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UPDATED: July 19, 2010 NO. 29 JULY 22, 2010
A New Chapter Opens

On June 29, the mainland's Association for Relations Across the Taiwan Straits (ARATS) and Taiwan's Straits Exchange Foundation (SEF) signed the Economic Cooperation Framework Agreement, the famous ECFA. When it comes into effect, this landmark agreement, a true breakthrough in the past six decades of cross-Taiwan Straits relations, will usher in an era of free trade between the two sides.

The establishment of a cross-Straits economic cooperation mechanism was first proposed by top leaders of the Communist Party of China and the Kuomintang in 2005. It became a practical objective since the improvement of cross-Straits relations from May 2008 onward. Well-structured and efficient consultations between the ARATS and SEF for nearly six months have finally brought the ECFA into being.

The ECFA lays the foundation for the gradual normalization of cross-Straits economic ties and provides institutional assurances for future cooperation. It will help the mainland and Taiwan boost economic competitiveness, improve people's well being and speed up economic integration so the two sides can participate jointly in international competition.

An "early harvest" list of goods and services of the ECFA lists 539 Taiwan products categories, worth $13.83 billion or 16 percent of Taiwan's exports to the mainland in 2009, that are likely to receive zero tariff rates during the next two years. In return, 267 categories of mainland products, worth $2.85 billion or about 10.5 percent of the mainland's exports to Taiwan in 2009, will be available to the island tariff-free.

This is only a small part of the beneficial aspects of the ECFA.

In the past, cross-Straits economic and trade cooperation has been largely based on Taiwan businesses' investment in the mainland. The implementation of the ECFA will profoundly change the one-way trade model, as mainland businesses will be able to gain access to the Taiwan market.

More importantly, the removal of investment and trade barriers will result in significant increases in areas of economic and trade cooperation between the mainland and Taiwan, in addition to the previously dominant processing trade.

Despite the difference in quantitative benefits, the ECFA will be mutually beneficial to the mainland and Taiwan. The reduction and scrapping of tariffs will make the vast mainland market more accessible for Taiwan businesses and make their products more competitive. As part of this process, mainland businesses will be able to leaƒrn advanced technologies and management expertise from their Taiwan counterparts.

The realization of the ECFA also offers valuable experience, apparently, for future negotiations between the mainland and Taiwan on broader issues.

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