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ECFA – Economic Cooperation Framework Agreement

ECFA – Economic Cooperation Framework Agreement. BUSI 3001 SBLC Week 7(9) , Spring 2010. Charles Mo & Company April 19, 2010. ECFA. Why both sides need ECFA History and background of the modern China in Beijing and Taipei Taiwan’s economy after the 50’s China’s economy after 70’s

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ECFA – Economic Cooperation Framework Agreement

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  1. ECFA – Economic Cooperation Framework Agreement BUSI 3001 SBLC Week 7(9), Spring 2010 Charles Mo & Company April 19, 2010

  2. ECFA • Why both sides need ECFA • History and background of the modern China in Beijing and Taipei • Taiwan’s economy after the 50’s • China’s economy after 70’s • Relationship between cross-Taiwan-straight during • Deng’s era • Jiang’s era • Hu’s approach • Potential ECFA economic impact on Taiwan • BJ and Taipei set stage for ECFA • Three agreements signed under ECFA • Future potential for the two sides

  3. China’s modern history • In 1950, the Nationalistic Party (KMT) led by Chiang Kai-shek was driven off the mainland by the Communist Party to the island of Taiwan with two million soldiers and civil servants. • Chiang fled to Taiwan and hung on to two island clusters near the province of Xiamen, Kinmen and Matsu. • Why?

  4. The two sides shut off all communications and were at war until 1978 when the artillery shelling stopped to Kimen islands. • Why? February 21, 1972

  5. In 1978, China’s second generation leaders led by Deng Xiao Ping embarked on market reform and economic development • "One country, two systems" is an idea originally proposed by Deng Xiaoping

  6. In 1996, US dispatched two aircraft carriers after Chinese missile tests over the island. • What happened and why? • What was the result of this action?

  7. In 1998, Hu Jing Tao became the president and during his rein, • Chen Shui Bian was arrested for corruption in 2008 • Ma Yin Jeou was elected president of Taiwan in 2008 • ECFA discussion was resumed in May 2008

  8. Rapprochement between the two sides • May 2008: China and Taiwan resumed trade talks, first of the ECFA four meeting began. • June 2008: Taiwan and China reach agreements for direct flights and Chinese tourists’ visits to Taiwan • July: First Chinese tourist group lands in Taiwan • April 2009: Both sides sign agreements for regular passenger and cargo flights, financial cooperation and mutual assistance in cracking down on crimes. • April: Taiwan introduces a cross-Straight industrial exchange project to promote cooperation in 15 industries • June: Taiwan opens 100 industries to Chinese investments • June: resumed ECFA talks following a suspension of some 10 years • June: China sends the first procurement delegation to Taiwan • November: The two sides sign memorandum of understanding for financial investment

  9. Founding father of the current China • Market reform and economic boom • Negotiated return of Hong Kong and Macau • During his time, Hong Kong and Macau returned to China • Possible signing of landmark ECFP

  10. Taiwan’s economy • Technology industry • Taiwan firms make world’s many Personal Computers and related products • Taiwan is part of the global high tech value chain • Both sides have staked personal prestige on this pact • China is Taiwan’s largest export destination • 1/3 Taiwan export destined to China • Bilateral trade amounting to US$130 b in 2008

  11. Taiwan opens tourism to China • Tourists from China arrive in Taiwan from a cruise ship this year amid loosened restrictions on visitors from the mainland

  12. China and Taiwan are launching key talks toward a trade pact that would mark the biggest step forward in a détente that is reshaping East Asia’s economics and politics. • The talks are expected to result in the signing of 2011 free trade deal between the onetime enemies • This new pact includes opening: • Business, travel, and political contacts. • If successful • Bind Taiwan to its giant neighbor • Erase decades old barriers in Taiwan to investments from China

  13. Jiang’s era • Pressure for reunification • Taiwan’s new democratic party pushing for independence • Missile tests in the Taiwan Straight • China had 1500 missiles pointing at Taiwan

  14. Hu’s approach • Abandoned the sort of fiery threats toward Taiwan • Instead signing a series of free-trade deals with its Asian neighbors including one with Taiwan’s major competitors • When the pacts take effect next year, Taiwan’s exports to China will become much more expensive. • Forbid its regional partners from making similar deals with Taiwan

