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DOLE: Ending estrangement, cementing ties

Taiwan and China sign deal to accelerate commerce

- The Washington Times - Wednesday, June 30, 2010

In one of his most significant policy addresses to date, Ma Ying-jeou, president of Taiwan, hailed his country's new Economic Cooperation Framework Agreement (ECFA) with China. Signed Tuesday, the ECFA is the most significant manifestation of a thaw in bilateral ties between Taipei and Beijing.

This improvement in cross-strait relations has included 12 new economic and social agreements, regular talks between Taipei and Beijing, numerous direct commercial flights between the countries and the travel of more than 600,000 tourists from mainland China to Taiwan in 2009.

As someone who championed Taiwan, formally known as the Republic of China, in Congress and helps represent its interests in Washington, I am pleased with these developments. Over the longer term, I have been impressed by the country's evolution into a fully modern state with vibrant democratic institutions and a competitive political process. Taiwan's leaders are seeking to cement their country's dramatic political achievements, deepen its economic growth and improve its geostrategic stability. The ECFA would do all of these, plus tangibly benefit Taiwan by creating more than 260,000 jobs and spurring annual economic growth by approximately 1.7 percent. The two parties have agreed on an "early harvest" list that will remove more than 500 types of Taiwanese goods from tariffs within two years. Tariffs will be eliminated immediately for more than 100 of these.

For its part, China will see 270 types of export goods exempted from tariffs and reportedly will realize an additional annual growth of 0.4 percent of gross domestic product (GDP) if the ECFA is implemented. It also will benefit from the easier transfer of entrepreneurship from Taiwan.

China needs better economic integration with Taiwan to preserve its economic growth. The risks to Chinese export industries from the euro crisis setting off another round of global recession are significant. Beijing spent $600 billion on domestic stimulus last year and cannot afford to see that effort lost to new market volatility. The survival of export industries in eastern China is key until the point at which domestic demand can be stimulated sufficiently to power a greater share of economic growth.

Taiwan is heavily invested in many of these industries and will in turn benefit from a closer economic relationship with a China that is increasingly developing sources of sustained domestic demand. In addition, Taiwan rightly sees the ECFA with China as a means of competing fairly in Asian markets and as a springboard to economic agreements with other neighbors (and trade rivals), including Malaysia, Singapore and Japan. Throughout Asia, China and many other countries have used such agreements to eliminate or lower tariffs. Taipei also hopes for an eventual trade agreement with Washington. Although the United States and Taiwan enjoy first-rate trade relations, a formal free trade agreement between our countries is in order.

The Obama administration has applauded the recent improvement in Taipei-Beijing relations and supports President Ma's cross-strait policies, including the ECFA. It also has repeated its support for Taiwan's meaningful participation in the World Health Organization, the International Civil Aviation Authority and other international bodies. In addition, it recently approved arms sales to Taiwan worth $6.4 billion.

Some critics of the agreement argue that the ECFA will overly expand Taiwan's economic dependence upon China in ways that threaten the country's politico-military system (in other words, de facto sovereignty). In my view, the globalization of the economy makes the ECFA necessary and thereby outweighs these concerns. Since the early 1990s, Taiwan has invested $150 billion in China. Forty percent of Taiwanese exports go there - with an average tariff of 9 percent, which, if removed, would provide for major economic growth. While the United States and Taiwan's other allies must remain vigilant in thwarting political, economic or military encroachments by the mainland, there is simply no viable alternative to some form of ECFA to move the two countries toward normal economic relations. We should promote policies that encourage China to be more like Taiwan - economically and politically. I believe liberalized trade is a good move in that direction.

Critics of the ECFA should recognize that Taiwan has insisted upon a pact to protect intellectual property rights. It has also ensured that Taiwan's agricultural and labor markets will not be flooded with cheap goods and workers from the mainland. Unilaterally, Taipei will provide approximately $3 billion in assistance to its industries adversely affected by tariff reductions. Of course, full normalization of trade relations cannot and should not happen overnight, but now is the time for a major step forward through this vital agreement.

Bob Dole, the 1996 Republican presidential candidate, is a former Senate majority leader.

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