As the most significant agreement since Taiwan and mainland China (China) split after the Chinese Civil War in 1949, the Cross-Strait Economic Cooperation Framework Agreement (ECFA), a preferential trade agreement that aims to reduce tariffs and commercial barriers between the two sides, was signed on June 29, 2010 in Chongqing, a southwestern mainland city. Since the relations across the Taiwan Strait started to improve two years ago, Taiwan and China have signed 12 separate agreements before the ECFA, including pacts on direct flights, marine links, financial cooperation, industrial standards, food safety and fishery cooperation.

At the same time with the signing of the ECFA, delegations of the two sides also reached an agreement on intellectual property rights (IPR) protection, highlighting effective resolutions and new approaches to the pressing IP problems between the two sides, i.e., trademark squat, fake patent and piracy on the Internet as well as the reciprocal protection of plant varieties.

In Taiwan, the Congress (Legislative Yuan) ratified the ECFA and IPR protection agreement on August 17, certainly leading the two sides to put subsequent measures in place a little faster than expected originally. Shortly after the endorsement by the legislature, the ECFA and IPR protection agreement have taken effect in both Taiwan and China since September 12, 2010. Both of the governments believe that the agreements, in particular the ECFA, will boost more economic and trade development between Taiwan and China, now approximately US$110 billion a year for bilateral cross-strait trade. The two sides are scheduled to continue negotiating deals on investment and other goods and services exchange.

The ECFA focuses on cross-strait trade in goods and services, investment, economic cooperation, early harvest, dispute settlement, regulations under which the pact can take effect or be abolished, and follow-up negotiations. The IPR protection agreement lays out goals to promote inspection cooperation, industrial cooperation and certification services, collaboration and protection of patent and trademark priority rights and plant variety rights, as well as a joint mechanism to monitor cross-border criminal infringement.

Looking into further details of the ECFA, the tariffs will be cut or abolished in three stages over a period of two years. For certain industries, the ECFA including the relevant items on the so-called “Early Harvest” list has rendered those industries more favorable treatment in the cross-strait markets, such as significantly lowered tariffs at the first stage. The “Early Harvest” list of tariff concessions covers 539 Taiwan-made products and 267 China-made goods, the advantage to Taiwan amounting to US$13.8 billion a year while US$2.86 billion to China. Taiwan agreed to offer wider access in seven areas, including banking and movie production, while China promised to open markets in 11 service sectors, such as banking, securities, insurance, hospitals and accounting.

The Chung-Hua Institution for Economic Research (CIER), a Taiwan-based non-profit organization, suggested in 2009, that the implementation of the ECFA would not only open the China market but also prevent Taiwan from being isolated in economy, in particular after the establishment of the Association of South East Asian Nations (ASEAN) and China’s Free Trade Agreement. In the eyes of some academic researchers and high-ranking officials in Taiwan, the ECFA-boosted Taiwan industries will rival in competitiveness if not surpass the ASEAN enterprises in the China market in the years to come.

The economic consequences of signing the ECFA came up even earlier than when the ECFA took effect. The International Monetary Fund (IMF) revised upward its forecast for Taiwan's 2010 GDP growth rate to 7.7 percent from 6.5 percent projected in April 2010, in an IMF report released on July 8, 2010. Dr. Christina Liu, Chairwoman of the Cabinet-level Council for Economic Planning and Development (CEPD) in Taiwan, remarked that the sharp rise in the IMF’s projection for Taiwan's 2010 GDP expansion mainly resulted from an anticipated substantial increase in private investment in Taiwan to be fueled by the ECFA. “Both inbound investments from foreign enterprises or domestic investments by private sectors are poised to surge significantly after signing of the ECFA pact,” Dr. Liu said in a press interview.

Beyond the IMF’s revision, through a series of comprehensive studies sponsored by the government, the Administration in Taiwan has enumerated positive factors of the ECFA to the public, inter alia, those attracting overseas investments in Taiwan and the future impacts (see Table*), in a report from the Ministry of the Economic Affairs in Taiwan released early this year.

The ECFA marks a milestone in cross-strait trade relations, expected to help link Taiwan to the Asia-Pacific and the rest of the global economy. The IPR protection agreement reflects the universal value attached to the IPR safeguarding, in an attempt to foster innovation and R&D in the corporate sector in Taiwan and China. In the ECFA era, an open and free economic environment will be forthcoming with the aid of the ECFA effects, manifesting the necessity and value to include Taiwan in the current global economic strategies for international transaction-oriented enterprises. Seeking IPR protection in Taiwan, such as patent, trademark and copyright, is even more valuable from the perspective of the integrated market of the Greater China area, worth consideration in depth when a worldwide IPR portfolio is being devised.

Table*