Opportunities and Challenges for

Economic Development in Taiwan

under the ECFA
Dr. Chiang Pin-kung
Chairman, Straits Exchange Foundation
September 30, 2010

Content
1. Cross-Strait Economic Relations under
President Mas Administration
2. Results of SEF-ARATS Negotiation
3. Major Significance of ECFA
4. Challenges of Cross-Strait Economic Relations
5. Opportunities of Taiwans Economy
6. Conclusion

1. Cross-Strait Economic Relations under

President Mas Administration
In the Economic field, President Ma announced
the policies for cross-strait economic exchanges
1 Resume institutionalized negotiations on
the foundation of the 1992 Consensus.
2 Promote the normalization of cross-strait
economic and trade relations.
3 Sign cross-strait economic cooperation
framework agreement (ECFA)

President Ma announced the vision of turning

Taiwan into
1 a global innovative center
2 an Asia-Pacific trade hub
3 an operation headquarters for Taiwan
businesses
4 a regional headquarters for foreign
enterprises

2. Results of SEF-ARATS Negotiation

The Straits Exchange Foundation (SEF) and the
Association for Relations Across the Taiwan
Straits (ARATS) have held five rounds of talk,
signed 14 agreements, and reached one
consensus on Chinese mainlands investment in
Taiwan.

 1 Air transportation: 33 mainland airports

offer direct flights to airports in Taiwan,
with 370 flights weekly. The travel time
from Taipei to Shanghai is only 82 minutes.
2 Sea transportation: the mainland has
opened up 63 ports, including 15 river
ports, meaning that Taiwan can ship
goods directly by sea to the mainland
interior.

 3 Mainland tourist visits to Taiwan: in 2009,

nearly 970,000 mainlanders visited Taiwan.
In the first half of 2010, the figure topped
810,000 visitors. And the full-year figure is
anticipated to exceed 1.5 million.
Due to Chinese tourists, thirteen new hotels have
been built in the past two years and thirty-one
hotels will be completed before 2013, with the
total investment of NT$ 120 billion.

 4 Other agreements: such as cooperation in

food safety, financial affairs, postal services,
mutual judicial assistance, quarantine and
inspection of agricultural products, fishing
crew, standards, metrology, inspection and
accreditation, and mainland investment in
Taiwan.

3. Major Significance of ECFA

On June 29 this year, the SEF and the ARATS
signed the Cross-strait Economic Cooperation
Framework Agreement (ECFA) and Cross-Strait
Agreement on Intellectual Property Right (IPR)
Protection and Cooperation in Chongqing. These
two agreements came into effect on September
12, 2010.

 1 The main objective of ECFA is to seek

fair
treatment of Taiwan products in the
mainland market.
2 The scope of the agreement includes
reducing tariffs, elimination of non-tariff
trade barriers, promoting trade and
investment contacts, and boosting
economic development and employment.

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 3 The early harvest list for Taiwan exports

to the mainland includes 539 products,
eight service industries, and three financial
service sectors. The mainland list for
exports to Taiwan covers 268 products,
eight service industries, and one financial
service sector.

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 4 Early Harvest Plan in Goods

Industry

The list for Taiwan exports

to mainland China

The list for mainland exports

to Taiwan

Items

Export
amount
In 2009
US$ M.

% of the
total
Taiwan
exports to
China

Items

Export
amount
In 2009
US$ M.

% of the
total
Chinas
exports to
Taiwan

Petrochemical

88

5,944.08

6.93

42

328.69

1.21

Machinery

107

1,143.39

1.33

69

473.97

1.75

Textile

136

1,588.34

1.85

22

116.33

0.43

Transportation

50

148.44

0.18

17

408.94

0.02

Others

140

4,997.21

5.84

167

1,529.83

5.64

Agriculture

18

16.08

0.02

0.00

Total

539

13,837.54

16.14

267
(268)

2,857.76

10.53

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 5 Early Harvest Plan in Services

Modes of service supply: (1) Cross-border supply (2) Consumption
abroad (3) Commerce Presence
China give Taiwan

Taiwan gives China

Business
Services

1. Accounting, auditing and Bookkeeping

2. Software implementation and Data
processing
3. Research and Development
4. Convention
5. Special design
6. Audiovisual services
7. Hospital
8. Aircraft repair and maintenance

1. Research and development

2. Convention
3. Exhibition
4. Special design
5. Motion Picture
6. Commission agents services
7. Sporting and other
recreational services
8. Computer Reservation System

Financial
Sector

1. Banking and other financial services

2. Insurance and related services
3. Securities, futures and other related
services

Banking and other financial

services

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4. Challenges of Cross-Strait Economic

Relations
ECFA is only a framework agreement. After
ECFA comes into effect on September 12, the two
sides need to begin negotiations on four followup agreements within six months.

