EFCA Makes Taiwan a New Gateway to China

(Lexology – Jack J.T. Huang et al., Jones Day)

On June 29, 2010, Taiwan and China signed the Economic Cooperation Framework Agreement (“ECFA”), a landmark bilateral trade agreement that will make Taiwan a new gateway to China. The ECFA, which came into effect on September 12, 2010, is the latest, and the most significant, installment in a series of cross-strait agreements signed between Taiwan and China over the past few years to foster closer economic relationships between the two sides of the Taiwan Strait.

The ECFA seeks to provide a framework for Taiwan and China to gradually reduce tariffs on goods, remove non-tariff trade barriers, open up service sectors, and lift investment restrictions, thereby promoting closer cross-strait economic cooperation and interaction. The ECFA is essentially a free trade agreement (“FTA”), encouraged by the World Trade Organization (“WTO”) to be entered into among its members.

The ECFA provides a mechanism pursuant to which Taiwan has an opportunity to be placed on par with, if not more favorably than, ASEAN and other countries having FTAs with China, with respect to exports to China. The Early Harvest List for Export Goods (Schedule 1 of the ECFA) seeks to progressively cut tariffs to zero within three years on hundreds of Taiwanese export goods to China (currently valued at US$13.84 billion per annum).

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