  15. ECFA Potetial Economic impact on Taiwan • 1.65-1.72% to Taiwan’s gross domestic product • Create 263,000 jobs • Taiwan has in the past prevented multinationals from integrating Taiwan into their global operations, driving many to Shanghai • Limits on banking and investment in China set back in companies Taiwan government study

  16. Beijing, Taipei set stage for landmark pact • Rapid improvement in relations with China since Taiwanese President Ma Ying Jeou took office. • Taiwan-China tension is the greatest security concern in East Asia

  17. What may be accomplished in the week Dec 21, 2009 • No formal trade talks • Setting a frame work for the free-trade deal • Set a time frame for trade talks • An agreement is expected in the first half in 2010 • A list of zero-tariff products • Including financial, machinery, and petro chemical industries • Something will come out during the week of Dec. 21, 2009 • Agreement on fishing-industry cooperation • Quality checks of agricultural products, • Cooperation in inspection and certification • Prevention of double taxation • Ease visits by Chinese professionals • Offer scholarships to Chinese students

  18. On going talks • Enabling Chinese banks to enter Taiwan • Worry by the Taiwanese • Chinese banks market capitalization is often 10 times of the Taiwanese banks. • Control by Chinese banks • Financial regulators will bar from buying stakes in Taiwanese banks

  19. Talking points/key issues in Taiwan-China trade negotiations • Tariffs on machinery, textile, and petrochemical – Taiwan seeks tariff-free sales in these industries • Ban on agricultural products – Taiwan vows not to open its market more than 800 Chinese agricultural products • Ban on industrial products – China urges Taiwan to open its market to some 1300 industrial Chinese products • Local currency service – Taiwan seeks right for Taiwanese banks to provide local currency • Chinese investments to Taiwan • Investment Protection Agreement

  20. Taiwan, China signed 3 agreements • Tuesday, December 22, 2009 signed 3 agreements • Industrial standards • Food quarantine • Fishery cooperation • Effective in 90 days after the signing • Taiwan would like to sign the trade pact with China and set in motion the negotiations ASAP • China’s position is that in light of the importance and complexity involved, it is not wise to set a timetable for the signing of ECFA • Expected to hurt makers of shoes, socks, towels, garments, automobile parts, and petrochemical products

  21. Industrial standards • Taiwan and China will work together to establish joint standards and specifications on products for which there are not international standards yet • Bureau of Standards, Metrology and Inspection under the Ministry of Economic Affairs • Exporters would have to ensure the products complied with these standards • Related companies may collect royalties if they register patents on them • Profit involved is huge given the size of the Chinese market • Benefit Taiwan’s light-emitting diode, solar-cell and flat panel makers because international standards aren’t available

  22. Other discussions • Trade talks will also settle which sectors will be included in the list of the first industries to be allowed to sell their goods at lower or zero tariffs • Taiwan hopes to indlude • Banking, • Textile • Auto parts • Machinery • Increase cross straight flights during lunar year • Taiwan and China currently operate 270 passenger flights a week

  23. Future potential

  24. Two economies

  25. Export countries in the world Rank Country Exports Year World $12,461,000,000,000 2009 est. European Union $1,525,000,000,000 2009 est. 1 PR China $1,202,000,000,000 2009 est. 2   Germany $1,121,000,000,000 2009 est. 3   United States $1,057,700,000,000 2009 est. 4   Japan $ 581,000,000,000 2009 est. 5   Netherlands $ 499,000,000,000 2009 est. 6   France $ 475,000,000,000 2009 est. 7   Italy $ 405,000,000,000 2009 est. 8   Belgium $ 370,000,000,000 2009 est. 9   South Korea $ 364,000,000,000 2009 est. 10   United Kingdom $ 351,000,000,000 2009 est. —   Hong Kong $ 330,000,000,000 2009 est. • Canada $ 316,000,000,000 2009 est. 12   Russia $ 304,000,000,000 2009 est. 13  Singapore $ 270,000,000,000 2009 est. 14  Mexico $ 230,000,000,000 2009 est. 15  Spain $ 218,000,000,000 2009 est. 16   Taiwan $ 204,000,000,000 2009 est

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