Scenarios: Will Taiwan get hoped-for FTAs after China deal?
Reuters | 2010-05-17
SCENARIOS-Will Taiwan get hoped-for FTAs after China deal?
By Jonathan Standing and Ralph Jennings
TAIPEI, May 17 (Reuters) — Taiwan is pitching a controversial free-trade framework deal with China as a way to get its giant neighbour and political rival to allow it to seek similar deals with other countries, giving a boost to its $390 billion economy.
China has previously used its economic clout to block other countries from signing trade deals with Taiwan, over which it claims sovereignty.
But Taiwan is banking on the economic cooperation framework agreement (ECFA) giving it enough leverage, and has dropped many controversial areas to get it signed, leaving a deal short on content but long on symbolic value.
But will it get its FTAs? Here are some scenarios that may develop after the signing of ECFA, expected by June.
FTAs FOLLOW QUICKLY
– Probability: Medium to high
– Market reaction: Positive if realised
Taiwan President Ma Ying-jeou has declined to say how many FTAs Taiwan wants and with which countries, but officials from the foreign trade bureau told Reuters last month they have begun canvassing potential partners, such as the United States and Japan.
Ma has said that he would move quickly to start talks and noted that in previous talks with unnamed countries Taiwan has "been told to sign with China first."
Academics expect Beijing to let Taiwan sign trade deals as part of a long-term charm offensive aimed at eventual reunification. But Beijing may restrict the content of those pacts and insist that Taiwan use a name that implies a connection to China, such as the "Chinese Taipei" moniker it uses for the Olympic Games.
"The mainland China government’s point of view is positive," said Li Peng, assistant to the director of Xiamen University’s Taiwan Research Institute in China. "Whether that means an FTA model for Taiwan needs to be negotiated further."
If Ma can score an FTA or two, benefits will include job creation in Taiwan and more support for his government.
If not, the anti-China opposition will gain ground ahead of presidential elections in 2012. It has said it would move to scrap ECFA if it wins power.
CHINA OPPOSES FTAs
– Probability: Low:
– Market reaction: Markets could still gain on signs that ECFA was bringing Taiwan’s economy closer to China’s, but foreign fund inflows might be weaker without solid prospects for FTAs.
China may continue to ask other major world powers dependent on its huge markets not to sign trade deals with Taiwan.
Beijing has so far remained silent on whether it will allow Taipei to pursue other FTA talks, saying only that it wants to fast-track ECFA, which would "yield benefits" to Taiwan’s much smaller economy.
"China can’t openly do it," said George Tsai, a political scientist at Chinese Cultural University in Taipei. "Whether to allow FTAs depends on what name, what title (Taiwan) uses. It’s a subtle issue and China will monitor that issue very carefully."
Beijing’s opposition to outside FTAs would put a spotlight squarely on any deliverables from ECFA itself.
With many key industrial sectors such as high-tech left out of the initial deal, much would depend on subsequent negotiations with China on expanding ECFA to key sectors.
