經濟部

Minister of Economic Affairs Chii-Ming Yiin

April 7, 2009

Possible Content for Advancing the Possible Content for Advancing the Cross-Strait Economic Cooperation Cross-Strait Economic Cooperation

Framework Agreement Framework Agreement

The 2009 First Joint Meeting of Heads of the Industrial Associations of 23 Counties and Cities in Taiwan

經濟部

Outline

1. Overview of the Cross-Strait Economic Cooperation Framework Agreement (ECFA)

2. Impact of the ECFA

3. Vision for the ECFA

Appendix

1

經濟部

1. Overview of the Cross-Strait Economic Cooperation Framework Agreement

2

1. Title

2. Objectives

3. Positions

4. Guiding Principles

5. Meaning of the Framework Agreement

6. Reasons for Choosing the Framework Agreement

7. Main Content

8. Measures for Vulnerable Industries

9. Steps toward Signing the Agreement

10. Negotiating Principles

11. Immediate Impact of Not Advancing the Agreement

12. Public Involvement and National Assembly Oversight

4

經濟部

The tentative title is “Cross-Strait Economic

Cooperation Framework Agreement” (or simply

“Cross-Strait Economic Agreement”).

The English title ECFA (Economic Cooperation

Framework Agreement) may be used

temporarily.

1. Title

5

經濟部

2. Objectives

1. Normalization of cross-strait economic and trade relations While both parties are members of the WTO, there are still many economi

c and trade restrictions.

2. Avoidance of being marginalized from regional economic integration schemes Currently, there are over 230 FTAs globally with mutual duty-free arrange

ments. If we do not participate, we will face the threat of being marginalized and losing our competitive edge in the important markets.

3. Internationalization of our economy, trade and investments By signing the Framework Agreement, the cross-strait economic and trad

e relations will be more predictable and benefit Taiwanese business to make worldwide arrangements and attract foreign business to Taiwan, thus enabling Taiwan to become a trading hub in the Asia-Pacific.

6

經濟部

(1) Cross-Strait Economy and Trade is Still Not Fully Normalized

Goods Taiwan restricts 2,194 agricultural and industrial

products from being imported from China.

Investments Taiwan is still not open to investments from China. Taiwan still restricts some investments in China.

7

經濟部

Southern Common Market

(MERCOSUR)

North American Free Trade Area（ NAFTA）

Establishing Free Trade Area of the Americas (FTAA)

EU-Mexico Free Trade Area

European Union (EU) ASEAN-Japan

Comprehensive Economic Partnership Agreement

(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 Agreement

ASEAN-India

ASEAN-Australia + New Zealand Free Trade Area

Signed Feb. 27, 2009Enter into force July 1, 2009

China-Hong Kong-MacaoCloser Economic

Partnership Arrangement (CEPA)ASEAN Free

Trade Area (AFTA)

US-South Korea FTA

CAFTA－ DR

Delay of the WTO Doha Round has caused the spread of international bilateral FTAs and accelerated the deepening of regional economic integration in the world.

(2) The Present State of Development of Regional Economic Integration

EU-South Korea

ASEAN-China Free Trade Area (set to lower tariffs on most

goods to 0% in 2010)

8

經濟部

Cross-strait links will ease the bottleneck of participating in regional cooperation

Promote dynamic modifications in cross-strait economic and trade relations

Integration of business opportunities in global and mainland markets

• Bridging cross-strait projects, cross-strait industry exchanges

• Cross-strait direct flights• Open Taiwan’s production enterprises to

Chinese investments• Loosen the 40% ceiling on investments in

China and other industry restrictions

Shanghai

Silicon Valley

Taipei

Dual Golden

Triangles of High-

Tech Industries

Tokyo Shanghai

Taipei

• Promote the ECFA• Sign FTAs• ASEAN + N

(3) Promoting Internationalization of Taiwan’s Economy, Trade and Investments

9

經濟部

We do not adopt the model of Hong Kong and Macao, and the

ECFA is not an ordinary free trade agreement (FTA); it is an

economic cooperation agreement with a distinctive cross-strait

quality and one that does not violate the spirit of the World

Trade Organization (WTO).

