Challenge vs Opportunity -- Tasks and Prospects in Signing ECFA

1、經濟部Bureau of Foreign Trade, MOEA Mar.16, 2010經濟部 I. PrefaceII. Possible Effects of Signing ECFAIII. Most Recent Progress in Promoting ECFAIV. Early Harvest Program and Government Measures for Vulnerable Industries Outline經濟部1. Change of Cross-Strait Relations before & after May 20, 20082. Challe

2、nges to Taiwans Trade Development3. What We Confronted / will ConfrontI. Preface經濟部 1. Change of Cross-Strait Relations before & after May 20, 2008 From divergence to convergenceFrom confrontation to negotiationFrom antagonism to cooperation I. Preface經濟部 1. Change of Cross-Strait Relations befo

3、re & after May 20, 2008 Look squarely at reality, Build mutual trust, Put aside disputes, Create a win-win situationI. Preface經濟部6The talks between Chiang Pin-kung, Chairman of Taiwans Straits Exchange Foundation (SEF), and Chen Yunlin, Chairman of mainland Chinas Association for Relations Acros

4、s the Taiwan Strait (ARATS) Results of the Chiang-Chen talksThe first round of talks :June13 , 2008 Signed the “Minutes of Talks on Cross-Strait Charter Flights” and “Cross-Strait Agreement on Travel by Mainland Residents to Taiwan”(1) The fourth round of talks :December 22, 2009 Three agreements on

5、 agricultural product inspection and quarantine(10); cross-strait cooperation on industrial product standards(11), inspection and certification; as well as on fishing crew collaboration(12). The third round of talks :April 26 , 2009 The two sides completed and signed agreements on joint crime-fighti

6、ng(6) and mutual judicial assistance, cross-strait financial cooperation(7), and regular cross-strait flights(8). They also reached a consensus on matters pertaining to promoting mainland investment in Taiwan(9).The second round of talks :NOV. 4 , 2008 Confirmed the content of the four agreements on

7、 cross-strait air transport(2), sea transport(3), postal services(4), and food safety(5)經濟部2. Challenges to Taiwans Trade DevelopmentI. Preface經濟部8Trade Milestones in Taiwan: Taiwans foreign trade turned a surplus for the first time in 1971; Taiwans foreign trade value exceeded US$100 billion in 198

8、8 and exceeded US$200 billion in 1995. Total trade value has continued to grow rapidly since 2003, exceeding US$300 billion in 2004, exceeding US$400 billion in 2006 and exceeding US$496 billion in 2008, which was more than 120 times greater than in 1971, thus becoming the 18th leading exporter in t

9、he world.Rapid Growth in Trade Data Source : DGBAS, R.O.C. ;WTO19713.9 2. Challenges to Taiwans Trade Development Taiwans trade performance over the years2008496.11988 110.21995 217.3 2004 351.12006 426.72007 465.92009378.4(Unit: US$ billion)經濟部9 Due to the rapid slowdown in the international econom

10、y caused by the global financial tsunami, Taiwans exports have declined for eleven consecutive months since Sep. 2008. According to the latest export performance, the worst situation ended in the 4th quarter of 2009 with exports amounting to US$59.8 billion, an increase of 8% compared with the previ

11、ous 3 quarters of consecutive growth; though it hasnt fallen back to the 2008 level .Severe plunge in Taiwans exports since Sep. 2008Unit: US$ billion; %Data source: Taiwan Directorate General of Customs2. Challenges to Taiwans Trade Development經濟部101985US$30.8 billionData source: Taiwan Directorate

12、 General of Customs; Compiled by the BOFT1998US$110.6 billion Taiwans major export destinations have shifted to China2009US$203.7 billion經濟部11Data Source: DGBAS, R.O.C.2. Challenges to Taiwans Trade DevelopmentUnit :%經濟部12Taiwan is an export-oriented economy and foreign trade has played a vital role

13、 in Taiwans economic development over the past years. Taiwans trade contribution has accounted for around 60-70% in recent years, showing the importance of trade in Taiwans economic development.Trade contribution to Taiwans economic growth Data source：Directorate General of Budget, Accounting and St

14、atistics, Executive Yuan Note: The economic growth rate in 2001 and 2009 are negative, hence the contribution can not be calculated.2. Challenges to Taiwans Trade Development經濟部3. What We Confronted / will ConfrontI. Preface經濟部3. What We Confronted / will Confront Taiwan acceded to WTO as a formal &

