negative political implications — first and foremost Taiwan’s eventual absorption into China. Ma denies that will happen on his watch.

Led by the Democratic Progressive Party, opposition forces are planning a massive anti-ECFA demonstration Saturday in Taipei.

Since losing the presidency to Ma in 2008, the party has returned from the brink of political oblivion, winning 6 out of 7 legislative by-elections, and scoring important gains in a series of local polls. It has made no secret of its ambition to ride unhappiness about Ma’s China policies — particularly his support of ECFA — to big gains in mayoral elections later this year, and ultimately into the 2012 presidential elections.

But at least for now, polls show that more Taiwanese support ECFA than oppose it. Government estimates that ECFA could provide a $13.8 billion bounce for Taiwan’s annual sales to China could strengthen Ma’s hand even further, particularly if its expectations that China’s tariff advantage would amount to only $2.9 billion come to fruition.

Ma has promised that Taiwan’s Legislature will examine ECFA after negotiations are completed. His Nationalist Party enjoys an overwhelming majority in the chamber, so implementation of the deal is not expected to be held up for long.