The conflict between China and Taiwan that has been going on for a long time began when the civil war between the communist parties and nationalist parties divided China’s territory and separated Taiwan from The Chinese mainland in 1945. Taiwan’s decision to establish its own government has complicated its relations with China, which still considers Taiwan as part of the territory that must be reunified. Even though Taiwan has been recognized as a sovereign nation by the United Nations and some countries in the world since 1971, China has expressed its desire for reunification with Taiwan to this day. (Qingli, 2022) Taiwan, which rejects China’s wishes, is trying to maintain its autonomy and independence by strengthening military cooperation with The United States. Taiwan’s close relationship with the United States has invited China’s anger and stated ready for war with Taiwan in any time. China is even increasing its military agenda in the Taiwan Strait and flying its warplanes over Taiwan territory. This has fueled the possibility of war between the two countries which until now have continued to increase their military budget and military training.
However, the threat of war between the two countries did not stop their trade activities between China and Taiwan. On the contrary, China is still the most important export partner which control 38.8% of Taiwan’s total exports in 2022, far above the United States which only reaches 15.7% of Taiwan’s total exports (Ma, 2023). Not only that, China and Taiwan depend on each other in semiconductor products where China depends on semiconductor products from Taiwan and Taiwan depends on the broad reach of China’s electronic market which uses semiconductors from Taiwan that has good quality and affordable prices. The trade relations between the two countries seem peaceful even though political and military tensions continue to escalate. This condition has been created since trade relations between Taiwan and China were regulated under the ECFA (Economic Cooperation Framework Agreement) which guarantees the security of trade relations between the two countries in all conditions.
What is an Economic Cooperation Framework Agreement?
ECFA or known as the Cross-Straits Economic Cooperation Framework Agreement is a form of China-Taiwan Free Trade Agreement, which was signed on June 29, 2010, in Chongqing. This agreement is the most important bilateral trade pact between China and Taiwan because it is the first agreement made after nearly two decades of sovereignty disputes between the two countries hindering their trade relations. In this agreement, the two countries agreed to create fair economic relations by gradually reducing and eliminating trade and investment barriers to each other. This agreement has agreed to reduce tariff barriers on 539 Taiwanese products to China and 267 Chinese products to Taiwan with total benefits that both countries promise.
During the signing process, a preliminary discussion on ECFA began in 2008 that continued with four rounds of preliminary talks in 2009. After both countries agreed to establish the ECFA, discussions on the substance and framework of the agreement were held for the first time on January 26, 2010, in Beijing between the Taiwanese government represented by Kao Koong-lian, general secretary and vice chairman of the Straits Exchange Foundation (SEF) and the Chinese government represented by Zheng Lizhong, Vice President of the Association for Relations Across the Taiwan Straits (ARATS). Discussions regarding the substance and framework of the ECFA agreement were carried out by SEF-ARATS representing Taiwan and China for 5 rounds of discussions. The final agreement of the 5 rounds was then approved on July 2, 2010, and came into effect on September 12, 2010. (Jianmin, 2011)
ECFA consists of 16 articles, 5 chapters, and 5 annexes. The first chapter is about general principles which consists of two articles, the first article is about objective and the second article is about cooperation measure which discusses the principles that must be obeyed by the two countries. The second chapter is about Trade and Investment which consists of 3 articles that discuss the rules of trade in goods, services, and investment. The third chapter is about economic cooperation which consists of 1 article that discusses the expansion of the area of economic cooperation that will expand the benefits of this agreement. The fourth chapter is about Early Harvest which consists of 2 articles that discuss the early harvest program of trade in goods and trade in services as a form of implementation of this agreement. The fifth chapter concerns other provisions consisting of eight articles concerning exceptions, dispute settlement, Institutional arrangements, documentation formats, annexes and subsequent agreements, entry into force, and termination. (Elleman, 2022)
How ECFA Guarantees China and Taiwan Mutual Benefit on Trade?
ECFA as an agreement amidst the sovereignty dispute between China and Taiwan is included in hard legislation. This can be seen from the substance and framework of the ECFA that meets the three dimensions of hard legislation.(Abbott et al., 2000) The first dimension is an obligation, the clarity of the provisions regarding the types of goods, services, and investments that receive reduced tariff barriers has been attached in Annex 1. Not only that, the provisions regarding the principles that must be obeyed by the two countries are also clearly stated in Article 2 and the exceptions are in Article 9.
The second dimension is Precision, a clear diction regarding the agreement between the two countries in the ECFA as seen from the use of the words “have agreed (article 2-8), shall engage (article 10), shall establish (article 11), shall cease to apply (article 7)) and others. The use of the sentence shall in law implies an obligation for an action without permissiveness so as to minimize the possibility of violation (Legal Information Institute, 2021).
The third dimension is delegation, China and Taiwan establish the Cross-Straits Economic Cooperation Committee which is a representation of the two countries to resolve disputes that may occur regarding trade and investment relations under the ECFA. Of the 22 agreements formed by China and Taiwan from 1990-2010, ECFA was the initial agreement that placed their economic relations under a legal framework (Hsieh, 2011). The clarity of provisions, diction, and dispute settlement that apply in the ECFA has reduced the possibility of violations or deviations from the agreement that has been formed. So that economic cooperation carried out under ECFA does not experience obstacles or disturbances due to the heating up of China-Taiwan political relations.
Not only that, establishing cooperation under ECFA has become a consideration that provides cost reduction in economic and political terms for the two countries if it is compared to the choice not to cooperate. By cooperating under ECFA, Taiwan and China come through economic growth from the export-import of goods, services, and technology investments made by the two countries. Through the Early Harvest Program (EHP) in ECFA, Taiwan experienced a surplus from sales of its machine tools that reached 61.9%, while China benefited from better and cheaper technology transfer from Taiwan (Heo & Cho, 2012). In addition, increased trade and investment activities between the two countries have created interdependence which also has an impact on increasing stability and peace between the two countries where Taiwan can reduce tensions that can trigger Chinese military attacks and China itself gains space for controlling Taiwan without having to incur military costs and bear the consequences of conflict due to the lack of communication space that must build mutual trust.
These two things then underlie economic cooperation between China and Taiwan under the ECFA agreement which can guarantee the creation of fair trade even though there has been a prolonged conflict of sovereignty since 1945 to this day.