15、amp; full member on Jan. 1, 2002 WTO Rules:u Standstillu MFNu National Treatmentu TransparencyI. Preface經濟部 3. What We Confronted / will ConfrontTurbulence FTAs/RTAs Exceptions to MFN Rulesu 266 FTAs/RTAs are currently in effect, of which 41 are signed by Asian countries.u Taiwan has signed 4 FTAs w

16、ith 5 countries, which account for only 0.187% of our global exports.I. Preface經濟部16Southern Common Market (MERCOSUR)North American Free Trade Area（NAFTA）Establishing Free Trade Area of the Americas (FTAA)EU-Mexico Free Trade AreaEuropean Union (EU)ASEAN-JapanComprehensive Economic Partnership Agree

17、ment(set to lower tariffs on most goods to 0% in 2018)ASEAN-South Korea Free Trade Area(set to lower tariffs on most goods to 0% in 2010)Japan-SingaporeNew Age Economic Partnership AgreementASEAN-IndiaASEAN-Australia + New Zealand Free Trade AreaSigned Feb. 27, 2009Entered into force July 1, 2009Chi

18、na-Hong Kong-MacaoCloser Economic Partnership Arrangement (CEPA)ASEAN Free Trade Area (AFTA)US-South Korea FTACAFTADRDelay in concluding WTO Doha Round has caused the spread of international bilateral FTAs and accelerated the deepening of regional economic integration in the world.EU-South Korea ASE

19、AN-China Free Trade Area (set to lower tariffs on most goods to 0% in 2010) The Trend and Present State of Acceleration of Economic Integration經濟部17Taiwans world ranking and share of exports and imports over this past decadeData source：WTO International trade statistics annuallyUnit：US$ billion;%經濟部

20、18ASEAN + China FTA1 Jan. 2005, began implanting tariff reductions on goods.1 Jan. 2010, zero tariff on most goods.ASEAN + South Korea FTA1 July 2007, began implementing tariff reductions on goods.1 July 2010, zero tariff on 90% of goods.Impact in 2010I. Preface3. What We Confronted / will Confront

21、經濟部3. What We Confronted / will Confront I. PrefaceCountriesDatesTermsASEAN + India FTAWill enter into force Mar. 2010Between 2013 and 2016, mutual reduction of import tariffs on 80% of goods.ASEAN + Japan EPADec. 2008By 2018, zero tariff on 91% of goodsJapan + Vietnam EPAOct. 2009By 2019, zero tari

22、ff on 92% of total bilateral trade goods.ASEAN + Australia & New Zealand FTAJan. 2010By 2020, zero tariff on 96% of goods.Impact in the next 10 years經濟部20CountriesDatesTermsSouth Korea + USA FTASigned Jun. 2007.Pending approval of respective National Assemblies.95% of S. Korean and USA industria

23、l and consumer goods will be exempt from tariffs within 3 years of FTA implementation.South Korea + EU FTATo be signed in Q1 2010.(Initialed 15 Oct. 2009)South Korea + India FTAEntered into force 1 Jan. 2010.India commits to tariff cuts/exemptions for 85% of S. Korean goods.S. Korea commits to tarif

24、f cuts/exemptions for 93% of Indian goods.Impact in the next 10 yearsI. Preface3. What We Confronted / will Confront 經濟部21Potential effects of future East Asia FTAs/RTAsFTAs/RTAs currently under study ASEAN+3 (mainland China+Japan+Korea) ASEAN+6 (mainland China+Japan+Korea+ India+Australia+New Zeala

25、nd) Mainland China+Japan+Korea Korea+China FTA (5 joint studies completed as of June, 2008) Free Trade Area of the Asia Pacific (FTAAP)I. Preface3. What We Confronted / will Confront 經濟部3. What We Confronted / will Confront The future options For political reasons, we havent yet had any positive res

26、ponse from “target trading partners” to our endeavor in promoting bilateral FTAs. Work on the Cross-strait ECFA?I. Preface經濟部23II. Possible Effects of Signing ECFA經濟部24 Improve Macroeconomic Scale (1/2)Effects of signing ECFA: Macroeconomy (dynamic analysis) Scenario Item Scenario 1Scenario 2GDP (%)

27、1.651.72Exports (%)4.874.99Imports (%)6.957.07Trade condition (%)1.421.41Social welfare(US$ million)7,710.907,771.00Trade balance(US$ million)1,757.901,779.40Total production(US$ million)28,004.7328,884.20Resource: GTAP 7.0 database, “Evaluation on the Impact of ECFA,” CIER, 2009.06Scenario 1: Maint

28、ain current restrictions on agriculture and industry sectors, liberalize items now open to import, and have zero tariff for all Chinese goods. Scenario 2: Maintain import restrictions and do not reduce tariffs only in the agriculture sector; eliminate tariffs and fully liberalize import of industria

