Empirical Studies Of The Effect Of The Implementation Of ECFA On The Cross-strait Trade Flows

After entering 21 st century, a number of economic indicators of Taiwan decline, the economic situation is grim. So the Taiwan region must take the most advantage of the opportunity of cooperation with mainland China, explore the market and use the resource of mainland China maximally and strengthen economic and trade cooperation with China, so as to promote Taiwan’s own industrial structure upgrade and start a new round of economic growth in Taiwan. On June 29, 2010, the government of mainland China and Taiwan finally signed an preferential trade agreement know n as“Economic Cooperation Framework Agreement”(ECFA) that aims to reduce tariffs and commercial barriers between the two sides. The “Early Harvest Program" of ECFA came into effect on January 1, 2011. ECFA is a framework agreement w hich is involved in trade and economic cooperation, investment, and a series of content. ECFA also is a long-term cooperation between mainland China and Taiwan region finally signed for a long-term economic and trade policies, so the sides of the Taiwan straits are of the high political and economic aspects of expectations. So the signing and implementa tion of the ECFA for studies of the impact between mainland China and Taiwan become very necessary.This article start with the implement of ECFA, mainly study the implementation for nearly three years early harvest plan of the protocol which base on statistical and econometric analysis, and then provide a series of policy suggestions on the deepening economic and trade cooperation between mainland China and Taiwan region, w hich has great research significance. The studying data is from July 2004 to June 2014 and use the extended gravity model to examine several important economic indicators of mainland China and Taiwan region, including two key industries after the implementation of the agreement: the test of the specific effects of mechanical and electronic industry and agricultural products trade. Results show that:(1) agricultural imports from the mainland and Taiwan agricultural exports from the mainland largely affected by the ECFA’s early implementation;(2) mechanical and electrical products exports to the mainland and Taiwan’s import of mechanical and electronic products from mainland China are also largely affected by promoting effect on the implementation of ECFA early;(3) although it seems ECFA implementation for Taiwan to mainland export promoting effect is not very big, but as time goes on, under the framework of the ECFA and the deepening of cross-strait economic and trade cooperation, the nature of the agreement and function will be increasingly apparent. Because the moment, only goods trade in listing is implementing, a lot of product profitability has not appeared;(4) the implementation time of ECFA is not long, so the agreement on Taiwan’s imports from the mainland coefficient is not significant, this can also be illustrate from effect of trade hysteresis. We summarized the effect of the sign of the ECFA to trade flows across the Taiwan straits as: ascension is unclear, the divisions of the total benefit effect is remarkable. Finally, we put forward the policy suggestions: continue to strengthen policy coordination and cooperation between industries on both sides of the relationship; gradually establish a series of evaluation mechanism of the development of cross-strait trade and speed up the implementation of ECFA mechanism.