Trade talks with China to begin Jan. 20

Taiwan hopes the talks will enable the two sides to sign the so-called Economic Cooperation Framework Agreement in May, as it seeks access to the world's fastest-growing major economy, Wu said at the Cabinet's New Year press briefing in Taipei.

“This will help us save taxes significantly,” Wu said. 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 of 4 percent, he said.

China and Taiwan agreed last month to increase cooperation in fishing, agriculture and industrial goods as they seek to end a 60-year standoff since Mao Zedong's Communists took control of the mainland, prompting their Nationalist opponents to flee to the island. Previous talks to boost economic ties were stalled in 1998 by a dispute over how to describe the dialogue.

Taiwan's President Ma Ying-jeou is seeking better relations with the island's biggest trading partner to spur economic growth and reduce China's hostility toward Taiwanese efforts to improve ties with other countries.

The planned economic agreement will include two parts initially: cuts to import duties on about 500 goods and a further easing of restrictions on services such as retail and wholesale businesses and financial services, Taiwan Economics Affairs Minister Shih Yen-shiang said last month.

Ma has been pushing for the trade pact with the mainland to prevent export-dependent Taiwan from being marginalized after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year.

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

The government will say at the end of this month which of the island's industries it will allow to invest in China, Wu said.

Taiwan currently bars its citizens from investing in factories in China that will produce advanced semiconductor chips on 12-inch wafers, flat-panel screens and ethylene, a raw material used to make plastics.

Taiwanese companies have invested an estimated US$150 billion in China in the past 20 years, while Chinese companies have invested NT$1.2 billion (US$38 million) in Taiwan since June 30, according to data from the island's Straits Exchange Foundation.

The island's benchmark stock index climbed 78 percent in 2009, the best year in 16, as investors bet that closer China ties will bolster the island's economic growth.

The TAIEX stock index rose 0.5 percent to close at 8,280.90 Friday before the briefing. The Taiwan currency was little changed at NT$31.880 versus the U.S. dollar at 4 p.m. local time, according to Taipei Forex Inc.

On China's opposition to U.S. arm sales to Taiwan, Wu said the island is just doing what it needs to do to strengthen its defense capability.

“It's very natural that China has this kind of reaction, but we just do what we need to do, and that is to strengthen our self-defense capability, and the U.S. is just doing what they are obliged to do under the” 1979 Taiwan Relations Act, the premier said.

The U.S. Department of Defense said on Jan. 6 that Lockheed Martin Corp., the world's largest defense contractor, would sell US$968.7 million of Patriot Advanced Capability-3 missiles and associated equipment to Taiwan, the U.S. military, and the United Arab Emirates.

China “firmly” opposes U.S. arm sales to Taiwan and has lodged a formal complaint, Foreign Ministry spokeswoman Jiang Yu said in Beijing Thursday. Jiang urged the U.S. to “stop selling arms to Taiwan so as not to undermine the overall cooperation between China and the U.S.”

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