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Taiwan, China to sign landmark trade deal

world Updated: Jun 24, 2010 11:03 IST

Taiwan and China will sign a landmark trade deal on June 29, Taiwan officials said on Thursday, cutting import tariffs on hundreds of items and giving a major boost to around $100 billion in annual two-way trade.

The economic cooperation framework agreement (ECFA) would see tariffs cut on some 540 Taiwanese products bound for China and about 270 Chinese products exported to Taiwan, said sources and media reports, with full details due later on Thursday.

The deal, the most significant between the former political foes in 60 years, will be signed in the Chinese city of Chongqing, once briefly the capital of China under the rule of the Nationalists, now Taiwan's ruling party, before they lost the civil war to Mao Zedong's Communists in 1949.

Markets will welcome the deal as the strongest ever tie-up between export-reliant Taiwan and economic powerhouse China, Taiwan's biggest trade partner and top foreign investor. The tariff cuts will cover about 15 percent of Taiwan's exports to China.

Taiwan's petrochemical, machinery, auto parts and textile products are set to be among the first to benefit, though any tariff reductions are likely to be phased in, meaning the major benefits will be longer term.

A private research body in Taiwan has previously estimated that ECFA could create some 260,000 jobs in Taiwan and lift GDP by around 1.7 percentage points a year.

Taiwan's government has been heavily pushing the deal, fearing the country's $390 billion export-led economy will lose out to rivals in the booming Chinese market.

The ruling party also faces tough local elections at the end of the year that will give an indication of how presidential elections in 2012 will go.

But opponents fear the deal will unleash a flood of cheaper Chinese goods, costing jobs in Taiwan, and will be the first step to a political takeover by China.

The opposition, which has called for any trade deal to be done under the auspices of the World Trade Organization, plans to hold a protest rally against ECFA in Taipei on Saturday.