Mainland Affairs Council

President Ma has emphasized more than once that the highest guiding
principle of the government's Mainland policy is "putting Taiwan first for the benefit
of the people." Many of our friends in the media and the general public have heard
me explain this position: "putting Taiwan first" means adhering to Taiwan's identity
in the process of cross-strait exchanges and negotiations. "For the benefit of the
people" means that the fruits of institutionalized cross-strait negotiations shall
be shared jointly by all the people instead of certain business groups. "Putting
Taiwan first for the benefit of the people" is not just political rhetoric. It is
a policy commitment, one in which the government will act on its words. In the specific
content of the Economic Cooperation Framework Agreement (ECFA), including the text
itself and the early harvest list, it is apparent that the government's negotiation
team has worked hard to protect Taiwan's economic identity and has been attentive
in securing the interests of farmers, workers, small and medium enterprises as well
as major industries.

Putting Taiwan First: Agreement Text Protects Taiwan's Economic
Identity

1. Inclusion of the "consideration of the economic conditions
of both sides" in the text is a safety valve installed by the government to safeguard
Taiwan's interests

The specific meaning of "consideration of the economic conditions
of both sides" is that the government will carefully attend to the fact that broad
differences of economic scale exist between the two sides and this situation must
be prudently considered when both sides implement the ECFA. Taiwan will not fully
ease the current restrictions on more than 2,000 agricultural and industrial import
items from mainland China, ensuring that sensitive local industries in traditional
or relatively weak sectors are not affected after the signing of the ECFA. At the
same time, the government will not further open Taiwan up to Mainland agricultural
imports. The government also will not further reduce tariffs on the 1,415 Mainland
agricultural import items already admitted.

Therefore, the ECFA cannot and will never lead to the so-called
"one China market" that the opposition parties have raised doubts about through
repeated distortions. The situation in which "over 90% of Mainland goods can be
imported tariff-free within 10 years after the signing of the ECFA," as the opposition
parties fear, also absolutely will not happen.

2. Termination clause enables unilateral termination of the
Agreement without the consent of the other side

The termination clause that opposition parties are so concerned
about has always been part of the government's plan. During a Legislative Yuan interpellation,
I also emphasized several times that it is normal for termination clauses to be
included in the economic agreements signed by other countries.

Under the "termination" clause, any one party to the Agreement
will be able to notify the other party in writing to initiate consultations between
the two sides within a certain period of time. If the consultations fail to produce
a consensus, the Agreement can be terminated within a specified period after one
party notifies the other. In short, after the ECFA is signed, any one side can terminate
the Agreement if deemed necessary, without requiring the consent of the other side.

3. In accordance with the basic principles of the WTO, the
substantive content of the ECFA is an economic agreement signed between two WTO
full members as equals

The ECFA is a cross-strait agreement rooted in the basic principles
of the World Trade Organization (WTO), negotiated and signed considering the unique
cross-strait relationship.

Many friends are concerned that signing the ECFA will undermine
Taiwan's identity. We take this opportunity of announcing the main content of the
Agreement to report to you all with the utmost confidence: There is no need to worry.
The ECFA will be reciprocally negotiated under the framework of the Straits Exchange
Foundation (SEF) and the Association for Relations Across the Taiwan Straits (ARATS).
Moreover, the basic spirit of the entire Agreement text accords with the basic principles
of the WTO; in terms of its substantive content, the Agreement is an economic agreement
signed by two WTO members.

1) The preamble of the Agreement begins with: "In accordance
with the basic principles of the World Trade Organization… " This means that the
two sides are both WTO members and that the rights of both sides as WTO Full Members
will not be eliminated or limited due to the signing of the ECFA.

2) The schedule of commitment in the early harvest list on trade
in services is presented mainly in a format commonly used among WTO members.

3) The Agreement maintains the right to utilize WTO global safeguard
mechanisms. Terms on the trade in goods exemplify WTO trade relief measures, including
the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994, the Agreement on Subsidies and Countervailing Measures, the Agreement
on Safeguards, and other measures used among WTO members. The Agreement also will
stipulate safeguard measures for both sides.

In other words, the ECFA mandates safeguard measures for both
sides and maintains Taiwan's right to apply global safeguard measures, embodying
in spirit the fact that both sides are WTO Full Members. This differs considerably
from the Closer Economic Partnership Arrangement (CEPA) signed between Hong Kong
and mainland China on the "one country, two systems" basis. The CEPA eliminates
the application of WTO safeguard measures and treats trade issues between the two
sides as internal affairs of one country; in comparison, Taiwan and mainland China
have an equal relationship under the ECFA.

