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