It will cover matters pertaining to economic cooperation and

will not touch on unification, independence, and political

issues.

3. Positions

10

經濟部

1. Principle of reciprocity: There will be no mention of one country, two systems.

2. From simple to complex: Thread together a complete picture from one starting point by means of

a phased, step-by-step progression. Advance normalization and bilateral cooperation simultaneously.

3. A time for progress: Utilize a high level of reciprocity regarding urgent matters and building consensus to progress in an orderly way toward dealing with issues concerning sensitive industries.

4. The Early Harvest Program together with a period of adjustment can help to take care of short, medium and long term needs.

5. By advancing along a dual track of liberalizing items on one hand and keeping a reservation list on the other, flexibility in policy adjustment is maintained.

6. Establishment of risk management mechanisms: Strengthen the monitoring mechanism for imports from China, set up a cross-strait trade relief system, and build a notification mechanism for unsafe products.

4. Guiding Principles

11

經濟部

A comprehensive FTA cannot be achieved in one step. There will be more flexibility in dealing with it only by pre-determining the framework and goals and through future consultations on specific content.The “Early Harvest” provisions will meet the urgent needs of the project and provide early realization of favorable benefits.

Examples: ASEAN + China The ASEAN-China Comprehensive Economic Cooperation Agreement was signed

in Nov. 2002 (“Early Harvest”: HS Chapters 1-8 for agriculture and fishery products) and went into effect in Jan. 2004.

Signed a framework agreement for Agreement on Trade in Goods in Nov. 2004. Signed a framework agreement for Agreement on Trade in Services in Dec. 2006.

5. Meaning of the Framework Agreement

12

經濟部

1. Gradual liberalization of the framework content will help resolve the pressure from general FTAs for immediate and total liberalization.

2. Once the agreement is signed, it is expected to alleviate the problem of Taiwan’s marginalization.

3. An open agenda and clear timetable will improve predictability of our business environment and help attract foreign investment.

4. An “Early Harvest” approach in conjunction with an adjustment period will, on the one hand, meet our urgent needs and, on the other hand, take into account our short, medium and long term economic development needs.

5. It will provide time and flexibility to form a national consensus and adjust policies.

6. Reasons for Choosing the Framework Agreement

13

經濟部

Investment Trade in goods Trade in services Economic cooperation

tariff

non-tariff

Early Harvest Program Excluded and retained items and measures

TimetableLiberalization

Dispute settlement mechanism

(1) StructureMakes reference to the development of the “ASEAN-China Comprehensive Economic Cooperation Framework Agreement”

7. Main Content (1/4)

Sectors

Disputes

open

negotiable

14

經濟部

7. Main Content (2/4)

•(2) Scope

I. Agreement Title

II. Trade in Goods:

(i) Early Harvest Program: Both sides propose commodity tariff reduction

list and schedule for early harvest. (ii) Market Access: a. Agree to proceed with future negotiations on market access for trade in

goods and formulate a timetable for future negotiations.

b. Goods will be divided into general and sensitive, with the sensitive goods further differentiated into high level and low level in accordance with the reduction schedule.

c. Consider the question of normalization of cross-strait trade in goods and retaining items.

(iii) Others: Rules of Origin, trade relief measures, non-tariff measures (technical barriers to trade, SPS measures).

15

經濟部

(2) Scope (cont.)

III. Trade in Services:

(i) Agree to proceed with future negotiations on market access for trade in services and formulate a timetable for future negotiations.

(ii) Do not rule out trade in services as part of the Early Harvest Program.

IV. Investment:

(i) Gradually achieve liberalization of investment mechanisms through negotiations.

(ii) Strengthen cooperation to facilitate investments and improve investment regulations and transparency of laws and regulations.

(iii) Establish investment protection mechanisms.

7. Main Content (3/4)

16

經濟部

(2) Scope (cont.)

