Monday, January 10, 2011

ECFA: The week after

l  With the arrival of 2011, China and Taiwan have entered into a new period in cross-Strait economic relations as the landmark trade pact—the ECFA—took effect on January 1.

l  Trade offices on both sides of the Taiwan Straits stayed open during the New Year holiday and issued certificates of origin for products on the “early harvest list” (EHL), which were to be given preferential tariff treatment by the other side.

l  Incidentally, the first certificate issued from Taiwan was for shipment of 5,000 grouper, totaling three tons in weight, from southern Taiwan's Pingtung County destined for Fujian Province in southeastern China.

l  Under the EHL, China agreed to substantially cut the import tariffs for Taiwanese products ranging from grouper to petrochemicals starting January 1, 2011, making products and services from the island more competitive in the massive mainland market.

l  At the same time, with ECFA now in effect, the amount of total trade between the two sides—particularly for Taiwan’s agricultural and fishery exports to China—is expected to increase steadily and significantly this year.

l  As items on the EHL will receive further tariff reductions before the end of 2012, volume of cross-Strait trade will increase even more as many products will eventually be able to enter the mainland market tariff-free.

l  Though it was a big disappointment when the importation of whole automobile was left off the EHL, Beijing is apparently considering allowing up to 100,000 cars, where over 50% of the manufacturing and assembly was done on the island, from Taiwan each year when negotiations for the post-ECFA commodity trade begins on or before March 12 this year.

l  If this proposed import quota for automobiles is agreed to and accepted by both sides, Taiwan's car manufacturers like Yulon Motors (TWSE 2201), CMC (TWSE 2204), and local auto parts manufacturers stand to benefit the most.

l  The stalled investment plans for foreign automakers like Volkswagen may also receive a new boost, making Taiwan the preferred partner for car companies looking to expand in the Chinese domestic market.

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