Saturday, January 22, 2011

US-Taiwan TIFA talks set to begin on January 28

l  The United States and Taiwan are scheduled to begin a new round of talks under the “Trade and Investment Framework Agreement (TIFA),” set to start on January 28 in Taipei. The focus will apparently fall on post-ECFA trilateral economic relations between the US, China, and Taiwan, particularly intellectual property rights enforcement, pharmaceuticals and medical devices, agricultural (including US beef imports) issues and others matters related to trade barriers.

l  The TIFA, signed in September 1994, provides an official framework for US-Taiwan official dialogue on trade and economic issues, but the two sides have not held any TIFA talks since 2007, primarily because of non-economic factors.

l  Another priority issue in US-Taiwan relations this year is the likelihood of Washington granting visa-free status to Taiwan passport holders. As part of the government steps to meet the requirement for visa-free treatment, Taiwan's Ministry of Foreign Affairs (MOFA) plans to launch a new policy requiring that passport applications be filed in person, scheduled to be implemented in July.

l  The planned change in passport application will help reduce passport forgery and boost Taiwan’s chances of gaining visa-free privileges from the United States. At the same time, the decrease in the US visa refusal rate for Taiwanese passport holders to 2.2 percent in 2010 is another factor favorable to Taiwan's bid.

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Wednesday, January 19, 2011

CSECC and implications on China-Taiwan relations

l  The Cross-Strait Economic Cooperation Committee (CSECC), whose formation was mandated in the “Economic Cooperation Framework Agreement” (ECFA), became operational in the first week of January.

l  The CSECC is seen as necessary to facilitate talks on the coordination, implementation, and interpretation of the "early harvest" list (EHL) and other ECFA-related issues.

l  There will also be panels set up in the CSECC, which are expected to continue discussions on issues involving commodity trade, service access, dispute settlement, and investment protection.

l  Though staffed mostly with economic officials from both sides, the CSECC will remain under the ARATS-SEF framework and operate according to provisions contained in the ECFA.

l  While China and Taiwan are not ready to get rid of the “white gloves,” i.e. ARATS and SEF respectively, the substantive matters will hereafter have to be decided by economic officials from both sides.

l  Any CSECC agreement will, however, have to be referred by the SEF to Taiwan's Legislative Yuan (LY) for reference or ratification. Legislative oversight is required for the CSECC to perform its functions.

l  Incidentally the CSECC—from its format to future operations—could become a pattern for other cross-Strait official negotiations in the future, including those on political matters.

Friday, January 14, 2011

Individual Chinese tourists to Taiwan: When and how

l  Despite earlier reports to the contrary, the timetable for allowing Chinese citizens to travel to Taiwan individually—without being confined to tour groups of at least five people—has yet to be finalized.

l  Though Beijing and Taipei have reached a consensus, in principle, on opening Taiwan's travel market to individual Chinese tourists, both sides, however, have not yet finalized when and where a trial run would take place.

l  Both sides had earlier agreed that China would begin allowing up to 1000 residents a day from Beijing and Shanghai—in addition to the 4000 per day limit for group travels—to visit Taiwan individually by early April, which would occasion the traditional “tomb sweeping” recess in memory of family ancestors.

l  Among all the breakthroughs that China and Taiwan have made since May 2008, direct air and sea links and Chinese tourists to Taiwan have offered most conveniences and generated most benefits to the ordinary people—businessmen, merchants, retailers, cab drivers, and students—of Taiwan.

l  In fact, according to the latest estimates by Taiwan’s Tourism Bureau, more than 1.2 million Chinese tourists have visited Taiwan during 2010, up almost 150 percent from a year earlier. From hotels to department stores, the boost in revenue for tourism-related industries has been indeed substantial, which is estimated to exceed NT$60 billion in 2010.

l  The major problem in allowing individual Chinese tourists to Taiwan appears to be the necessity for a "financial security deposit" for each individual tourist, as demanded by Taipei. Beijing, however, finds this requirement "unreasonable and insulting."

l  After further negotiations, Taipei has apparently relented on the demand. It now appears that individual Chinese tourists to Taiwan will become a reality by Q II, possibly as early as April.

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Monday, January 10, 2011

ECFA: The week after

l  With the arrival of 2011, China and Taiwan have entered into a new period in cross-Strait economic relations as the landmark trade pact—the ECFA—took effect on January 1.

l  Trade offices on both sides of the Taiwan Straits stayed open during the New Year holiday and issued certificates of origin for products on the “early harvest list” (EHL), which were to be given preferential tariff treatment by the other side.

l  Incidentally, the first certificate issued from Taiwan was for shipment of 5,000 grouper, totaling three tons in weight, from southern Taiwan's Pingtung County destined for Fujian Province in southeastern China.

l  Under the EHL, China agreed to substantially cut the import tariffs for Taiwanese products ranging from grouper to petrochemicals starting January 1, 2011, making products and services from the island more competitive in the massive mainland market.

l  At the same time, with ECFA now in effect, the amount of total trade between the two sides—particularly for Taiwan’s agricultural and fishery exports to China—is expected to increase steadily and significantly this year.

l  As items on the EHL will receive further tariff reductions before the end of 2012, volume of cross-Strait trade will increase even more as many products will eventually be able to enter the mainland market tariff-free.

l  Though it was a big disappointment when the importation of whole automobile was left off the EHL, Beijing is apparently considering allowing up to 100,000 cars, where over 50% of the manufacturing and assembly was done on the island, from Taiwan each year when negotiations for the post-ECFA commodity trade begins on or before March 12 this year.

l  If this proposed import quota for automobiles is agreed to and accepted by both sides, Taiwan's car manufacturers like Yulon Motors (TWSE 2201), CMC (TWSE 2204), and local auto parts manufacturers stand to benefit the most.

l  The stalled investment plans for foreign automakers like Volkswagen may also receive a new boost, making Taiwan the preferred partner for car companies looking to expand in the Chinese domestic market.

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