Implement the ECFA. Prospects of a bilateral investment agreement between Mainland China and Taiwan
| DOI | https://doi.org/10.1108/17544401211233525 |
| Pages | 127-156 |
| Published date | 15 June 2012 |
| Date | 15 June 2012 |
| Author | Jie Huang |
| Subject Matter | Economics |
Implement the ECFA
Prospects of a bilateral investment agreement
between Mainland China and Taiwan
Jie Huang
School of Law, Shanghai Institute of Foreign Trade, Shanghai, China
Abstract
Purpose – After Ma Yingjeou’s re-election in 2012, Mainland China and Taiwan will continue
cooperation in economic fields. The purpose of this paper is to undertake research on a bilateral
investment agreement (BIA) between Mainland China and Taiwan.
Design/methodology/approach – The paper uses statistics to demonstrate the growing
cross-strait investment and incompetent contemporary investment protection mechanisms in
Mainland China and Taiwan. The paper also compares laws in Mainland China and Taiwan and the
investment protection agreements concluded by Mainland and Taiwan with other countries,
respectively.
Findings – Based on the similarities of current laws and the investment protection agreements
concluded by Mainland China and Taiwan with other countries, respectively, Mainland China and
Taiwan can possibility agree upon major provisions of a BIA. Solutions are provided to both macro
and micro challenges against a successful BIA.
Research limitations/implications – It is hard to predict whether the BIA will promote political
integration between Mainland China and Taiwan in the near future.
Practical implications – A BIA can boost investors’ confidence.
Social implications – This paper may serve as a humble reference for both the Mainland China and
Taiwan government when negotiating the BIA.
Originality/value – Cross-strait investment is an important and prosperous field in practice, but has
not been fully explored in literature thus far. This Article aims to fill this gap.
Keywords Bilateral investment agreement, MainlandChina, Taiwan, China, Economics
Paper type Research paper
Between Mainland China and Taiwan[1], the political dispute over sovereignty is a
deeply contentious issue[2]. For years, much scholarship has discussed how to maintain
peace between the Taiwan Strait from the political and military aspects (Bush, 2005).
These efforts are valuable because the political controversies and economic instability
had shrouded the Strait for decades since 1949. The situation begun to change since
Mr Ma Ying-Jeou of the Kuomintang (hereinafter “KMT”) took the president’s office in
Taiwan in 2008. He engineered a dramatic turnaround in cross-strait relations[3]. By
accepting the 92 Consensus [Jiuer Gongshi], he significantly reduced tension with
Mainland China. He also moved the cross-strait economy from the non-governmental
informal level to the formally cooperative governmental level, and from sporadic to
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1754-4408.htm
This paper was made possible in part through the International Trade Law Project of Shanghai
Education Commission (J51204) and through Shanghai Pujiang Rencai Program (2011-2014).
The author can be reached at humilityus@gmail.com. All comments are highly appreciated.
This paper was made possible in part through the International Trade Law Project of
Shanghai Education Commission (J51204) and through Shanghai Pujiang Program (2011-2013).
Implement
the ECFA
127
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 5 No. 2, 2012
pp. 127-156
qEmerald Group Publishing Limited
1754-4408
DOI 10.1108/17544401211233525
regular and comprehensive. For example, Taiwan and Mainland China concluded the
Economic Cooperative Framework Agreement (hereinafter “ECFA”) on April 26, 2009.
The ECFA laid down a milestone for cross-strait bilateral cooperation in trade, service,
and investment.
In close race of 2012, Taiwan presidential election, Ma won 51.5 per cent of the final
tally, beating opposition candidate Tsai Ing-Wen of Taiwan Democratic Progressive
Party (hereinafter “DPP”), who had 45.6 per cent. Addressing supporters, Ma stated
that “You have told me, in the clearest voice possible, to continue on my current
path”[3]. Ma’s continuation of Mainland-friendly policy is also highly welcomed by
Washington and Beijing [4]. Therefore, implementing the ECFA will be important for
Ma, particularly to satisfy his “life-saving” [5] entrepreneur electorates wh o have heavy
investment in Mainland China ( Jacobs, 2012).
However, few efforts have been devoted to analysing how to implement the
ECFA[6]. Among little valuable scholarship, more attention has been paid to
cross-strait trade than investment. Nevertheless, concluding a Bilateral Investment
Agreement (hereinafter “BIA”) will be of top priority for Ma’s cross-strait agenda,
because at least three rounds of negotiation with Mainland China was held in Ma’s first
term but no laudable result. Moreover, some have complained of not enough progress
in attracting Chinese investment to Taiwan[3]. Cross-strait investment is an important
and prosperous field in practice, but has not been fully explored in literature thus far.
This article aims to fill this gap. It focuses on the practice and regulation of cross-strait
investment and discusses the prospects of an investment agreement under the ECFA.
This article can be divided into four parts. The first part uses statistics to
demonstrate the growing cross-strait investment and incompetent contemporary
investment protection mechanisms in Mainland China and Taiwan. It argues that a
(“BIA”) can best boost investors’ confidence. It surveys the three rounds of negotia tions
that have been conducted between Mainland China and Taiwan. It concludes that
macro and micro challenges should be resolved for a successful cross-strait BIA. The
second part concentrates on three macro challenges of the BIA: politic dispute s
between Mainland China and Taiwan, disagreements between KMT and DPP, and
different focuses of investment between Mainland China and Taiwan. It provides
solutions to each challenge. Micro challenges against a successful BIA com e from
differences in Mainland China and Taiwan laws. Therefore, the third part analyzes the
similarities and differences of laws in Mainland China and Taiwan. It also compares
the investment protection agreements concluded by Mainland China and Taiwan with
other countries, respectively. It argues that Mainland China and Taiwan can possibility
reach agreements upon major provisions of the BIA such as the definitions of investors
and investment, National Treatment, Most-Favored-Nation Treatment (hereinafter
“MFN Treatment”), security exception, investment protection, and dispute resolution.
Regarding the negotiation strategy, it suggests that, at the current stage, due to
political disputes and partisan in Taiwan, the BIA will be a framework only. The
ARATS-SEF meeting[7] or the Cross-Strait Economic Cooperation Committee will play
a significant role in developing the framework. New consensus can be added to the
framework as amendments. The forth part discusses the BIA and the cross-strait
political prospects. It argues that cautions should be put when applying
neofunctionalism, intergovernmentalism, and liberal intergovernmentalism to the
cross-strait situation. It is hard to predict whether the BIA will promote political
JCEFTS
5,2
128
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