V. Other Sectors for Economic Cooperation: Intellectual property protection, dispute settlement mechanism, customs

cooperation, e-commerce, trade facilitation, and avoidance of double taxation.

VI. Administrative and Systemic Arrangement:

The Agreement’s entry into force; its implementation and management.

7. Main Content (4/4)

17

經濟部

• Not included in the Early Harvest Program

Adjustment period for liberalizing

Government Guidance Measures

At this stage, various relevant guidance measures will continue to apply for all types of industries.

Trade Relief Measures

Import relief, anti-dumping, countervailing duties.

8. Measures for Vulnerable Industries

18

經濟部

Both sides consider individually Both sides

consider jointly Negotiate Sign

Send to governing bodies for approval

Take effect

During the stage of individual consideration stage, pub

lic opinion will be broadly canvassed in order to reach

consensus.

9. Steps Toward Signing the Agreement

19

經濟部

Negotiation Principles:

Our side will adhere to the principles of equality, dignity,

and fairness; we will absolutely not humble ourselves.

President Ma’s campaign pledges of “not further opening

our market to Mainland China’s agricultural exports” and

“not permitting Mainland China’s laborers to come to

Taiwan” will be maintained.

10. Negotiation Principles (1/2)

20

經濟部

Negotiation Principles (cont.):

Three No’s: No belittlement; No opening of Taiwan to

Mainland China’s laborers; and No opening up of new agricultural products.

Three Needs: Need to reach consensus; Need to

proceed gradually; and Need to form good relations. (President Ma made this statement on Mar. 12 in an exclusive interview with the United Daily News)

10. Negotiation Principles (2/2)

21

經濟部

In 2010, when the ten countries of ASEAN and Mainland China

implement a majority of tariff exemptions based on their FTA,

our businesses will be forced out as a result of higher tariff

barriers, and this will seriously affect employment opportunities

for our laborers.

11. Immediate Impact of Not Advancing the Agreement (1/3)

22

經濟部

The Process of ASEAN + X

Free Trade Area Entry into Force Scheduled Commitments

ASEAN + China (Agreement on Trade in Goods)

July 20052010: most products 0%

ASEAN + South Korea (Agreement on Trade in Goods)

July 20072010: 90% of products 0%

ASEAN + Japan EPA Dec. 20082018: 91% of products 0%

ASEAN + Australia and New Zealand FTA

Scheduled for July 2009

2020: 96% of products 0%

11. Immediate Impact of Not Advancing the Agreement (2/3)

23

經濟部

Comparison of tariffs for main products from Taiwan and ASEAN countries in the Chinese market

Tariffs

Products

Taiwan’s Applied

Tariff Rates

(average nominal

rate)

Under the ASEAN + 1 Frameworkthe MFN Rate China Gave ASEAN

(average nominal tariff rate)

Taiwan’s Exports to China in 2007

Total Amount of Taiwan’s

Global Exports in

2007

Employed Workforce in Taiwan

2009 2005 2007 2009 2010 TotalChinaGlobal

%

Petrochemical

products6.49 6.01 5.53 0.98 0.25 13,405.68 43.34 30,929.63 57,000

Machine

Products8.23 6.97 5.84 2.08 0.07 4,098.32 27.04 15,154.43 327,480

Motor Vehicles

and Parts14.92 13.59 11.42 7.04 4.31 504.70 5.40* 9,353.34 80,000

The amount of exports for the above 3 products totaled US$55.437 billion, accounting for 23.6% of exports.

Unit: US$million:%

Note: The ratio, 5.4%, is insignificant because Taiwan’s motor vehicles and parts mainly exported to North America in 2007. However, the potential market in Mainland China is great.

Source: China’s Customs Statistics; Taiwan’s Customs Statistics

11. Immediate Impact of Not Advancing the Agreement (3/3)

24

經濟部

Before formal negotiation of the ECFA with Mainland

China, symposia and public hearings will be organized to

collect public opinions and build consensus.

