Rising ¡®Chiwan¡¯ Threat

China and Taiwan signed the Economic Cooperation Framework Agreement (ECFA) recently. The accord, seen as the milestone event in cross-strait relations, is to bring Taiwan closer to mainland China with significant implications both in political and economic terms.

Beijing views greater economic integration with Taiwan as steps toward eventual unification. Taiwanese opponents argue that it makes the island too economically dependent on Beijing.

For other outsiders, the economic integration between the two sides paved the way for the creation of the so called ¡°Chiwan (China + Taiwan)¡± economic zone, which is rising as a concern to neighboring countries including Korea.

Under the trade pact, tariffs for 108 Taiwanese products will be immediately lifted upon ratification, while tariffs for another 431 items on the list will be phased out within two years. This will benefit Taiwanese companies, particularly in the information technology sector, giving an advantage over their Korean competitors in exporting to Chinese market.

¡±Korean businesses will be affected by the ECFA. It is certain that small and medium sized businesses will be more affected than the large enterprises,¡± said an official of Korea International Trade Association (KITA, Çѱ¹¹«¿ªÇùȸ).

¡±If the ECFA takes effect, petrochemical products, textiles, electronics, automobiles and machinery sectors will affect the Korean companies¡¯ price competitiveness,¡± says Korea Institute for International Economic Policy (KIEP , ´ë¿Ü°æÁ¦Á¤Ã¥¿¬±¸¿ø).

Economic officials point out that early conclusion of a free trade agreement between Korea and China is necessary as a countervailing measure. For businesses, they need to aggressively expand in the Chinese domestic market.

Furthermore, negotiating free trade agreement with Japan and expanding trade with other Asian countries are also needed to cope with growing Taiwanese exports increase to China, they add.