Markets force China, Taiwan to inch closer

Iam_zhcn

Markets force China, Taiwan to inch closer
http://www.nationalpost.com/news/world/story.html?id=1351398

Published: Wednesday, March 04, 2009 Peter Goodspeed, National Post



China's parliament, the National People's Congress, pictured, is prepared to propose creating a "cross-straits economic zone" that would include Taiwan. （Peter Parks, AFP, Getty Images）

The world economic crisis may be driving Taiwan and China closer together than ever before.

Sixty years after China's unfinished revolution slid into a heavily armed stalemate across the Strait of Taiwan, delegates to mainland China's rubber stamp parliament, the National People's Congress, is prepared to propose creating a "cross-straits economic zone" that would include Taiwan and four mainland Chinese provinces directly opposite the disputed island. The move comes as Taiwan itself is debating the pros and cons of a possible free trade agreement with mainland China.

Since taking office in May, Ma Ying-jeou, the Taiwanese President, has moved aggressively to enhance the economic integration of the two Chinas by expanding contacts and seeking to relax controls on trade and investment.

Now, he is pushing for a free trade agreement to normalize economic and trade relations.

Details are vague, but Taiwan hopes to sign a deal with China before the end of the year. This would reduce tariffs on selected goods and ultimately pave the way for a much broader free trade agreement.

Mr. Ma says Taiwan needs the deal to avoid being marginalized when China, Japan, South Korea and members of the Association of Southeast Asian Nations (ASEAN) conclude a free trade agreement, expected next year. If Taiwan is excluded from the regional free trade zone, its petrochemical, electronics, textile and tool ma-chine industries will automatically lose market share in China. Mr. Ma estimates that could cost it as many as 114,000 jobs.

The island has been plunged into a severe recession as its exports have nose-dived by more than 40% year-on-year in the past two months. Like most export-oriented Asian economies, it has been hit hard in its main markets in China, the United States, Europe and Japan.

Statistics released last week show unemployment rose to 5.31% in January, the highest since the SARS (Severe Acute Respiratory Syndrome) epidemic in 2003. China is eager to accommodate Taiwan, even offering emergency economic aid to mainland-based Taiwan firms so they can survive the financial crisis. But that worries Taiwan's pro-independence opposition, which sees any economic integration as a possible precursor to unification.

On Monday, the Taipei Times warned any kind of free trade agreement with the mainland will lead Taiwan down the road to Chinese domination.
"There is no separation between political and economic concerns in Beijing's treatment of Taiwan," columnist Lu Shih Hsiang wrote. "All its policies are aimed at drawing Taiwan closer until it is entirely under Chinese domination."

The opposition Democratic Progressive Party has panned the proposed trade deal and is demanding a referendum.

Wu Rong Yi, a former vice-premier, notes that China blocks Taiwan from signing free trade agreements with other countries but is all too eager to sign one itself with Taiwan.

"The roads are all blocked and there is only one path left, but it leads to a trap," he said.

Kenneth Lin, an economist at National Taiwan University, argues Taiwan will lose the right to make decisions on its survival, development and sovereignty if it signs the trade deal.

Yesterday in parliament, Liu Chao Shiuan, Taiwan's Premier, said a trade deal with China would not jeopardize Taiwan's sovereignty, nor would it open Taiwan to Chinese labourers or more Chinese agricultural products.

In a bid to sweeten the deal, the government has stopped calling it a Comprehensive EconomicCo-operation Agreement because some Taiwanese felt that was too close to a similar pact, the Closer Economic Partnership Arrangement Beijing used to unite the economies of China, Hong Kong and Macau.

Now, Taiwanese officials talk of signing an Economic Co-operation Framework Agreement.

pgoodspeed@nationalpost.com