After the negotiations finish, a draft of the agreement will

be sent to the Legislative Yuan for review, and it will go

into effect after the Legislative Yuan approves it.

12. Public Involvement and National Assembly Oversight

經濟部

2. The Impact of Signing the “Cross-Strait Economic Cooperation Framework Agreement”

24

26

經濟部

Detrimental Impact: The market positions of Taiwan and China’s products are separated, so the detrimental impact will not be very great.

Room for Adjustment: Regarding sensitive commodities, liberalization may be limited or the timeframe for liberalization may be extended so as to give industries room for adjustment.

Strengthening the Relief System: Utilizing anti-dumping and safeguard measures can prevent the short-term dumping of large quantities of Chinese products in Taiwan, thus reducing the impact on local industries.

Providing Counseling and Assistance: To help industries adjust and upgrade in the face of any detrimental impact, counseling and assistance will be provided.

The Impact of Signing the “Cross-Strait Economic Cooperation Framework Agreement”

經濟部

3. Vision for Cross-Strait Economic and Trade Cooperation

26

28

經濟部

Promote Taiwan in becoming a global 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 Taiwan’s opportunities to enter into bilateral FTAs with other countries and participate in regional economic and trade cooperation.

3. Vision for Cross-Strait Economic and Trade Cooperation

經濟部

Appendix

28

30

經濟部

Appendix 1: Current Status of East Asia Economic Integration---Country List（1/2）

(Updated: 2009.01.31) Country Current Conditions Japan Signed: Singapore, Malaysia, Philippines, Thailand, Mexico, Chile,

Indonesia, Brunei, ASEAN, Switzerland, Vietnam. In process: South Korea, Australia, India, GCC. Proposed: ASEAN+3, China + Japan + South Korea, Peru.

South Korea

Signed: United States, Chile, Singapore, EFTA, APTA, ASEAN. In process: Japan, Canada, Mexico, India, EU, GCC. Proposed: ASEAN+3, Mercosur, China + Japan + South Korea, China, GCC,

Peru, Australia, New Zealand. China Signed: Hong Kong（CEPA）, Macau（CEPA）, APTA, ASEAN, Pakistan,

Chile, New Zealand, Singapore. In process: Australia, Iceland, GCC, Norway, Costa Rica, Peru（2008.11.20

negotiation concluded）, SACU. Proposed: India, South Korea, ASEAN+3.

Taiwan Signed: Panama, Guatemala, Nicaragua, Honduras, Salvador. In process: Dominica. Proposed: Japan, United States, Singapore, New Zealand, Philippines.

ASEAN Signed: AFTA（ASEAN FTA）, ASEAN + China, ASEAN + South Korea, ASEAN + Japan

Framework Agreement Signed: ASEAN + India In process: ASEAN + CES (consultation concluded), ASEAN + EU。 Proposed: ASEAN+3, ASEAN + Canada、ASEAN + Japan, China, South

Korea, India, Australia, New Zealand（ASEAN+6）.

Note: Bangkok Agreement was changed into Asia Pacific Trade Agreement (APTA) in 2005, including Bangladesh, India, South Korea, China, Laos, Sri Lanka, in total 6 countries.

31

經濟部

Appendix 1: Current Status of East Asia Economic

Integration---Country List（2/2）

Country Current Condition

Singapore Signed: ASEAN, New Zealand, Japan, EFTA, Australia, United States,

Jordan, India, Trans-Pacific SEP, South Korea, Panama, Peru,

China, GCC.

In process: Mexico, Canada, Pakistan.

Thailand Signed: ASEAN, Bahrain, Australia, New Zealand, Peru, Japan, India, China

(ASEAN + China), South Korea (ASEAN + South Korea).

In process: Papua New Guinea, United States, Chili, ASEAN + EU,

BIMSTEC (Bangladesh, India, Burma, Sri Lanka, Thailand,

Bhutan).

Proposed: Canada, EFTA.

Philippines Signed: ASEAN, Japan.

Proposed: United States, Taiwan, India, China, Australia, New Zealand.

