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China-Taiwan trade deal: Buyer's remorse?

Analysis: A week after historic pact, many Taiwanese worry that they did the wrong thing.

Taiwanese man in front of stock exchange
A man walks past a wall of stock monitoring panels at a securities trading house in Taipei on June 30, 2010. Taiwan's weighted index fell 94.2 points, or 1.27 percent, despite the signing of a sweeping trade deal with China. (Patrick Lin/AFP/Getty Images)

TAIPEI, Taiwan — Is it a vitamin, or a poison pill?

A week after China and Taiwan signed a landmark trade deal binding their economies closer, Taiwanese can't decide if they've been thrown an economic life-line or, as one paper put it, signed a political "suicide note." And that's the experts.

The two sides inked the Economic Cooperation Framework agreement (ECFA), on June 29 at a ceremony in Chongqing, China. The deal lowers tariffs on a range of goods. It also provides better market access for services, including banking.

All fine and good. Except this is no run-of-the-mill trade deal.

Strange to say, it was signed by two countries who don't recognize each other's existence. In fact, they're technically still in a state of hostilities. China covets self-ruled Taiwan and has some 1,300 missiles piled up across from the island as a reminder it shouldn't be naughty (i.e., make a formal, permanent break with the mainland.)

China's claim is long-standing. But instead of bellicose threats, Beijing has  begun using the honey of economic enticements to catch the fly. ECFA's terms heavily favor Taiwan, with tariff reductions on 539 Taiwanese exports to China versus just 267 Chinese exports to Taiwan. In other words, it's a big, fat dollop of honey.

Now, self-ruled Taiwan is wondering whether its fragile young democracy can long endure in the sweaty economic embrace of the hulking suitor next door.

Participants in a protest against the China-Taiwan trade deal in Taipei on June 26, 2010.
(Jonathan Adams/GlobalPost)

"I think we all know why China is making so many concessions," said Taiwanese economist Ma Kai at a forum. "China thinks ECFA is a very important step toward the unification of China. Everyone in Taiwan knows that."

"If that is the political price that Taiwan has to pay to get ECFA, this price is too high for many Taiwanese to accept."

Polls suggest a majority of Taiwanese backed the trade deal, at about a 62 percent to 37 percent ratio in May, according to survey data compiled by the Election Study Center's Yu Ching-hsin. But only 10 percent support unification with China.

Even some of the deal's supporters have voiced anxiety about how Taiwan can fend off Beijing's political advances. And they worry about over-dependence. Already, some 35 percent of Taiwan's exports go to China; after the deal some say that percentage could rise to 45 percent or even 50 percent.

"That ratio's too high — it's dangerous," said Hwang Jen-te, an economist at National Chengchi University. "It will endanger Taiwan's economic security; we have to consider this."