Thu, Jul 30, 2009 - Page 1 News List

ECFA to boost GDP, create jobs: CIER

OPPOSING VIEW The economics ministry dismissed a rival report that said the IT industry could lose up to NT$350 billion if the trade pact with Beijing were signed

By Elizabeth Tchii  /  STAFF REPORTER

The inking of an economic cooperation framework agreement (ECFA) with China could generate between 257,000 and 263,000 jobs per year in Taiwan and raise annual GDP by between 1.65 percent and by 1.72 percent, a top local research institute said yesterday.

Presenting a study on the potential effects of an ECFA, the Chung-Hua Institution for Economic Research (CIER) said it had drawn two possible scenarios for the signing of the pact: In the first scenario, tariffs on select Taiwanese agricultural products that are currently open to China will be removed, while the industrial sector will be closed to China; in the second scenario, there will be no changes in the agricultural sector, but the industrial sector will be completely opened to China.

CIER vice president Liu Bih-jane (劉碧珍) said that exports could increase by 4.87 percent in the first scenario and by 4.99 percent in the second one. Imports could correspondingly rise by 6.95 percent or 7.7 percent.

Balance of trade — or net exports — would experience an annual boost of US$1.76 billion to 1.78 billion, Liu said.

“Although inking the trade agreement is not the only solution to the economic crisis, it is certainly be an effective one, as our calculations show,” Liu said.

The institute decided to run two scenarios because the government's proposed pact is likely to fall somewhere inbetween, the Ministry of Economic Affairs said.

The ministry also conducted separate ECFA calculations that included the multiplier effect, which in essence produced higher results.

Based on the ministry's calculations, annual GDP could rise by 1.83 percent and employment could increase by 273,000 jobs compared with CIER's estimates of 257,000 to 263,000.

“Furthermore, over a seven-year period after inking the ECFA, we expect foreign direct investment to top US$8.9 billion as more international companies set up subsidiaries in Taiwan,” Minister of Economic Affairs Yiin Chii-ming (尹啟銘) said.

The ministry said an ECFA would not negatively affect the information technology (IT) sector, while other industries such as plastics, chemicals, machinery, textiles and steel should see direct and immediate benefits.

“If the IT industry could lose up to NT$350 billion [US$10.7 billion] because of the ECFA as the Cross-Strait Interflow Prospect Foundation has said, why haven't we heard any IT companies complain,” Yiin said.

Yiin made the comment in response to another CIER study commissioned by the non-profit foundation.

The minister said the foundation failed to take into account that many Taiwanese electronics, information and communication technology companies already enjoy zero tariffs and only based its calculations on companies that could suffer as a result of the ratification of the ECFA.

Speaking on the government's timetable for the proposed pact, Yiin said the plan was “to complete independent studies in June, conduct joint studies in July, August and September, and start discussions in October.”

“That's our plan so far. We don't know about China's timetable,” Yiin said.

CIER used two financial models to analyze the impact of an ECFA: the Global Trade Analysis Project (GTAP) adopted by most WTO countries prior to signing any free trade agreement, and a Taiwan General Equilibrium Model, which is an offshoot of GTAP, but tailored for the local economy.

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