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Ministry expects cross-strait trade pact to boost GDP by 1.7%
Central News Agency
2009-07-29 10:18 PM
Taipei, July 29 (CNA) Taiwan's annual gross domestic product (GDP) will increase by an estimated 1.72 percent if Taiwan and China sign an economic cooperation framework agreement (ECFA), the Ministry of Economic Affairs forecast Wednesday.

The forecast was based on a study commissioned by the ministry and conducted by the Chung-Hua Institution for Economic Research (CIER), one of Taiwan's major economic think tanks.

The CIER study on the possible impact on the Taiwan economy of the proposed comprehensive trade pact with China was unveiled at a news conference hosted by Minister of Economic Affairs Yiin Chii-ming.

Speaking on the occasion, CIER Vice President Liu Bih-jane said the institution used the standard GTAP Model, a global computable general equilibrium model that is widely used by major countries around the world in measuring the impact of forming a free trade area with major trading partners.

Using this model, Liu said, the institution estimated Taiwan's possible annual economic growth rate after signing an ECFA with China under two different scenarios.

In the first scenario, in which Taiwan would not remove its restrictions on imports of agricultural and industrial products from China but would just lower tariff rates to zero for Chinese products that are already allowed to enter the local market, Taiwan's GDP growth rate would increase by 1.65 percent, the report stated.

In the other scenario, in which Taiwan would refrain from further opening its agricultural market to China but would only lift restrictions on imports of industrial goods from China and cut tariffs to zero, Taiwan's economic growth rate would increase by 1.72 percent, according to the report.

Meanwhile, Liu said that the institution also conducted a study at the request of a local think tank in which it preducted that Taiwan's GDP could increased by 1.83 percent if the proposed cross-strait ECFA is signed on the terms that cross-strait trade in agricultural and industrial sectors is fully liberalized.

The CIER report also estimated that Taiwan's employed population will increase by between 257,000 and 263,000.

But the economics ministry itself has estimated a larger increase of 273,000 in the number of employed persons.

The CIER report further conjectured that an estimated US$8.9 billion in foreign direct investment will flow into Taiwan in the next seven years if the much-talked-about ECFA is signed.

The report said foreign companies will be more interested making Taiwan their regional operations and marketing hub because Taiwan will then be able to take part in regional economic integration.

The report also warned that if Taiwan fails to strike an ECFA deal with China, its economic growth rate could fall by 0.176 percentage points after the free trade agreement between China and ASEAN countries takes effect next year.

Once "ASEAN plus 3" becomes a reality, with which China, Japan and South Korea forming a free trade area with ASEAN countries, Taiwan's annual GDP growth rate might see an even bigger drop of 0.836 percent, the CIER report conjectured.

As to how the ministry will promote the ECFA project, Yiin said the proposed pact will only outline negotiation goals and timeframes for reaching each policy goal or cooperation project in a gradual manner in order to minimize any possible negative impact on local industries.

(By Sofia Wu)

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