PRC SCHOLARS ON CROSS-STRAIT FREE TRADE.

C O N F I D E N T I A L BEIJING 000691 E.O. 12958: DECL: 03/16/2019 TAGS: ECON ETRD CH SUBJECT: PRC SCHOLARS ON CROSS-STRAIT FREE TRADE. Classified By: Economic Minister Counselor Robert S. Luke. Reasons 1.4 (b) and (d). ¶1. (C) Summary. Taiwan President Ma Ying-jeou is anxious to conclude an Economic Cooperation Framework Agreement (ECFA) with China in advance of the establishment of the China-ASEAN free trade zone in January 2010, local Taiwan experts told Emboffs. Should an agreement not be reached, Taiwanese exports to China will be subject to higher tariffs than exports from ASEAN nations. Taiwan opposition party fears that closer economic ties will bring closer political ties are justified, one expert admitted, but Taiwan will reap huge benefits from an ECFA, he claimed. The opposition should "swallow the bitter political results," he added. Our contacts stated the next round of talks is likely to be held in May or June. Should things proceed smoothly, they predict an ECFA will be signed in the second half of 2009. End Summary. ¶2. (C) Regardless of whether it is called a Comprehensive Economic Cooperation Agreement (CECA) or an Economic Cooperation Framework Agreement (ECFA),closer economic ties with the mainland will bring huge benefits to Taiwan, China Institute of Contemporary International Relations (CICIR) Center for Taiwan Related Studies Professor SUN Keqin told EmbOffs March 5. Taiwan President Ma Ying-jeou is particularly anxious to conclude an agreement before the establishment of the China-ASEAN free trade area, Sun continued. The "ASEAN 1" arrangement, which excludes Taiwan, will eliminate import duties on trade between signatory countries. As such, beginning January 2010, Taiwan's petrochemical, electronic, textile and other exports to China will face steeper competition from ASEAN nations as Taiwanese goods will still be subject to 6.5 to 10 percent import duties. Sun stated conservative estimates project an impact on Taiwan's GDP of between minus 0.5 to minus 0.7 percent and a loss of as many as 110,000 jobs in Taiwan should this situation arise. ¶3. (C) Concerns voiced by Taiwan's opposition Democratic Progressive Party (DPP) that closer economic ties could bring greater dependence on the PRC are probably well-founded, opined CICIR Associate Professor NIU Xinchun. However, Taiwan will receive far more benefits from an ECFA than the mainland so the DPP and other opponents need to "swallow the bitter political results" and realize that "there is no free lunch." President Ma has already stated an agreement would not open Taiwan's market to Chinese laborers or permit more mainland agricultural imports so mainland farmers and migrant workers, among others, will receive no benefits from an ECFA. Yet, there is no resistance on the mainland because opponents have no voting power to speak out. "The PRC is not free," Niu said frankly. Can Taiwan Seek FTAs with Other Countries? -------------- ¶4. (SBU) If the two-sides do conclude an ECFA, it is unclear what the implications would be for the PRC's position on Taiwan negotiating FTA-like agreements with other countries, said Chinese Academy of Social Science (CASS) Institute of Taiwan Studies Research Fellow Wang Jianmin. Under former President Chen Shui-bian, the Taiwanese government wanted to pursue FTAs purely for political reasons, he said. Back then, it was an easy decision for the PRC to say oppose Taiwan's efforts, Wang laughed. The PRC may have to revisit its historic opposition to Taiwan concluding trade agreements with other countries, Wang suggested. Tsinghua University Institute of Taiwan Studies Postdoctoral Candidate Wang Hualei concurred. She cited as evidence President Hu Jintao's December 31 speech in which he said the PRC is open "to exploring feasible approaches to the dovetailing of the common development of both economies with the economic cooperation mechanism in the Asia-Pacific region." Next Round of Cross-Strait Dialogue -------------- ¶5. (SBU) The dates for the next meeting of the mainland's Association for Relations Across the Taiwan Straits (ARATS) and Taiwan's Straits Exchange Foundation (SEF) are not yet set, but CASS' Wang Jianmin said he expects the next round to be held in May or June. The two sides have agreed to discuss joint anti-crime efforts, regular cross-strait flights, financial cooperation and Chinese foreign direct investment in Taiwan. China has taken note of Ma's requests to include a discussion on the ECFA but, in a March 11 interview, the PRC's Taiwan Affairs Office Director Wang Yi pointed out the two sides have not started official or unofficial dialogue on this issue. Despite this, CASS's Wang Jianmin predicted, if things continue to proceed smoothly, an ECFA could be signed during the second half of 2009, before the lower tariffs for ASEAN products go into effect. PICCUTA