A New Landscape in the WTO: Economic Integration Among China, Taiwan, Hong Kong, and Macao

Abstract

At the World Trade Organisation (the WTO) Ministerial Conference held in Doha in 2001, two events were under the spotlight: the launch of Doha Round of negotiation and the People’s Republic of China’s accession. In addition to these two events, a less-noticed event was that, in parallel to China’s successful bid for the WTO membership, Taiwan, acting as a “separate customs territory possessing full autonomy in the conduct of its external commercial relations and of other matters provided for” in the WTO Agreement under the title of “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu” instead of its official title of “Republic of China”, joined the WTO 1 day after China. The WTO has thus become one of the very few international organizations where both China and Taiwan enjoy full membership. The story does not end here. Prior to the accession to the WTO of China and Taiwan, Hong Kong and Macau had long participated in the General Agreement on Tariffs and Trade (the GATT) under the sponsorship of the United Kingdom and Portugal. Being Contracting Parties to the GATT, Hong Kong and Macau had thus become two of the founding members of the WTO organization came into being in 1994. With China resuming its sovereignty over Hong Kong and Macau in 1997 and 1999 respectively, they began to participate in the WTO using the official title of “Hong Kong, China” and “Macau, China”.

Counting Taiwan’s official title, Republic of China, altogether, the situation then turns out to be that there are four Chinas in the WTO, which presents a unique legal landscape and has much to explore. This contribution thus aims to examine economic integration among these four WTO members that may be characterized as “hub and spark” in nature: China being the hub and the other three members the sparks. Since (in fact, even earlier before) their return back to China, Hong Kong and Macau have heavily relied on Chinese economy. It is also generally shared that aid from China was one of the important weapons to shield Hong Kong to go through the Asian financial crisis bursting off in 1997, immediately after China’s resumption of its sovereignty over Hong Kong. One of the major instruments to boost the economies of Hong Kong and Macau is the Closer Economic Partnership Arrangements [hereinafter CEPAs] signed between China and Hong Kong and Macau on 29 September and 17 October 2003 respectively.

The speed of economic integration varies depending on the political climate. It is especially so in relations to China and Taiwan. During 2000 to 2008 when the Democratic Progress Party which is in favor of dependence, was the ruling party in Taiwan, the political interaction between China and Taiwan remained lukewarm and economic integration stagnant. Until the entry into force of direct-transportation agreements on 15 December 2008, direct transportation between China and Taiwan had been prohibited. Goods shipping and passengers traveling between China and Taiwan had to transit via a third country or area, normally Hong Kong and Macau. However, since 20 May 2008, when the Ma administration that is more sympathetic toward China came into power, the speed of economic integration between China and Taiwan has sharply increased. Among those measures adopted by the Ma administration, the landmark Economic Cooperation Frame-work Agreement [hereinafter the ECFA] between China and Taiwan signed on 29 June 2010 attracts the most attention.

In observing the economic integration among these four WTO members, there are some important historical points to highlight: the accession to the WTO of China and Taiwan at the Doha Ministerial Conference; the direct transportation between China and Taiwan; and the ink of the CEPAs and ECFA. This contribution is thus organized in chronological order while examining the economic integration between China and Hong Kong and Macau first and then that between China and Taiwan. Following this introductory section, this contribution, in Section “Economic Integration Between China and Hong Kong and Macau”, will examine economic integration between China and Hong Kong and Macau with a brief note on trade policy and practice of Hong Kong and Macau at the first place and particular emphasis on the CEPAs. Section “Economic Integration Between China and Hong Kong and Macau” then explores the economic integration between China and Taiwan under the Ma administration with an introductory background on the cross-Taiwan strait trade relations and special focuses on direct-transportation agreements and the ECFA. Section “Dispute Settlement Mechanisms in CEPAs and ECFA” then compares the dispute settlement mechanisms contained in the CEPAs and ECFA. This contribution then concludes with a short summary of its main findings and major arguments.

Keywords: WTO, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Taiwan, Economic Integration, China ,Hong Kong, Macau, ECFA, CEPA