The Research Of Agricultural Integration Between Taiwan And Chinese Mainland

The agricultural cooperation between Taiwan and Chinese Mainland is an important component in the economic and trade development of both sides across the Taiwan Strait (herein after called "the two sides") and it has been playing a vital role in the relationship between the two sides. During past 30 years, the agricultural cooperation of the two sides has achieved prominent outcomes and it will be deepened and broadened with the increasingly speedy pace of the regional economic integration,the increasingly close relationship in economic sector between two sides, and the full implementation of Economic Cooperation Framework Agreement (ECFA). What are the prospects of the agricultural cooperation of the two sides, an important part of regional agricultural cooperation?By far, there are tremendous literatures on the agricultural cooperation of the two sides and the agricultural cooperation between Fujian and Taiwan, but studies on the agricultural cooperation of the two sides in the context of ECFA are limited,especially in the field agricultural integration. The existing literatures didn't give a clear definition on agricultural integration of the two sides. There are studies on the economic integration of the two sides but they are mostly based on foreign theories and experiences. The agricultural integration between the two sides is the integration between two separate tariff zones within one nation. Considering the complex and unique features of the relationship of the two sides, it can not be analyzed by the theories of preferential tariff areas, free trade areas, customs union, common market,and economic alliances. The experiences of EU Model or East Europe Model are inadequate for the explanation. The paper originally put forward the idea and definition of the agricultural integration of the two sides as follows: in the context of increasingly close economic and trade relations and in-depth agricultural cooperation between the two sides, agricultural integration of the two sides is the process of the integration of agricultural product market, the integration of agricultural production factors, and the integration of agricultural management and administration by strengthening policy coordination, eliminating institutional obstacles as per the requirements of market economy. The objectives of this integration are to achieve the accumulation effects,coordination effects,and complementary effects of agricultural economy, and to increase the welfare of farmers of the two sides. The goal is to reduce the transaction costs, and to encourage the free flow and allocation optimization of agricultural products and factors.During the past 30 years, the agricultural cooperation of the two sides follows the progressive path of separation, communication,initial cooperation,in-depth cooperation, harmonization and integration, showing an evident trend of agricultural integration. However, there are some issues which cannot be neglected from the perspectives of functional integration and institutional integration. Though agricultural trade between the two sides is on the rapid growth, two-way product flow is not smooth and trade value is relatively small. Agricultural trade is hampered and trade cost is on the high side. Although the agricultural cooperation shows the upgrading trend,two-way factor flow is hindered, agricultural technology spillover is low, and win-win situation has not been reached. There are obstacles on two-way free flow of factors and the resource allocation is not optimized. There is a large gap between the two sides from the perspectives of agricultural management and administration, and of farmers' cooperative organizations, hindering the improvement of agricultural integration. How to eliminating trade barriers and lower agricultural product trade costs, to eliminate the obstacles of factor flow to improve its beneficial effects, and to narrow the gap in management and administration to enhance the agricultural integration of the two sides become key issues to be addressed.Based on previous researches, this paper started its research from the fact of both sides and the concrete practices of the agricultural cooperation between Fujian and Taiwan by normative and empirical studies. It constructs the theoretical framework for agricultural integration, analyzes the foundation and development of the agricultural cooperation, empirically tests the integration, explores the key issues in agricultural product trade integration and factor integration, proposes the integration models and puts forward solutions so as provide decision-making suggestions for the enhancement of agricultural cooperation and economic and trade communication between the two sides.The research contents are as follows. In the first part, the author critically assessed the related researches and draws some enlightens. In the second part, the author defined the concept and connotation of agricultural integration between the two sides. Based on the practices of agricultural cooperation, the author explored the mechanism on agricultural cooperation by using theories of comparative advantages and factor endowments, the division of labor and competitive advantages, transaction costs and opportunity costs, and non game cooperation and game cooperation. The analytical framework of agricultural integration is constructed. In the third part, the author discussed the foundation and development of agricultural cooperation between the two sides, analyzed the major issues, and draws the basic rules of agricultural integration. In the fourth part, the author empirically analyzed the agricultural integration and tested the rules of this integration by exploring different models for integration improvement, i.e., transaction and logistic centers of agricultural products,Tianfu Group, and pioneer parks for Taiwan farmers. In the fifth part, the author analyzed the critical issues for agricultural product market integration between the two sides, focused on the integration level of the agricultural product markets, and the impacts of trade policies on agricultural product trade between the both sides.Furthermore, by taking the fruit trade as an example and using the gravity model, the author empirically analyzed the impact of the changing tariff rates on trade between the two sides. In the sixth part, the author adopted the bi-logarithm regression model,from the perspectives of the impacts of Taiwan agricultural FDI in Chinese Mainland on Taiwan agricultural development and the impacts of Taiwan agricultural FDI in Fujian on Fujian agricultural development, to analyze the impacts of factor movements on the agricultural development of the two sides respectively. The author studied the critical elements which have impact on production factor