Taiwan, China Finalize Landmark Trade Pact

TAIPEI, Taiwan (AP) -- Negotiators from China and Taiwan completed work Thursday on a trade agreement that will raise ties between the former antagonists to their highest level since they split amid civil war in 1949.

The Economic Cooperation Framework Agreement, to be signed next week in the Chinese city of Chongqing, is intended to give Taiwanese companies tariff benefits in China that are similar to those received by Southeast Asian countries under a separate trade pact with China that went into effect earlier this year.

It also contains provisions protecting intellectual property rights for both sides -- an important gain for Taiwan's entertainment sector -- and regulates cross-strait banking.

In tying Taiwan's high-tech economy closer to China's lucrative markets it paves the way for much closer political relations between the sides -- cited by China as one of its key benefits.

Closer political and economic ties serve China's long-term goal of returning the island to its control, the fundamental aim of its Taiwan policy for the past six decades.

The United States also strongly supports the trade agreement because it lowers the chances of a conflict in the volatile western Pacific. Such a conflict seemed possible as recently as three years ago under former Taiwanese President Chen Shui-bian's pro-independence pronouncements and China's repeated threats to combat them with military force.

But since assuming office two years ago, successor Ma Ying-jeou has jettisoned Chen's policies, insisting that closer economic ties with the mainland serve the interests of both sides and provide Taiwan its best chance of escaping increasing economic and political isolation.

Ma is backed by important sectors of Taiwan's powerful business community, which over the past 20 years has set up profitable ventures on the mainland and ramped up exports to China to more than $80 billion a year.

The trade pact provides Taiwanese companies with tariff advantages on 539 products exported to China, while Chinese companies receive advantages on 267 products in the Taiwan market. Taiwanese officials say that tariff-advantaged goods account for about 16 percent of the island's total exports to China. That's considerably more, they say, than the 10 percent that China's advantaged items account for in its exports to Taiwan of about $30 billion.

Still, Taiwanese Premier Wu Den-yih acknowledged that the island was not able to achieve tariff advantages for all the items it wanted, including some petrochemical products.

"It's impossible to get everything we wanted because China has to take care of its industries as well," he said.

While Ma and Taiwan's business community welcomed the pact, the opposition doubted its economic benefits and warned of negative political implications -- including Taiwan's eventual absorption into China. Ma denies that will happen on his watch.

Led by the Democratic Progressive Party, opposition forces are planning a large demonstration against the pact in Taipei on Saturday.

Since losing the presidency to Ma in 2008, the party has won six out of seven legislative by-elections, and scored important gains in a series of local polls. It hopes to use unhappiness over Ma's China policies -- particularly the trade pact -- to achieve big gains in mayoral elections later this year and ultimately win the 2012 presidential election.

But at least for now, polls show that more Taiwanese support the trade pact than oppose it. Ma says the agreement will be submitted to Taiwan's Legislature -- where it is expected to be approved because his Nationalist Party holds a large majority -- after it is signed next week.

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