China, Taiwan ECFA benefits will take time

“Signing the Economic Cooperation Framework Agreement is Taiwan's first step to East Asia regional integration,” Siew told a forum in Taipei Tuesday. Taiwan stocks have rallied 57 percent in the past year on expectations of the accord.

The government is pushing for the agreement to prevent export-dependent Taiwan being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year. North Korea and Taiwan are the two countries in the region that haven't signed trade agreements with China and Asean.

“Investors' enthusiasm for improving relations is visible in the Taiwan stock market's rally of the past year,” Standard & Poor's credit analyst Kim Eng Tan said in a statement Tuesday. “But relations are still far from normal, and it will take time before investors believe the recent changes are permanent and not prone to reversal under a new government.”

China regards the island as part of its territory and has threatening to attack if it declares independence. The two sides split 60 years ago after Mao Zedong's communist forces took control of China, forcing the nationalists to retreat to Taiwan.

China and Taiwan will probably hold a second round of negotiations on the accord in Taipei later this month, Ma Shaw- chang, deputy secretary-general at the Taipei-based Straits Exchange Foundation, said Tuesday in an interview.

The talks will be on an “early-harvest list” of industries that will be first to have lower tariffs and is likely to include textiles, petrochemicals and automobile parts, the foundation's Ma said.

President Ma Ying-Jeou revived efforts to normalize trade and investment with China, the island's biggest export market and No. 1 investment destination, after taking office in May 2008 and abandoning his predecessor's pro-independence stance.

Taiwan exports about US$100 billion of goods to China a year and pays an average tariff of 9 percent to the mainland, while China's shipments to Taiwan are worth about US$30 billion a year, taxed at an average 4 percent.

Taiwan's government estimates that the agreement would boost economic growth by 1.65 to 1.72 percentage points annually, spurring exports and creating more than 260,000 jobs.

Taiwan's economy expanded 9.2 percent in the three months to Dec. 31 from a year earlier, exiting the deepest recession on record, as warming ties with China boosted demand for the island's goods.

The statistics bureau last month raised its 2010 export growth forecast to 20.9 percent and increased its gross domestic product estimate to a 4.7 percent increase from 4.4 percent.

Taiwan's government in February announced an easing of rules that paves the way for local companies to make liquid- crystal-display panels on the mainland while requiring applicants to keep more advanced technologies on the island. It also eased rules to let local semiconductor makers use advanced technologies in China.

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