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Researcher says firms relying on service pact

TAIPEI, Taiwan -- Taiwanese business operating in China will lose out gradually if the cross-strait service trade pact continues to be shelved, an economic researcher warned yesterday.

Within China's newly established pilot free trade zone in Shanghai, Taiwanese businesses will face a lot of pressure from international and domestic competitors, said Ku Ying-hua, a researcher with Taiwan's Chung-hua Institution for Economic Research (CIER).

Taiwanese businesses do not have any significant advantages over their international and domestic peers inside the zone, Ku said.

The cross-strait service trade pact signed earlier this year could give Taiwanese businesses extra competitiveness elsewhere in China, but the agreement has to be implemented soon, Ku argued.

If the cross-strait service trade pact fails to take effect soon, Taiwanese businesses will not enjoy the privileges promised them by the Chinese government and their competitiveness will dwindle gradually in the face of keen competition from rivals operating in the free trade zone, Ku said.

Taiwan and China signed the service trade pact earlier this year under their mutual Economic Cooperation Framework Agreement (ECFA), but Taiwan's Legislature has yet to approve it because of a boycott by opposition lawmakers.

Beijing has reportedly exerted pressure on Taiwan to implement the agreement as soon as possible, but judging from current developments at the Legislature, the service pact stands a slim chance of being approved anytime soon.

Ku, speaking at a symposium in Taipei on China's latest economic policies, said the Shanghai free trade zone is chiefly aimed at liberalizing the country's service sector, creating new management models and reforming the government's role.

The researcher said China's policy is banking on a liberalized economy to lead reform.

China is expected to set up more “pilot” zones elsewhere in the country to serve different purposes, and Taiwan must think how it must respond to these developments, Ku said.

Ku suggested that under ECFA, Taiwan and China should seek to create a cooperation model based on both sides' characteristics and special needs.

Taiwan could become a testing ground for China's pilot run for financial liberalization, Ku said.

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