integration between the two sides. By using related data, the author analyzed the present status and obstacles of the flows on land, labor, capital, technology and management. In the seventh part, the author discussed the objectives and the trend of agricultural integration between the two sides. The author mentioned four principles to achieve the integration objectives and chose the basic integration models. In the eighth part, based on the above analysis, the author came up with the solutions to push the agricultural integration of the two sides as follows: the construction of agricultural coordination mechanism, the fostering of agricultural logistic industry, the enhancement of two-way factor movements, the improvement of cooperation outcomes, and the focus on the pioneering experiments between Fujian and Taiwan.The conclusions of this research are as follows:The agricultural integration between the two sides is an inexorable trend. The agricultural integration between the two sides follows the progressive path of separation, communication, initial cooperation, in-depth cooperation, harmonization and integration. At present, it is facing opportunities to deepen the cooperation between the two sides. These opportunities include: increasingly close economic and trade relations of the two sides, the signature and implementation of ECFA, and the huge economic development potentials in Chinese Mainland. The fundamentals and engine of cooperation of two sides are relying on the comparative advantages, i.e., the differentiation and complementarities in agricultural development stages, in agricultural structure, in agricultural trade, in agricultural production factors, in agricultural management and administration, and in agricultural production costs.Further development of the agricultural cooperation lies in the reasonably arranging the agricultural specialty and division and strengthening the competitiveness through cooperation. Even though there are political, economic, and administrative factors to restrict the cooperation, which increase the costs of cooperation, the barriers will phase out and a brand new era for cooperation will come with the development of economic globalization and regional economic integration, and with the deepening of the cooperation between two sides. The cooperation will reach its ultimate objectives,i.e., the agricultural integration in terms of agricultural product markets, agricultural factor markets, and the agricultural administration.In the process of further integration, agricultural trade, agricultural factor movements, and the specialty of labor in agriculture are integrated and demonstrated in some carriers or in some forms. All of the following models are effective models to propel the development of agricultural integration between two sides: the propelling model of logistics in the form of logistic centers for Taiwan agricultural products, the propelling model driven by economic entity demonstrated,the propelling model of development of industry clusters .The critical issues in agricultural trade are political issues, which increase the transaction costs of agricultural trade. Competition and complementarities co-exist for agricultural products of the two sides. The integration level in agricultural sector is still low, and the trade costs are relatively high. Trade policies, rather than tariff rates,significantly affect agricultural trade between the two sides. Direct transportation across the strait encourages agricultural trade, but transshipment via a third place to Chinese Mainland/Taiwan results in high transportation costs. Because both sides fall within the territory of one China, agricultural product circulation is related to the field of logistics and should not be imposed to tariff. On the basis of previous open policy to the selected Taiwan agricultural products, Chinese Mainland should fully open to and impose zero tariff on imported agricultural products originated from Taiwan to promote the agricultural trade and to increase the welfare of people between two sides.Taiwan agricultural FDI in Chinese Mainland will not harm but benefit the development of agriculture in Taiwan. Taiwan agricultural FDI in Chinese Mainland does not have significant impact on Taiwan agricultural GDP, agricultural product exports and imports, and agricultural output per labor. There is no direct causal relationship between Taiwan agricultural FDI in Chinese Mainland and the depression effects on export of Taiwan agricultural products and the Hollowing Issue of Taiwan agriculture, which may stem from the substitution effects and negative import effects.These issues have long been the concerns of Taiwan administration. On the contrary,Taiwan agricultural FDI in Chinese Mainland has broadened the room of agricultural development of Taiwan and the approaches of increasing farmer's income.Considering the political factors including "elective politics",Taiwan administration set the restrictions on Taiwan agricultural FDI in Chinese Mainland.The cooperation between the two sides in agriculture sector has achieved remarkable success; however, the demonstration and leading role of Taiwan agricultural enterprises have not given to its full play. Taiwan agricultural FDI in Fujian does not have significant impact on agricultural GDP, agricultural product exports, agricultural output per labor, and farmer's income per capita in Fujian. The reasons may be the small scale of investment, low technology content introduced,weak technology spillover, the tendency of selling products to the market of Chinese Mainland,and the narrow scope of demonstration effects. Re-positioning is needed for future cooperation focus and direction. Investment attraction should be replaced by investment screening and quality instead quantity is emphasized. Emphasis should be placed on extension, the actual results, and the win-win situation so that farmers can share the outcomes of cooperation.The product factors can not flow in and out freely between two sides so that the allocation of agricultural resources has not reached the optimal state. The major barriers are the limitations on Taiwan investment and technology export to Chinese Mainland and the restriction on the agricultural investment from Chinese Mainland to Taiwan set by Taiwan administration. At the same time, Taiwan agricultural FDI in Chinese Mainland still confronted the barriers in factor movements, which include the increasing costs of operation, lacking of financial support, difficulty in marketing products, and difficultly in renting lands.The models and characteristics are different at different agricultural cooperation stages. Policy should be oriented to optimizing resource allocation, mutual benefits,and win-win situation so that diversity in cooperation models is reached through effective management and service.