![Sample our Area Studies journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5922/TOC-Subject-Sample-2021-Area-Studies.jpg"})
Abstract
To come to terms with the realization of ASEAN+1, Taiwan had concluded with mainland China a special free trade agreement (FTA), the Economic Cooperation Framework Agreement (ECFA) in June 2010. This framework agreement provides an early harvest agreement of near-term tariff elimination, including detailed product schedules for goods and services from each side, with the final shape of fuller trade liberalization in goods and services taking years to negotiate and realize. The conclusion of the ECFA has been considered as a major breakthrough in cross-strait talks and economic relationships, even though it is by no means free from controversies inside Taiwan. The authors are therefore motivated by hot debates in Taiwan to reflect on the expected trade effect of the ECFA by taking into account the factor of cross-strait global production networks. In particular, we examine with a proposed model and statistical robustness, the trend of Taiwan-based firms' localization in mainland China, driven in part by constant movements in global production networks, which generates complicated and dynamic relationships between Taiwan's investment-induced trade and structural shift in Taiwan's exports to mainland China. Based on our empirical findings, we reflect on the conventional views on the trade effect of the free trade agreement. The results of our analyses tend to support a cautious view about the trade effect of the ECFA. Without denying the significance of the ECFA and deepening cross-strait economic relationships, we argue that the impact of the ECFA should be interpreted in a wider context than just the trade perspective, as the conventional wisdom and the existing evaluations suggested.
Acknowledgments
An earlier version of this paper was presented at 22nd Annual East Asian Seminar on Economics, held by China Center for Economic Research (CCER), National School of Development at Peking University, Beijing, China, on 24–25 June 2011. Apart from constructive discussions during the conference, the authors have also benefitted from detailed comments by two anonymous references.
Notes
1. In our opinion, an important reason why Korea had suffered less during the financial crisis is related to Korea's more diversified structure of manufacturing GDP and exports (Chen, Wen and Liu 2011).
2. According to Council for Economic Planning and Development (CEDP), the implementation of consumption voucher had helped stimulate GDP by 0.28–0.43% in 2009.
3. The Early Harvest List for Taiwan's exports to China includes 539 items of products, eight services, and three financial sectors. China's list for its exports to Taiwan covers 268 items of products, eight service industries, and one financial sector.
4. Some of which may be kept confidential.
5. Technically speaking, the CIER model makes the assumption of full employment and fixed endowment, hence other sectors would benefit from the ECFA at the expense of the current dominant electronic industry.
6. The deviation ratio of exports to export orders is defined as (value of purchase order-value of exports)/value of purchase order.
7. This classification (namely high-end producer goods, general producer goods and final goods) was reported in Hatzichronoglou (Citation1997) and used by Liu (2004) to examine the structure of Taiwan's exports to China
8. As a matter of fact, even such brand new products as the Wii, Xbox, iPhone, iPad nowadays are mostly made/assembled in China and/or Southeast Asia, because mainly of manufacturing offshoring by the Taiwan-based ICT OEM/ODM firms.
9. The ITA entered into force at that time when the participants represented approximately 90% of world trade in the related ICT products.
10. This is an unofficial translation of part of Nobuyuki Idei's speech in Taipei on 8 December 2009.