Taiwan-China deals offer no immediate payoff

  • World
  • Thursday, 11 Dec 2008

MYT 11:32:45 AM

TAIPEI (Reuters) - The much-trumpeted deals linking rivals Taiwan and China through direct daily flights and cargo routes are unlikely to boost cross-strait trade significantly, and they could dent the image of the island's president.

The landmark trade and transit ties will come into force on Monday, a triumph for China-friendly President Ma Ying-jeou just a little over six months since he took office.

However, analysts say stubborn legal curbs to investment remain in China while the number of new flights and cargo routes will fall short of demand.

The global financial crisis has raised the stakes for Ma, with Taiwan's export-driven economy contracting in the third quarter and November exports down 23.3 percent from a year earlier.

"The results will take longer than people in Taiwan want," said Li Peng, assistant director of the Xiamen University Taiwan Research Institute in China. "If they're fast it could take half a year, but if they're slow, it could be even longer."

Communist China has claimed sovereignty over democratic Taiwan since 1949, when Mao Zedong's forces won the Chinese civil war and Chiang Kai-shek's KMT fled to Taiwan. Beijing has vowed to bring Taiwan under its rule, by force if necessary.

Ties have improved rapidly since Ma took office, with talks in June and November resulting in the deals that aim to cut costs for about 750,000 Taiwan investors in China and boost the island by tying it to the faster growing Chinese economy.

But the agreements will bring few, quick tangible benefits in their current form, experts said, although the Taiwan government expects ocean shippers to save T$1.2 billion ($36 million) a year and air passengers to save at least T$3 billion annually.

The direct flights and cargo routes will not meet demand, while Beijing strictly controls travel by its citizens to Taiwan, hampering tourism growth, analysts say. Legal snags in China will still hold back Taiwanese shipping and investment, they add.

"It may take years to reach agreements on all aspects of cross-strait travel and trade and even longer for the new measures to have an impact," the European Chamber of Commerce Taipei said in its 2008-2009 position paper on Taiwan.


If Taiwan business travellers and shippers fail to get cost savings from the new deals, they may keep moving further afield, to Southeast Asia or even Africa, undermining the local economy as they leave their home bases behind.

"They will continue to look at opportunities offshore and look at moving production closer to their major markets," said Joseph Lau, an economist with Credit Suisse in Hong Kong. "They're already looking at locations outside China."

Taiwanese opposition leaders, who say Ma is selling out to China by neglecting long-term political disputes with the mainland in favour of economic deals, could attack the president if the new agreements fail to deliver on their promised benefits.

Coupled with a moribund economy, that could hurt the image of the ruling Nationalist Party (KMT) ahead of island-wide local elections in late 2009.

Taiwan's main opposition Democratic Progressive Party (DPP), which lost the presidency and saw its strong legislative minority shrink this year, sees local elections as its next chance to regain a foothold in the government.

"If mainland China is perceived to not be doing enough to help Taiwan's economy, Ma will be criticised," said Bonnie Glaser, a consultant with the Washington-based think tank Center for Strategic and International Studies.

Beijing, for its part, is wary of giving Taiwan too much, in case the anti-China DPP wins the 2012 presidential race, said Kou Chien-wen, a political scientist at National Chengchi University.

That puts Ma in a difficult position.

"I don't see Ma pulling back, but I think he will be more cautious about things, not as willing as he was in the past, probably tougher in negotiations," said Shane Lee, a political science professor at Chang Jung University in Taiwan.

"(Taiwan) will tell the other side 'our people are not happy about what they've seen from the other side so far,'" he said.

($1 = T$33.37)

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