The most significant deal between the former political foes
in 60 years will be signed on June 29 in Chongqing, once briefly the capital of
China under the rule of the Nationalists, who are now Taiwan's ruling party
after losing the civil war to Mao Zedong's Communists in 1949 and retreating to
the island.
Taiwan's government has been heavily pushing the deal,
fearing the country's $390 billion export-led economy will lose out to rivals
in the booming Chinese market.
"In all free-trade agreement negotiations, there are
bound to be winners and losers," said Tony Phoo, an economist with HSBC in
Taipei.
"I think, looking at what we have so far, the list
covers most of the top export categories for what Taiwan ships to China, so
it's not too bad of a deal.
The economic cooperation framework agreement (ECFA) would
see tariffs cut on 539 Taiwanese products bound for China and 267 Chinese
products exported to Taiwan, Premier Wu Den-yih told reporters at Parliament.
The cuts on the Taiwan items are valued at $13.84 billion
and those from China $2.86 billion. A private research body in Taiwan has
previously estimated that ECFA could create some 260,000 jobs in Taiwan and
lift GDP by around 1.7 percentage points a year.
China is Taiwan's biggest trade partner and top foreign
investor.
The deal will also open up to Chinese investment some of
Taiwan's service industries, including movies and business services, while the
mainland's computer services, airline maintenance and medical sectors would be
opened to Taiwanese investment.
Taiwan banks operating in China would be allowed to conduct
business in China's renminbi currency a year earlier than current rules allow.
Chinese banks will be able to convert their representative offices in Taiwan
into branches after one year.
The tariff cuts will cover about 15 percent of Taiwan's
exports to China, and include petrochemicals and plastics, cars and parts,
textiles, machines tools and medical equipment. But the list left out PVC
products, one of Taiwan's top exports.
Taiwan will in turn cut tariffs on Chinese products,
including toothbrushes and wristwatches, bicycle tires, light bulbs and some
industrial oils.
The imbalance in the number and type of items in favor of
Taiwan reflects China's view that the deal is a sweetener aimed at advancing
China's charm offensive towards the island it hopes one day to incorporate.
The deal could also boost the chances of Taiwan's ruling
party at tough local elections due at the end of the year, with a tough
challenge expected from an opposition fearful of ECFA's economic and political
consequences.
With a message that ECFA will flood Taiwan with cheap goods,
creating massive unemployment, and is a first step toward a Chinese political
takeover, the opposition is looking to score big in the local elections to give
it chance of ousting pro-China President Ma Ying-jeou in 2012 presidential
polls.
"(The deal) gives Ma a beautiful list of scores he can
deliver at the next elections," said Lin Chong-pin, strategic studies
professor at Tamkang University in Taipei.
"It's a political decision made by Beijing, not
economic. It's Beijing's high-level strategic political decision to win the
hearts and minds of the Taiwan people and pre-empt the pro-independence
opposition party."
The opposition, which has called for any trade deal to be
concluded under the auspices of the World Trade Organization, plans to hold a
protest rally against ECFA in Taipei on Saturday.
