Taiwan's Dilemma in Signing the ECFA
By Vivian Sung JGSM '10
Issue date: 11/2/09 Section: Features
This opinion editorial was chosen as one of the top submissions in the NBA 5670 Management Writing course as part of Cornell Business Journal's collaboration with Prof. Charlotte Rosen.
There is a fierce debate among Taiwanese people whether the government should sign the Economic Cooperation Framework Agreement (ECFA) with China. Within the WTO framework, countries must treat all other members equally and openly with respect to trading terms and tariffs. Exceptions can be made by certain treaties, which deliver trading benefits exclusively to two parties. The intention of ECFA is to widely exempt Taiwan's products from Chinese import tariffs, and thus, open China's market to Taiwan. In the meantime, Taiwan must also raise the portion of tariff-free products exported from Mainland China. Signing the agreement is a controversial issue. While there are certainly rewards to signing, there are significant consequences as well.
The primary reason the ruling party aims to push this agreement is to protect Taiwan from economic marginalization. This urgency arises from the fact that beginning in 2010, member countries of the Association of Southeast Asian Nations (ASEAN), plus China, Korea, and Japan (ASEAN plus 3), will have tariff exemptions on certain imports from each other's side, which will undermine the competitiveness of Taiwanese exports to China and ASEAN plus 2, thereby shrinking the Taiwanese economy. For many industries in Taiwan, current tariff levels, averaging 9.8%, have put them at a disadvantage, diminishing their pricing power in the Chinese market. If Taiwan signs ECFA, its industrial sectors would benefit tremendously. Based on the projections of the Ministry of Economic Affairs, the benefit of lower import tariffs would add 1.7 percentage points to Taiwan's GDP growth rate, raising it to more than 6%. And, over the next seven years, foreign direct investment in Taiwan would gain US$8.9 billion. With Asia's strategic geographical location, highly educated labor force, language advantage, and strong technological R&D abilities, Taiwan could become one of the most competitive countries interested in entering the Chinese market. Some industries particularly will benefit from ECFA, including petrochemicals, automobiles, textiles, and machinery.
There is a fierce debate among Taiwanese people whether the government should sign the Economic Cooperation Framework Agreement (ECFA) with China. Within the WTO framework, countries must treat all other members equally and openly with respect to trading terms and tariffs. Exceptions can be made by certain treaties, which deliver trading benefits exclusively to two parties. The intention of ECFA is to widely exempt Taiwan's products from Chinese import tariffs, and thus, open China's market to Taiwan. In the meantime, Taiwan must also raise the portion of tariff-free products exported from Mainland China. Signing the agreement is a controversial issue. While there are certainly rewards to signing, there are significant consequences as well.
The primary reason the ruling party aims to push this agreement is to protect Taiwan from economic marginalization. This urgency arises from the fact that beginning in 2010, member countries of the Association of Southeast Asian Nations (ASEAN), plus China, Korea, and Japan (ASEAN plus 3), will have tariff exemptions on certain imports from each other's side, which will undermine the competitiveness of Taiwanese exports to China and ASEAN plus 2, thereby shrinking the Taiwanese economy. For many industries in Taiwan, current tariff levels, averaging 9.8%, have put them at a disadvantage, diminishing their pricing power in the Chinese market. If Taiwan signs ECFA, its industrial sectors would benefit tremendously. Based on the projections of the Ministry of Economic Affairs, the benefit of lower import tariffs would add 1.7 percentage points to Taiwan's GDP growth rate, raising it to more than 6%. And, over the next seven years, foreign direct investment in Taiwan would gain US$8.9 billion. With Asia's strategic geographical location, highly educated labor force, language advantage, and strong technological R&D abilities, Taiwan could become one of the most competitive countries interested in entering the Chinese market. Some industries particularly will benefit from ECFA, including petrochemicals, automobiles, textiles, and machinery.
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dissertation editing
posted 12/25/09 @ 8:37 PM EST
I agree that the primary reason the ruling party aims to push this agreement is to protect Taiwan from economic marginalization.
seifas
posted 4/07/10 @ 1:11 PM EST
Good scene, interesting post, thanks.
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