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Growing Economic Ties in the Strait

Interviewee: Johnny C. Chiang, Minister, Government Information Office, Taiwan
Interviewer: Jayshree Bajoria, Staff Writer, CFR.org
July 15, 2010

China and Taiwan signed a trade deal last month that brings the two economies closer and is largely seen as a sign of improving relations across the strait. The deal, officially called the Economic Cooperation Framework Agreement, slashes tariffs on a wide range of products and allows Taiwanese firms to invest in Chinese service sectors. By some estimates, it will help increase Taiwan's 2020 GDP by about 4.5 percent (PDF). Head of Taiwan's Government Information Office Johnny C. Chiang says the agreement protects Taiwan's vulnerable industries, such as some agricultural goods, by excluding them from tariff-reducing measures. The deal also does not permit workers from China to come to Taiwan, he adds.

While the deal is a good start for Taiwan, Chiang says it will not be sufficient, because Taiwan lags behind in a region with increasing trade integration. "Countries like South Korea have very similar economic structures to Taiwan. And when they enjoy preferential treatment, our companies become less competitive." But pressure from Beijing, which considers Taiwan a part of China, has made countries wary of signing trade deals with Taiwan in the past. "It is hard to deny that Beijing won't have any political influence," but with improving cross-strait relations, more free trade agreements with its major trade partners have become a greater possibility for Taiwan, says Chiang.

However, security in the strait remains a concern, with Chinese ballistic missiles deployed against Taiwan and Beijing's modernization of both its missile forces and amphibious assault capabilities. Taiwan relies heavily on U.S. arms sales as a counterbalance to the threat, but these sales frequently prompt angry protests from China's leaders. Chiang says the arms provide a "credible deterrence to prevent any miscalculation that could lead to armed conflict" in the region. He ruled out any near-future plans for a political settlement with China.


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