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Taiwan Close to Implementing Historic Economic Agreement With China

Taiwan and China recently signed a landmark economic agreement removing tariffs on hundreds of trade items. If, as expected, Taiwan's legislature approves the agreement, it will have long-lasting economic and political implications for the island.

Taiwan's Economic Cooperation Framework Agreement with China is the most significant agreement between the governments in Taipei and Beijing in the past 60 years.

Taiwan's President Ma Ying-jeou describes the importance of the deal, known as ECFA. Mr. Ma says the agreement signed on June 29 is a large-scale pact and its influence is far-reaching. He says it represents three giant steps forward: one, it averted marginalization in Taiwan's economy; two, it normalized cross-strait trade, and three, it promoted Taiwan's internationalization.

Taiwan has been governed separately since Nationalist forces fled there at the end of China's civil war in 1949. Beijing considers the island part of its territory. For most of the past 60 years, relations have been hostile, and China's communist government has long vowed to eventually retake control of the island.

Since he took office in 2008, President Ma and his Kuomintang party, however, have pushed for greater economic ties with China. The two sides have signed a several agreements on issues such as tourism.

The new economic agreement brings cross-strait ties to a new level and its advocates say it offers more benefits to Taiwan than China.

Among other benefits, China has agreed to tariff concessions on more than 500 Taiwan products, while Taiwan grants concessions to just over 250 Chinese items. China open will markets in 11 service sectors such as banking, securities, insurance, and medical care. Taiwan will offer wider access in seven areas.

Later this month, Taiwan's legislature holds a special session to review the agreement. If it passes, it will go into effect at the beginning of next year. The legislature is dominated by the Kuomintang, which favors the deal.

This week, business representatives went to the legislature to talk about the deal's benefits. Tsuo Ching-ming, chairman of Ho Yu Textile Company, says it eliminates China's 10 percent customs tax and gives Taiwan's textile makers a new market, much larger than their current markets - the United States and Europe.

Tsuo says that the U.S. and European populations are less than half of China's. Taiwan's textile makers now depend entirely on the U.S. and European markets, and once China develops its domestic market, it can replace the U.S. and Europe.

He says this is an additional market and unlimited one. It can eat up all their products.

Not everyone is convinced that closer ties to Beijing are good. There have been many protests against the economic deal, some led by politicians and activists who think Taiwan should declare itself an independent nation. China has threatened to attack if that happens.

Taiwan's opposition Democratic Progressive Party is among the groups wary of China. But it has toned down its criticism of the economic deal a bit since the preliminary details were finalized.

Political scientist Yang Tai-shuen of Taipei's Chinese Culture University explains why: "At the current stage, if we open the documents, then we can see clearly Taiwan gets more benefits in this agreement than the Chinese side. This is the reality. The DPP cannot criticize this agreement. What they can say is (it is) betting on the future: In the long term, this kind of benefit might turn to be [a] poison to Taiwan, because Taiwan will rely more heavily on China, and China will control Taiwan's economic developments," he said.

Yang also says the real effects of the agreement will only be seen when it is implemented next year.

To reduce potential damage to vulnerable local industries, Taiwan's government will establish a 10-year fund of $3 billion to help them compete. A special "Made in Taiwan" consumer label also has been developed to promote high-quality local products.

Despite the closer economic ties, President Ma emphasizes that his China policy has not changed. He says he will stick to his pledge of no unification with China, no formal Taiwan independence and no military actions during his term in office.

Mr. Ma's administration hopes the cross-strait economic agreement will enable Taiwan's economy to integrate with other countries in the region. This year, China entered a free trade area with the Association of Southeast Asian Nations.

In the past, China has tried to block Taiwan from signing trade agreements with other governments. But that opposition appears to be changing: this month Taiwan and Singapore said they begin discussions on a trade deal. Taiwan also hopes to reach an investment protection deal with Japan and trade agreements with the Philippines and Malaysia.