29、l items.經濟部25Simulated ScenarioEmployment(default) Scenario 1 Scenario 2Percent changePersonsPercent changePersons10,100,7202.6257,2862.6263,100Agriculture(1-32)716,2181.712,2881.711,951Manufactg.(33-112)1,890,8901.425,9611.528,105Services(113-161)7,493,6122.9219,0373.0223,044Effects of signing ECFA

30、: employment (dynamic analysis) Note: The employment numbers in each industry are estimates based on employment table 2006 published by the Directorate-General of Budget, Accounting and Statistics.Resource: “Evaluation on the Impact of ECFA,” CIER, 2009.06 Improve Total Employment (2/2)經濟部26Gain Lar

31、ger Savings Margin on Tariffs than China(1/2)Possible effects of tariffs (based on 2008 performance) (1/2)Currently:China sets no special limitation on Taiwan products; its average tariff on industrial goods is 9%. Taiwans exports to China (including Hong Kong) have reached US$100 billion (tariffs a

32、mount to US$9 billion) Taiwan maintains restrictions on 1,300 industrial and 834 agricultural goods with the average tariff on industrial goods at 4%. Chinas exports to Taiwan are valued at US$35 billion (tariffs amount to US$1.4 billion)We ran a US$65 billion trade surplus; Taiwans tariff burden ex

33、ceeded Chinas by US$7.6 billion.經濟部27Gain Larger Savings Margin on Tariffs than China (2/2)Possible effects of tariffs (based on 2008) (2/2) If both sides eliminate tariffs after signing ECFA and exports for both sides grow by 20%, then: Export growthTariff eliminationTaiwan:Exports to China will in

34、crease US$120 billion China:Exports to Taiwan will increase US$42 billionTaiwans trade surplus will expand US$78 billionTaiwan:Will save US$10.8 billion in tariff expenditure China:Will save US$10.8 billion in tariff expenditureTaiwan gains more!We will benefit more from the export expansion since C

35、hina has larger market scale than we do. 經濟部28nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnChinaP4 Deepen Relations b/w Taiwan and Major Trade Partners ExpectedFTAAP經濟部29Create Taiwans Advantages in Services TradeIn addition to trade in goods, ECFA can also provide numerous benefits to Taiwans services trad

36、e by helping foreign businesses invest in Taiwan as well as Taiwan businesses investing in China. In the Early Harvest List, Taiwan would like to request “market access” commitments from China in the financial and banking sectors for example, by reducing regulations on Taiwan banks setting up branch

37、es in China, restrictions on asset thresholds, and requirements for 3 consecutive years of profits. This will not only provide financial services to Taiwan businesses in China, but also help them resolve financial problems. Financially related domestic peripheral industries will also benefit while c

38、reating more employment opportunities.The securities industry: Taiwan requests China to reduce restrictions on investments and investment advisory services by allowing Taiwan trusts to invest in China. This will enable China to raise capital for investing in Taiwans stock markets, increase business

39、revenues, and enhance professional capabilities, which will benefit normal cross-strait financial business.經濟部30Strengthen Taiwans Advantages in Terms of International Position (1/5)Taiwan will enter the mainland Chinese market ahead of its main competitors.ECFA will help convert the mainland from a

40、 production base to a core market for businesses in Taiwan.Taiwan will become a priority cooperation partner and gateway for foreign businesses seeking to enter the mainland Chinese market.ECFA will accelerate Taiwans development into a regional industrial operations center.經濟部31Taiwan will enter th

41、e mainland Chinese market ahead of its main competitors. Tariffs on most industrial products exported from Taiwan to China will be reduced to zero. By getting in ahead of competitors like South Korea and Japan, Taiwan will replace their positions in that market.Take petrochemical raw materials as an

42、 example. In 2007, China imported approximately US$76.3 billion, of which Taiwan accounted for 15%, South Korea 20%, and Japan 18%. If Chinas average import tariff ( 6.17%) were reduced to zero, that would help Taiwan to win over Japan and South Koreans combined market share (38%), worth approximate

43、ly US$38 billion.Strengthen Taiwans Advantages in Terms of International Position(2/5)經濟部32ECFA will help convert the mainland from a production base to a core market for businesses in Taiwan. Once the mainland reduces tariffs on most industrial goods to zero, it will help businesses to keep Taiwan

44、on their supply chains and continue supplying their customers through the three links. For instance, when the mainland reduces tariffs on scooter parts from approximately 10% to zero, the various satellite factories may choose to ship from Taiwan, since then they will benefit from the zero tariffs a