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 1 Agreement on Investment Protection

There are about eighty thousand Taiwan
businesses, with total investment of US$ 150
billion or so, and one million Taiwanese people in
Chinese mainland.
The SEF received 428 investment dispute cases
from Taiwanese business people in Chinese
mainland last year.
At the sixth Chiang-Chen Talks, we will
negotiate and sign agreements on the investment
protection. Besides, we will also negotiate the
issue of medical and health cooperation.
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 2 Agreement on Trade in goods

Management of import Goods of mainland China
Eight-digit HS code
Total Items

8,726

Items in the Early Harvest

268

Items of Non-Tariff already

2,634

Items Needed to be negotiated

5,824

Divided into three categories

1. Immediately practice zero tariff

2. Reduce tariff by phases.
3. Exception or Others

If both sides can sign this agreement, Taiwan will get

more benefit than the mainland, since the average
tariff of Taiwan is only about 4%, but that of Chinese
mainland is about 9%.
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 3 Agreement on Trade in services

Mainland China treats Taiwan businesses as
foreign companies, therefore, some service
sectors in the mainland are prohibited for
Taiwanese businesses to invest. Through the
trade in services agreement, we can create
investment opportunities for Taiwanese
businesses people.

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 4 Dispute settlement agreement

Both sides will engage in consultation on the
establishment of appropriate dispute settlement
procedures.
Besides the four agreements, we will promote
comprehensive cross-strait exchanges and
cooperation: This includes economic cooperation
under the ECFA in such areas as industry,
finance, customs, e-commerce, as well as Small
and Medium enterprises.

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5. Opportunities of Taiwans Economy

After ECFA coming into effect and establishing a
good external environment, Taiwan is also
working hard to improve its investment
environment to further attract foreign
investment.
1 Improve administrative efficiency and
reduce the tax burden, such as lowering
the corporate tax rate from 25% to 17%,
and reducing the inheritance tax from
50% to 10%, to create a competitive tax
environment.
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 2 Approved the Industrial Innovative Act

to
improve the core competitiveness of
manufacturers and labors through
innovative R&D and industrial upgrading.
3 Developing Six Key Emerging
Industries,
including biotechnology, green energy,
quality agriculture, tourism, health care,
and cultural and creativity. This also is
aimed at improving economic innovation
in Taiwan.
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 4 Promoting loosening and opening

policies.
This has included opening up Taiwan to
investment from mainland China from
June 30, 2009. Since then, there have been
70 such investments in Taiwan with a total
value of US$185 million.
5 The government has established an
"InvesTaiwan Service Center" and held a
series of activities to provide for the
foreign investors.

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On September 19 this year, the U.S-based

Business Environment Risk Intelligence (BERI)
continued to rank Taiwan fourth globally for
investment environment.
IMD also ranked Taiwan at the eighth position in
2010 world competition Report.

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6. Conclusion
1 With a sound overall external
environment,
and through Taiwan's own efforts, we
have a great opportunity to realize the
President Mas vision of turning Taiwan
into a global innovative center, an AsiaPacific trade hub, an operation
headquarters for Taiwan businesses, and
a regional headquarters for foreign
enterprises.

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 2 The first two quarters of Taiwans

economic growth rate this year reached
13.71% and 12.53% respectively, and
predicted annual economic rate will reach
8.24%. Some institutions even predicted
that Taiwans economic growth will reach
double digits. This all due to ECFA bring
momentum for the economic development
of Taiwan.

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 3 The signing of the ECFA has set the stage

for cross-strait peace and prosperity and
builds a bridge for Taiwan to sign
economic cooperation agreements with
other countries. Its the best time to
enhance your economic relations with
Taiwan.

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