Foreign investment following the signing of ECFA

l  German automaker Volkswagen is expected to announce investment plans for Taiwan soon after its board meeting last week. However, because automobile was not included in ECFA’s “early harvest list” (EHL) last June, economic officials here do not expect a sizable investment from Volkswagen or other car manufacturers who had once planned to substantially increase investments in Taiwan to take advantage of the ECFA and penetrate the massive Chinese car market.

l  Among those foreign corporations that might have been interested in cross-Strait economic links, this wait-and-see attitude is indicative of the heightened uncertainty in China-Taiwan ties following the KMT’s disappointing performance in the metropolitan elections last month.

l  At the same time, with the presidential election just 15 months away, Taipei will likely toughen its stance toward Beijing in future negotiations to avoid being labeled as too “China-leaning.” Anything that could be perceived as being “soft” toward Beijing would be politically costly during the presidential campaign.

l  Moreover, the recent decision by the Ma administration to: (1) postpone the ARATS-SEF summit until December 21-22, (2) delay the planned signing of mutual investment protection agreement unless, and until, it meets domestic political and economic expectations, and (3) prepare for possible political repercussions since the December summit may be “thin on substance,” had send a clear message—to both the opposition DPP and Beijing alike—that domestic political factors will likely supersede all other considerations from now on.

l  In fact, the KMT administration would not rush into signing anything with China in the next 15 months unless: (1) there is enough domestic support and consensus, and (2) the popular perception has to be that “Taipei outmaneuvered Beijing” in the negotiation process. This approach, however, could put pressure on Beijing and test the limits of its patience.

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