Indonesia Signed: ASEAN, Japan.

Malaysia Signed: ASEAN, Japan, Pakistan.

In process: Australia, New Zealand, South Korea, Chile, India, United States.

Vietnam Signed: ASEAN, Japan.

Brunei Signed: ASEAN, Japan, Trans-Pacific SEP.

In process: United States, Pakistan.

32

經濟部

Appendix 2-1: Cases of Industries under Impact - Petrochemical

Rate

Goods

Rate Applied to Taiwan (Average Nominal Rate)

Rate Applied to ASEAN by China under ASEAN+1 Framework

(Average Nominal Rate) Taiwan’s Export to China in 2007

(Mainland China / Global, %)

Taiwan’s Global

Export in 20072009 2005 2007 20091 20102

291736Terephthalic Acid And Its Salts (PTA)

6.5 8.1 6.7 3.5 01,573.83

(87.6)1,796.30

390330Acrylonitrile-Butadiene-Styrene (Abs) Copolymers

6.5 9.7 7.6 5.3 0872.94

(40.3)2,167.46

390810Polyamide-6,-11,-12,-6,6,-6,9,-6,10 Or -6,12

6.5 9.1 7.1 3.5 0637.75

(80.0)797.07

390210Polypropylene 6.5 9.7 7.6 5.3 0

371.14

(43.3)856.54

290723Bisphenol A, Diphenylolpropane And Its Salts

5.5 5.5 5.0 1.1 0303.89

(58.9)515.76

Unit: US$ million, %

Sources: Customs Tariff Schedules; Taiwan’s Customs Statistics.Note 1: China’s Customs Tariff Schedules from 2005 to 2009 are different, to a certain extent, from Tariff Reduction Co

mmitment in Agreement on Trade in Goods of ASEAN+ChinaNote 2: Forecast based on Tariff Reduction Commitment in Agreement on Trade in Goods of ASEAN+China

33

經濟部

Rate

Goods

Rate Applied to Taiwan (Average Nominal Rate)

Rate Applied to ASEAN by China under ASEAN+1 Framework (Average

Nominal Rate) Taiwan’s Export to China in 2007

(Mainland China / Global,

%)

Taiwan’s Global

Export in 20072009 2005 2007 20091 20102

845710Machining Centers For Working Metal

9.7 9.7 5 1.9 0221.44

(19.5)1,134.09

846210Forging/Die-Stamp Mach Press and Hammers For Work Met

10.9 10.9 6.5 4.2 0155.80

(64.3)242.37

841490Air/Gas Pump, Compressor And Fan Etc Parts

8.8 8.8 5.8 2.3 0111.14

(46.0)241.80

848340Gears; Ball Or Roller Screws; Gear Boxes, Etc

8 8 5.9 2.1 075.45

(29.5)256.13

843999Pts For Machy Mkg Or Finishing Paper Or Paperboard

6 6 5 1.2 064.34

(73.7)87.31

Appendix 2-2: Cases of Industries under Impact - Machinery

Sources: Customs Tariff Schedules; Taiwan’s Customs Statistics.Note 1: China’s Customs Tariff Schedules from 2005 to 2009 are different, to a certain extent, from Tariff Reduction Co

mmitment in Agreement on Trade in Goods of ASEAN+ChinaNote 2: Forecast based on Tariff Reduction Commitment in Agreement on Trade in Goods of ASEAN+China

Unit: US$ million, %

34

經濟部

Duration Total Industrial Goods

Agricultural Goods

Up to 2000.05.20

5,689 5,210 479

Up to 2008.05.20

8,723 7,310 1,413

Appendix 3-1: Accumulated Items Allowed to Import from China

35

經濟部

Appendix 3-2: Accumulated China-bound Investment

Duration Investment Amount

Investment Cases

Up to 2000.05 15.30 22,390

Up to 2008.05 68.97 36,850

Unit: US$ billion

36

經濟部

Appendix 3-3: Trade surplus

YearTrade Surplus

from China

Trade Surplus

from Hong Kong

Trade Surplus from China + Hong

Kong

Total Trade Surplus by

Taiwan

2000 -1.84 30.38 28.54 11.22

2008 35.47 31.20 66.67 14.84

Unit: US$ billion

37

經濟部

Appendix 4-1: Industries and Employment of Taiwan’s Major Exports Still under Non-zero Tariff by China in 2007

