Cross-Strait Economic Relations and Its Development of Economic Cooperation Framework Agreement

Cross-Strait Economic Relations and Its Development of Economic Cooperation Framework Agreement

The cross-strait economic links between Taiwan and Mainland China have been rapidly evolving from relations since the1980s to the present economic cooperation with a particular reference to the recent negotiation on the Cross-Strait Economic Cooperation Framework Agreement（ECFA,兩岸經濟合作架構協議）. That is, a change from the previous unitary arrangement of economic transactions by oneself to the present bilateral agreement dully signed by both sides. The present ECFA, under the framework of World Trade Organization（WTO）, contains three integrated components of Free Trade Agreement, liberation and protection on foreign direct investment, and liberalization of the service sector. Proponents, such as the present ruling administration by Kuomintang, strongly argue its benefits: boosting economic growth, strengthening international competitiveness, avoiding Taiwan's further economic marginalization after Mainland China's participation in the Association of Southeast Asian Nations in 2010. Opponents, such as the hard-core Democratic Progressive Party, strongly argue its negative impacts: Mainland China's plot of hijacking Taiwan economically to force unification, further hollowing out Taiwan's capital and technology, increasing the dependence of Taiwan's economy on Mainland China, impacting on small and medium enterprises. There are several challenging tasks and uncertainty future to be encountered by the ECFA. To quote a Chinese idiom, ''sleep in the same bed but dream different dreams''. Mainland China's strategy places politics as the first consideration and economy second. The ultimate goal of Mainland China's united front（統戰）is unification without consideration of price, which cannot wait indefinitely. In contrast, Taiwan's strategy by President MA administration places economy as the first consideration and politics second. Unification must consider Taiwan's social and political stability. However, a majority of people are not ready yet for unification. I make the following recommendations with an aim that they can serve as a good reference to Taiwan's government as well as to the opposition parties on action plans to be taken on safeguarding Taiwan's economic security: (1). reducing Taiwan's heavy economic dependence on Mainland China, (2). compensating disadvantaged groups, (3). strengthening Taiwan's international competitive advantages by increasing economy of scale through strategic alliance of firm's size, (4). implementing monitoring information system and contingent plan on preventing hollowing-out of Taiwan's capital and high-tech, and (5). building a harmonious society regarding a consensus by both ruling administration and opposition parties on the ECFA, being a test of Taiwan's democracy. There are two objectives in this study. First, this study examines the evolution from cross-strait economic relations to the present economic cooperation with a particular reference to recent development of the CrossStrait Economic Cooperation Framework Agreement .That is, a change from the previous unitary arrangement of economic transactions by oneself to the present bilateral agreement dully signed by both sides. The second objective is to examine the evolution from the so-called ''indirect'' economic link between Taiwan and Mainland China where economic transactions must transit through Hong Kong to a ''direct'' economic link bypassing Hong Kong.