45、s well as the better quality of production in Taiwan.Strengthen Taiwans Advantages in Terms of International Position(3/5)經濟部33Taiwan will become a priority cooperation partner and gateway for foreign businesses seeking to enter the mainland Chinese market.Taiwan provides: Ripple effects:Help foreig

46、n companies choose Taiwan as gateway into Chinas marketSet up regional R&D, production, or operation centers Taiwan will be a first-choice “global innovation center” and “Asia-Pacific trading hub” for multinationals. Preferential tariffs for goods exported to China Better IPR protections The thr

47、ee links Incentives for building R&D centers in TaiwanStrengthen Taiwans Advantages in Terms of International Position(4/5)Taiwan provides：Ripple effects：經濟部34ECFA will accelerate Taiwans development into a regional industrial operations center.Effects of trade liberalization (three links, perso

48、nnel flows, lowered tariffs, removal of non-tariff barriers, etc.) will remake Taiwan into a multifunctional operations center with capabilities in transshipment, logistics, distribution, end-processing, etc.Coupled with the relaxation of restrictions on China-bound investment, measures to encourage

49、 the return of Taiwan businesses to the domestic market will make Taiwan their “operational HQ.”Strengthen Taiwans Advantages in Terms of International Position(5/5)經濟部35International Views on ECFA (1/2)American Chamber of Commerce 2009 Taiwan White Paper (May 2009) We would also hope that the concl

50、usion of this trade agreement with China would pave the way for Taiwan to participate in regional trade blocs and enter into bilateral FTAs with additional trading partners.Japanese Chamber of Commerce & Industry, Taipei 2009 Taiwan White Paper Issue (October 2009) If the ECFA comes into being,

51、it should form a great opportunity for Taiwan and Japan to discuss signing an FTA. Therefore, this Chamber sincerely looks forward to progress being made in the ECFA negotiations. 經濟部36International Views on ECFA (2/2)European Chamber of Commerce Taipei 2009-2010 Position Paper Overview (October 200

52、9) The sooner Taiwan signs the ECFA with China, the quicker political impediments to other countries (including the EU) signing economic agreements with Taiwan will be removed. In order to revitalize Taiwans economy and increase trade, the ECCT recommends that the government seeks to sign an Economi

53、c Cooperation Framework Agreement (ECFA) with China and commit to Trade Enhancement measures with Europe as soon as possible. This will help to secure Taiwans position as an important link between China and Europe and reintegrate Taiwan into the global and regional economy.經濟部37Make Taiwan a global

54、center of innovation, an Asia-Pacific hub of economy and trade, and the headquarters for Taiwanese businesses.Establish a stable cross-strait economic and trade cooperation framework; open a favorable cross-strait interaction mechanism.Improve the basis of promoting Taiwans opportunities to enter in

55、to bilateral FTAs with other countries and participate in regional economic and trade cooperation. Prospects for Cross-Strait Economic and Trade Cooperation 經濟部38Cross-strait links will ease the bottleneck of participating in regional cooperationPromote dynamic modifications in cross-strait economic

56、 and trade relationsIntegration of business opportunities in global and mainland markets Facilitate cross-strait projects and cross-strait industry exchanges Expand cross-strait direct flights Open Taiwans production enterprises to Chinese investments Loosen the 40% ceiling on investments in China a

57、nd other industry restrictionsShanghai Silicon Valley Taipei Dual Golden Triangles of High-Tech IndustriesTokyo Shanghai Taipei Promote the ECFA Sign FTAs Join ASEAN + N Possible Effects of Signing ECFA Promoting Internationalization of Taiwans Economy, Trade and Investments 經濟部39III. Most Recent Pr

58、ogress in Promoting ECFA經濟部401.Steps Toward Signing the AgreementIndividual studies conducted by each side Joint studies Negotiation Signing Send to legislatures for approval Take effectLatest Development: Joint study period is completed, and the first formal negotiation was held in Beijing on 26 Ja

59、nuary 2010.經濟部412.Achievements of the first round of formal negotiation (1/3)Name of agreementBasic structure of ECFAs clausesRules and positions of “Early Harvest Lists” on goods and servicesArrangements for the next round of formal negotiation經濟部422. Achievements of the first round of formal negot

60、iation (2/3)Name of agreement Each side agreed that the tentative Chinese title is海峽兩岸經濟合作架構(框架)協議 The English title “Economic Cooperation Framework Agreement” (ECFA) may be used temporarily.Basic structure of ECFAs clauses Include market access on trade in goods, trade in services, rules of origin, early harvest lists, trade