China, Taiwan to Sign Free Trade Accord

China and Taiwan are expected to agree to a preliminary free-trade agreement later this month in a effort to normalize relations across the Strait after more than six decades of bickering and mistrust.

According to The Economist, the proposed Economic Cooperation Framework Agreement (ECFA) calls for cuts on 539 categories of Taiwanese exports to China over the next two years with scope for more to follow. The paper describes the agreement as “the cornerstone of the China-friendly policies of Taiwan’s president, Ma Ying-jeou.” Critics allege that the president’s foreign policy is geared toward ultimate reunification with the mainland.

Following Ma’s election in May 2008, relations with China rapidly improved. His government allowed regular charter flights to take place between the two countries to bring in Chinese tourists and it eased restrictions on cross-Strait investments.

Taiwan is hoping that the ECFA deal will herald its future inclusion in international free-trade arrangements; something China has so far opposed and prevented.

Last January Beijing initiated a free-trade accord with the member states of ASEAN; the Taiwanese exports included in the ECFA are from some of the industries most threatened by that agreement. The Taiwanese government is likely to try to reach similar arrangements with nearby Southeast Asian countries in an effort that will boost the economic integration of the region and decrease the likelihood of future conflict.

The opposition has reason to be suspicious though. While Taiwanese negotiators did not get everything they asked for, “the terms of the deal still seem remarkably sweet for Taiwan,” according to The Economist.

The 539 categories of Taiwanese exports are worth $13.8 billion, while Taiwan in turn will reduce tariffs for only 267 categories of Chinese exports, worth $2.9 billion. What is more, China has gone beyond its World Trade Organization requirements by dropping tariffs on various Taiwanese agricultural and fishing products, and Chinese negotiators said they would never push Taiwan to return the favor.

“China’s largesse is clearly political.” Beijing prefers Ma’s moderate Kuomintang over the more independence leaning Democratic Progressive Party while it has to cope with an Asian naval race and mounting tension in the region. As Robert Kaplan wrote in April, China feels “boxed in,” particularly from the sea, where it faces a chain of nations from South Korea to Japan to the Philippines to Indonesia and Australia, with implicit backing from across the Pacific, which are watching China’s rise with skepticism — indeed, sometimes outright fear.

In order to address that perceived threat from the high seas, Beijing is preparing to envelop Taiwan “not just militarily but economically and socially,” according to Kaplan.

Amid high unemployment figures, Ma’s popularity is slumping however. “Economic success has not trickled down to many Taiwanese,” knows The Economist, “and for them the ECFA is an abstract idea of frighteningly radical engagement with China.” Ma will have to prove to his voters that the China deal will benefit Taiwan directly before the presidential elections in 2012.