Unit: NT$ billion

Taiwan’s Global

Export in 2007

Taiwan’s Export to China in 2007 Industry Total

Output

Total

Export

Export /

Output

(%)

Total

Export

Export /

Output

(%)

Export to

China / Total

Export (%)

China’s

MFN

(%)

Employment

(Persons)

TFT-LCD panel* 1,242.9 485.6 39.1 209.7 16.9 43.1 3 62,000

Machinery

(as a whole)

896.5 509.5 56.8 161.8 18.0 31.8 10 327,480

Machine Tools 147.7 114.0 77.2 42.0 28.4 36.8 9.7 42,200

Machine Parts And

Assembly

150.0 20.1 13.4 5.8 3.9 28.9 8 60,000

Rubber And Plastic

Machine

37.2 34.1 91.7 12.4 33.3 36.4 5 18,600

Textile 434.1 348.3 80.2 138.9 32.0 39.9 10.1 131,668

Petrochemical 1,595.8 641.3 40.2 426.6 26.7 66.5 6.5 57,000

38

經濟部

Rate

Goods

Rate Applied to Taiwan (Average

Nominal Rate)

Rate Applied to ASEAN by China under ASEAN+1 Framework

(Average Nominal Rate) Taiwan’s Export to China in 2007

(Mainland China / Global, %)

Taiwan’s Global

Export in 20072009 2005 2007 20091 20102

870899Parts And Accessories Of Motor Vehicles

14.1 15.0 11.4 6.2 0174.27

(10.2)1,705.15

871499Parts And Accessories Of Bicycles Etc

12.0 12.0 10.0 6.4 064.47

(8.9)721.29

870829Pts & Access Of Bodies Of Motor Vehicles

10.0 13.5 8.8 6.3 3.013.99

(3.7)382.02

870870Road Wheels & Pts & Accessories For Motor Vehicles

8.9 10.2 7.7 5.1 012.41

(3.2)383.43

Appendix 4-2: Cases of Industries under Impact –Vehicles Parts and Assembly

Sources: Customs Tariff Schedules; Taiwan’s Customs Statistics.Note 1: China’s Customs Tariff Schedules from 2005 to 2009 are different, to a certain extent, from Tariff Reduction Commitm

ent in Agreement on Trade in Goods of ASEAN+ChinaNote 2: Forecast based on Tariff Reduction Commitment in Agreement on Trade in Goods of ASEAN+China

Unit: US$ million, %

39

經濟部

Appendix 4-3: Industries and Employment of Taiwan’s Major Exports Still under Non-zero Tariff by China in 2008

Unit: NT$ billion

Taiwan’s Global

Export in 2008

Taiwan’s Export to China in 2008 Industry Total

Output

Total

Export

Export /

Output

(%)

Total

Export

Export /

Output

(%)

Export to

China / Total

Export (%)

China’s

MFN

(%)

Employment

(Persons)

TFT-LCD panel 1,185.1 402.4 34.0 207.1 17.5 51.5 3 63,200

Machinery

(as a whole)

855.0 503.3 58.9 148.8 17.4 29.6 10 329,390

Machine Tools 160.0 121.9 76.2 36.4 22.8 29.9 9.7 45,700

Machine Parts

And Assembly

165.0 23.2 14.1 6.5 3.9 28.0 8 65,000

Rubber And

Plastic Machine

40.0 35.4 88.5 11.2 28.0 31.6 5 19,800

Textiles 420.8 327.8 77.9 124.2 29.5 37.9 10.1 127,430

Petrochemical 1,630.0 674.4 41.4 432.0 26.5 64.1 6.5 57,000

40

經濟部

Thank You for Your

Attention