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Tuesday, July 6, 2010


New era for cross-strait relations

Officially, it is called the Economic Cooperation Framework Agreement (ECFA), but it is potentially much more. The trade deal signed by China and Taiwan early last week could transform the relationship between the two governments. It deepens the integration of the two economies, opening the door to closer political ties — so the mainland hopes. Cross-strait relations remain tense, however, and it will take considerable work to realize political gains from this economic agreement. In the meantime, Beijing must be patient and continue its efforts to win the "hearts and minds" of the Taiwanese people.

Since taking office in 2008, Taiwan President Ma Ying-jeou has tried to build better relations with China — unlike his predecessor, the independence-minded Mr. Chen Shui-bian. In the first two years of his administration, Mr. Ma has signed 12 economic agreements with Beijing, ranging from opening direct air and sea links to permitting direct Chinese investment in Taiwan, to thicken the weave of connections between the island and the mainland. The result has been 270 regular weekly flights between the island and the mainland and Chinese tourists spending nearly $1 billion during their visits to Taiwan.

Those developments were the prelude to the ECFA signed June 29 in Chongqing. In practical terms, the deal obligates China to cut import tariffs on more than 500 products and services worth nearly $14 billion in trade. For its part, Taiwan is obliged to make tariff cuts of just $3 billion. According to one estimate, the deal could create 260,000 jobs and add 1.7 percent to Taiwan's economic growth. Economists anticipate that the ECFA could add 5.3 percent to Taiwan's economy by 2020.

Just as important are the secondary benefits of the agreement. First, it is a confidence-building measure. It signals to Taiwan and mainland China the mutual desire to solve problems politically. Both governments are trying to improve their relationship and both seek "win-win" solutions.

Second, it is hoped the agreement will open the door to trade deals between Taiwan and other Southeast Asian governments. A free trade agreement between China and the Association of Southeast Asian Nations went into effect at the beginning of this year, and Taiwan has been disadvantaged by being left out. Taipei recognizes the dynamism of Southeast Asian nations and wants a piece of that action. Beijing's opposition to any such deals — for fear that they would legitimize Taiwan's international aspirations — has been the chief stumbling block to negotiations. Now, Southeast Asian governments, who hunger for Taiwanese investment and trade, can say that they are following Beijing's lead.

The trade deal is more than economic. To the extent that the agreement helps Mr. Ma deliver on his promise to improve the lives of ordinary Taiwanese, it is a device to boost the political prospects of himself and his party. Beijing wants the ECFA to convince Taiwanese that their future lies in closer relations — and eventual reunification — with the mainland.

The problem is that convincing Taiwanese is difficult. While welcoming the economic boost provided by the trade deal, island residents are deeply divided over the wisdom of closer ties with the mainland. Of course, independence activists, like those in the Democratic Progressive Party (which Mr. Chen used to head) will protest the deal and accuse the government of selling out Taiwan. Tens of thousands turned out to protest the ECFA. More moderate Taiwanese worry about being swallowed by the mainland economy.

Success for Beijing depends on winning over moderate Taiwanese. That means China must dampen expectations of what the ECFA can deliver and continue to exercise patience with Taiwan. It must acknowledge the aspirations of the Taiwanese people; they want more respect for their considerable political and economic achievements. Beijing should not try to block Taipei's efforts to conclude other deals with regional trade partners. Chinese red lines are well known, and no government will risk Beijing's anger by crossing them.

ECFA is only a first step. Additional talks are supposed to start six months after the agreement is ratified by Taiwan's legislature. Another deal, though, is not likely anytime soon, as Taiwan enters the election season. Local elections will be held later this year, parliamentary elections are scheduled for late 2011 and presidential elections will take place in 2012. Mr. Ma wants a second term and he needs to lead his party to victory in the other ballots to increase his odds of success.

Beijing can make that more likely if it resists the urge to push for quick political gains. Let Mr. Ma focus on domestic politics first. If he can demonstrate that good relations with China pay practical dividends for ordinary Taiwanese, then voters will back his strategy. That will help create a virtuous circle, building still stronger relations across the strait.

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