The Economic Cooperation Framework Agreement (ECFA), which
has triggered protests by the opposition in Taiwan fearful of Chinese moves to
unify with the self-ruled island, cuts tariffs on 800 products and opens up
service industries, giving a major boost to around $100 billion in annual two-way
trade.
But it covers only the easiest of potentially thousands of
items targeted for tariff cuts in years ahead and euphoria could fade quickly
as the two move to much tougher negotiations.
Taiwan believes the ECFA will open the door to free trade agreements
with major economies like Japan and the United States. Beijing had encouraged
that hope before saying last month it would try to block FTAs because Taiwan
lacks sovereignty.
The biggest deal in 60 years between the political rivals
was signed in Chongqing, the hilly, foggy wartime capital of China for the
Kuomintang (KMT) party, which now rules Taiwan after losing a civil war to Mao
Zedong's Communists in 1949.
"This agreement not only influences the development of
the economies on both sides of the Straits, it is also a new milestone for
them," said Chiang Pin-kung, the chairman of Taiwan's Straits Exchange
Foundation.
Tuesday's signing stems from 2008 talks launched by Taiwan
President Ma Ying-jeou, reversing 60 years of antagonism. China has considered
Taiwan a renegade province since the end of the Chinese civil war in 1949 and
insists on unification, by force if necessary.
Bringing the two sides closer together would be a major
achievement for Chinese President Hu Jintao, who is due to step down after the
Communist Party selects a new top leader in 2012.
The Taiwanese "have very limited expectations over
ECFA, but keeping the process going is important for them ... Ultimately the
Chinese have a political agenda behind which is not shared by the Ma
administration," said Steve Tsang, a China-Taiwan relations expert at St.
Anthony's College, Oxford University.
"As part of a long-term strategy it is part of the
process of embracing Taiwan and making Taiwan closer within the orbit of China,
and therefore reducing the scope of pro-independence people in Taiwan to push
for an independence agenda."
The pact will cut tariffs to zero within two years on 539
Taiwanese export items, worth $13.84 billion, versus only 267 valued at $2.86
billion headed from China to Taiwan.
That could help lift Taiwan 2010 GDP growth past 6 percent,
private forecasts show. The official target is 4.72 percent.
Still, Taiwan's stock and currency markets lost ground in
late trade despite stronger starts on Tuesday.
"People in the market have talked about the ECFA for a
while and after the two sides signed the deal, we thought the effect from this
positive factor came to an end," said Tom Tang, a vice president at
Masterlink Investment Advisory.
Exports from Taiwan's top industries, such as PVC plastics
and high-tech goods, compete closely with industries China wants to develop,
making those negotiations much more difficult.
A second agreement would increase intellectual property
right protection, which Chiang said was important for Taiwanese high-tech
investment in China.
On Saturday, thousands of Taiwanese rallied against the deal
in Taipei, but their opposition is not expected to prevent it.
Opposition could get louder if the ECFA fails to create the
promised 260,000 jobs in Taiwan or bring an economic payoff.