4) A special provision clearly states full protection of Taiwan's
rights as a WTO member. In Chapter V of the Agreement, there is a special provision
clearly stating that no stipulations of the ECFA can impede any one side from adopting
measures consistent with WTO norms. This means that we can continue to adopt any
WTO rules favorable to Taiwan and that the signing of the ECFA will not prevent
the application of WTO provisions.

4. No one China market and no timetable for a one China market

As for the trade in goods, Taiwan worked hard to secure consent
from the Mainland side that, in the future, after consultations on the trade in
goods begin, there will be no deadline set for completing the consultations. In
other words, after signing the Agreement, the government can prudently check on
it and move forward in a gradual, orderly manner. Consultations with the other side
on opening up the trade in goods and reducing tariffs can be carried out in a way
allowing consolidation at every step and in accordance with the conditions of our
industries and market needs. We can control the initiative. There is no timetable
and there will be no forming of a one China market.

Working for the benefit of the people and the interests of
farmers, workers, and SMEs

1. The early harvest list is entirely irrelevant with the movement
of natural persons. Taiwan absolutely will adhere to the position of not opening
up to Mainland workers, and it will not allow certified Mainland professionals to
do business in Taiwan. The employment opportunities of blue-collar and white-collar
workers in Taiwan will be protected.

2. Due to Taiwan's vigorous efforts as well as the goodwill of
the other side, all agriculture and fishery products have been excluded from the
Mainland's early harvest list, meaning that Taiwan will not admit any new types
of agricultural imports from the Mainland. At the same time, Taiwan will not further
reduce tariffs on the 1,415 agricultural import items previously admitted. Taiwan's
agricultural industry will not be further affected by the signing of the ECFA. Furthermore,
the Taiwan negotiation team has been paying equal attention to offense and defense,
winning inclusion of 18 Taiwan agriculture and fishery products in the Taiwan early
harvest list. In the future, these items can be exported to the Mainland tariff-free,
benefiting farmers in central and southern Taiwan.

3. Taiwan SMEs will benefit from the early harvest list.

Most of the 539 early harvest list items winning tariff concessions
from the Mainland side were specially sought by Taiwan in consideration of SME interests.
According to the statistics compiled by the Ministry of Economic Affairs (MOEA),
at least 23,000 SMEs will enjoy direct profits. These businesses have a combined
Mainland export value of US$2.77 billion per year and employ at least 426,000 people.
(See chart below)

Initial Estimates of Taiwan SMEs Directly Benefiting from
the ECFA Early Harvest List for Trade in Goods

Notes:

1. According to the statistics compiled by the Small and Medium Enterprise Administration,
MOEA, in 2009, there were 1,232,025 SMEs in Taiwan and they employed a total of
7,793,000 people. Of this total, there were 141,146 SMEs in the agricultural, fishing
and manufacturing industries, with a total employment of 2,648,000 people.

2. Figures in the chart represent the lowest values based on initial estimates.

4. Based on trade ratio principles, the total value of Taiwan
goods granted tariff concessions by the Mainland side is 4.8-times greater than
that of Mainland goods enjoying tariff concessions from Taiwan.

Generally speaking, Taiwan is benefiting more than the Mainland.
Taiwan's early harvest list is of considerable scale in terms of item number, amount,
and ratio of goods covered to total trade with the other side. Moreover, it goes
much further than the Mainland's early harvest list. The 539 Taiwan goods covered
under the early harvest list represent double the amount of the 267 Mainland items
included. The Taiwan items have a total export amount of about US$14 billion, or
4.8-times more than trade covered by the Mainland's early harvest list. The figure
of US$14 billion accounts for about 16.1% of Taiwan's total exports to the Mainland,
while the US$3 billion figure represents 10.8% of the Mainland's exports to Taiwan.
The ratio and scope of Taiwan items included in the early harvest list under the
ECFA is therefore far higher than the Mainland’s ratio of 2.12% under its early
harvest list signed with the ASEAN Plus One countries. (See chart below)

Comparison of Early Harvest List Goods Under the Cross-strait
ECFA

Conclusion

The entire Economic Cooperation Framework Agreement makes evident
that the government's negotiation team has upheld Taiwan's economic identity. Faced
up to the massive scale of the Mainland economy, we have worked hard to include
the safety valve to "safeguard Taiwan and protect the people" in the negotiation
process. In facing up to the fact that mainland China is the world's factory as
well as a world market, the signing of the ECFA is a proactive initiative to participate
in the international trend of regional economic integration and to refuse the isolation
from the world. Through this proactive participation, we have changed our external
environment and advanced into the world market. At the same time, "in opening the
door, we also are keeping an eye on the house." The future of Taiwan's economic
development absolutely lies in our hands.

2010