國立交通大學 科技法律學院 科技法律研究所

A Review on the Service Trade Agreement of the ECFA

 By Kuei-Jung Ni

Professor of Law, Institute of Technology Law, NCTU

According to the Cross-Straits Economic Cooperation Framework Agreement (ECFA)^[1] , both Mainland China and Taiwan are required to conduct consultations for concluding an agreement on trade in services with a view to seeking (1) gradually reduce or eliminate restrictions on a large number of sectors in trade in services between the two Parties; (2) further increase the breadth and depth of trade in services; (3) enhance cooperation in trade in services between the two Parties.^[2] The principle of progressiveness also applies to the proposed service trade agreement as the ECFA simply mandates a gradual reduction of restrictions on a large number, but not all, of sectors of services.

The ECFA by nature is a framework agreement and now in a preliminary stage for the realization of trade normalization across the Strait. Whether major goals and objects set by the ECFA can be achieved hinges on the subsequent conclusion and implementation of individual agreements. Since the ECFA came into force in late 2010, both parties have engaged in a serial of consultations and negotiations according to the roadmap underlined in the ECFA. 

        After intense consultations on areas of goods, services and dispute settlement, an agreement on trade in services was the first pact to be finalized. During the ninth round of cross-strait talks, the “Cross-Strait Agreement on Trade in Services” was signed on June 21, 2013.^[3] The contents of the new agreement reflect and synopsize the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO) with the view to further reducing restrictions on service sectors. More importantly, both sides commit themselves to liberalizing their respective service markets in Annex I^[4] where Taiwan allows Chinese to access to its service market for 64 sectors and Mainland China will open more sectors of services to be run by Taiwanese companies. The liberalization centers on the mode 3 of trade in services, namely “commercial presence”.^[5]

Overall, both sides largely enjoy WTO-plus benefits because they agree to entail each other better commercial competition conditions and status than other trade partners. The Chinese openness on service sectors will benefit Taiwan finance, telecommunication, computer and medical service providers in which Taiwan has more competitive advantages. By contrast, it is interesting to observe that on finance and banking sectors, Taiwan’s market remains restrictive to Chinese companies but agree to eliminate such limitation expeditiously.^[6] In contrast to Mainland China’s commitment on liberalizing professional services to Taiwan, Taiwan’s market in this area remains close to Mainland China.

Therefore, to some extent, the service trade pact is not of an exact WTO-plus for the Mainland China’s interest, but appears a WTO-minus on certain sectors, especially on finance. The special arrangement indicates certain degree of departure from the spirit of FTAs that normally lead to additional trade liberalization better than WTO members’ original commitments. Nonetheless, the political compromise is understandable. Like the Closer Economic Partnership Arrangements (CEPA) with Hong Kong^[7] and Macao,^[8] the service trade pact underscores Mainland China’s willingness to allow Taiwan to harvest more economic gains in exchange for building a stronger and closer economic tie with Taiwan, which certainly may deepen Taiwan’s reliance on Mainland China’s market.                       

        The service deal obviously favoring Taiwan more should have been ratified by the parliament of Taiwan swiftly if following the previous path for passing the ECFA.^[9] Yet, the review of the agreement has yet been arranged in the agenda by the parliament due to the strong boycott by the opposition party, some local service industry and student and civil society groups especially. They criticized the pact for lacking transparency and prior consultations, and requested the review of the agreement on a clause-by-clause basis.^[10] Worrying the delay of adopting the agreement will affect future trade promotion across the Strait, the Ninth Cross-Strait Economic, Trade and Culture Forum jointly hosted by the KMT and the Chinese Communist Party (CCP) on October 2013 called for facilitating the implementation of the service deal.^[11] Given the increasing controversy on the service agreement, the parliament decided to hold several public hearings for enhancing the transparency of the deal and keeping the public well informed about the costs and benefits of concluding the agreement.^[12]       

        The delay of ratifying the agreement on trade in services definitely would cast shadow on the prospect of fulfilling ECFA objects. But, the disagreement over the pact in Taiwan should be seen as a normal scenario given Taiwan is a democratic country in which people may feel free to express concerns about the disadvantage and costs brought by the agreement that requires Taiwan to open its service market to Mainland China. It should not be over pessimistic about the eventual passage of the deal. Taiwan would be used to the domestic strife over FTAs in the future as regional economic integration will increase in depth and width.

        In addition to the cross-strait service agreement, consultations on agreements on goods and dispute settlement are nearly finished. To facilitate the realization of a free trade area across the Taiwan Strait, the Ma administration should seek consensus internally and communicate with people in good faith concerning the necessity and advantage of further accessing to Mainland China’s market. Of course, providing genuine support to local industries suffering the trade liberalization should proceed.  

The domestic strife over the ratification of a service trade agreement in Taiwan surely may cast uncertainty about the future of the ECFA. The current deferral of validating the agreement should be a tentative phenomenon and the pact would be implemented eventually. For the subsequent consultation on trade in goods, it is predictable that Mainland China’s favorable concessions to Taiwan, like the service trade deal, will continue to apply. To realize the ECFA’s goals for building a free trade zone expeditiously, both sides should endeavor to persuade their people harder that the ECFA and subsequent agreements as a whole will make their life better.