(Reuters) – A landmark trade deal between Taiwan and China will cut tariffs on more than 800 products and open up service industries, officials and sources said on Thursday, giving a major boost to around $100 billion in annual two-way trade.
World | China
The most significant deal between the former political foes in 60 years will be signed on June 29 in Chongqing, once briefly the capital of China under the rule of the Nationalists, who are now Taiwan’s ruling party after losing the civil war to Mao Zedong’s Communists in 1949 and retreating to the island.
Taiwan’s government has been heavily pushing the deal, fearing the country’s $390 billion export-led economy will lose out to rivals in the booming Chinese market.
“In all free-trade agreement negotiations, there are bound to be winners and losers,” said Tony Phoo, an economist with HSBC in Taipei.
“I think, looking at what we have so far, the list covers most of the top export categories for what Taiwan ships to China, so it’s not too bad of a deal.
The economic cooperation framework agreement (ECFA) would see tariffs cut on 539 Taiwanese products bound for China and 267 Chinese products exported to Taiwan, Premier Wu Den-yih told reporters at parliament. The cuts on the Taiwan items are valued at $13.84 billion and those from China $2.86 billion.
Separately, a source with direct knowledge of the deal told Reuters it would also open up to Chinese investment Taiwan industries, including movies and business services, while the mainland’s computer service, airline maintenance and medical sectors would be opened to Taiwanese investment.
The source, who could not be identified as the information has not yet been made public, added that Taiwan banks operating in China would be allowed to conduct business in China’s renminbi currency a year earlier than current rules allow.
Chinese banks will be able to convert their representative offices in Taiwan into branches after one year.
Full details of the deal are due to be announced later on Thursday.
STRONGEST EVER TIE-UP
Markets will welcome the deal as the strongest ever tie-up between export-reliant Taiwan and China, Taiwan’s biggest trade partner and top foreign investor. The tariff cuts will cover about 15 percent of Taiwan’s exports to China.
A private research body in Taiwan has previously estimated that ECFA could create some 260,000 jobs in Taiwan and lift GDP by around 1.7 percentage points a year.
The deal could also boost the chances of the ruling party at tough local elections due at the end of the year, where an opposition fearful of ECFA’s economic and political consequences will be mounting a tough challenge.
With a message that ECFA will flood Taiwan with cheap goods, creating massive unemployment, and is a first step toward a Chinese political takeover, the opposition is looking to score big in the local elections to give it chance of ousting pro-China President Ma Ying-jeou in 2012 presidential polls.
“(The deal) gives Ma a beautiful list of scores he can deliver at the next elections,” said Lin Chong-pin, strategic studies professor at Tamkang University in Taipei.
“It’s a political decision made by Beijing, not economic. It’s Beijing’s high-level strategic political decision to win the hearts and minds of the Taiwan people and preempt the pro-independence opposition party.”
The opposition, which has called for any trade deal to be done under the auspices of the World Trade Organization, plans to hold a protest rally against ECFA in Taipei on Saturday.
Britain looks to China to pressure Iran
(Reuters) – China and Britain agree on pressing Iran about its nuclear activities while seeking engagement, British Foreign Secretary David Miliband said on Monday at the start of a visit to China that is likely to focus on the dispute.
World | China
Miliband said the two powers — both permanent members of the U.N. Security Council — shared an interest in ensuring Tehran abides by Security Council resolutions seeking to curb the “real threat” of its nuclear activities.
“Britain and China have not only agreed on the goal that Iran should respect the Nuclear Non-Proliferation Treaty, but also respect that we need to keep a combination of engagement and pressure,” Miliband told reporters at the Shanghai World Expo site, shortly before flying to Beijing.
The Nuclear Non-Proliferation Treaty is the pact seeking to prevent the spread of nuclear weapons beyond the formally recognized nuclear-armed states, including China and Britain.
But despite Miliband’s upbeat comments, his talks in Beijing about Iran — one of China’s major oil suppliers — could be one of the most difficult parts of his three-day trip.
Western powers want China to approve a proposed U.N. resolution imposing new sanctions on Tehran, which they say is seeking the means to make nuclear weapons and has violated non-proliferation safeguards.
Beijing however has previously resisted calls for harsh sanctions against Iran. And as one of the five permanent members of the Security Council, it has the power to veto any resolution.
Miliband’s meetings in the Chinese capital include one with Premier Wen Jiabao, when they will discuss “how we can address the real threat that the Iranian nuclear program poses to international stability and security,” the foreign minister said during an afternoon visit to a training center for peacekeeping police outside Beijing.
Tehran denies that its nuclear program is aimed at developing weapons and says it wants to enrich uranium to power planned electricity plants.
GREATER OPENNESS
Miliband also urged China to do more to open its economy and improve intellectual property rights protections.
“Foreign investors seek transparency and fair competition so they can be confident in their investment,” Miliband said.
China and Britain have recently sparred over climate change negotiations and Beijing’s stance on human rights, after China executed a Briton for drug smuggling, although his family said there was convincing evidence that he was mentally ill.
“We don’t pretend to agree on everything,” said Miliband. “Our relationship is one of many layers and one of growing strength and growing engagement.”
(Editing by Emma Graham-Harrison)