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Explanation on the Government's Promotion of the Cross-Strait Investment Protection Agreement

  • Date:2011-10-12

1. Benefits of signing the Cross-Strait Investment Protection Agreement

The greatest benefit of signing the Cross-Strait Investment Protection Agreement (hereafter the Agreement) is that it provides institutionalized protections for the rights and interests of Taiwan businesses’ investment as well as a basis for assistance between the competent authorities of the two sides in handling related affairs. Due to the extremely close nature of cross-strait economic and trade relations, investment by Taiwan businesses in the Mainland spurs demand for trade with Taiwan. In practice, the development of Taiwan businesses in the Mainland has an impact on Taiwan’s domestic industries and employment in related sectors; therefore, by protecting the rights and interests of Taiwan businesses in mainland China, the Agreement in fact indirectly safeguards the interests of Taiwan industries and personnel linked to Taiwan businesses and Taiwanese-funded enterprises in the Mainland. The government is not promoting this Agreement merely out of concern for Taiwan businesses, but rather from a comprehensive perspective.

2. Planning and negotiation principles of the Investment Protection Agreement

In formulating the content of the Cross-Strait Investment Protection Agreement, the government has referred to the framework of general investment protection agreements. It has also considered cross-strait characteristics, deep concerns of investors on both sides, and agreement enforcement. Cross-strait negotiations have been promoted under the principles of "reciprocity, mutual benefit, and pragmatism," "putting Taiwan first for the benefit of the people," and "better to sign a good agreement than to sign an early one." In the process of negotiations, the Ministry of Economic Affairs (MOEA) and the Mainland Affairs Council (MAC) have approached cautiously while continually seeking input from Taiwan businesses, major domestic industrial and commercial organizations, legislators, and the media circle.

3. Investment protection negotiations are already working for the rights and interests of Taiwan businesses

The two sides have held several talks on operational issues related to the Agreement, and consensus has been reached on most of the content. Due to the special circumstances of cross-strait relations, the government is deeply aware that the Agreement must pragmatically consider the demands of Taiwan businesses in order to provide effective protections. Consequently, in the course of cross-strait talks, the government has striven to secure protections beyond what the Mainland unilaterally provides for Taiwan businesses now. For example:

(1) Broadening the definition of investors: General investment agreements are limited in the scope of application to investors of either of the two parties to the agreement and who have direct investments on the other side. Considering that the great majority of Taiwan businesses invest in the Mainland through an intermediary site, negotiations have produced an initial consensus to include such investors within the definition of investors under the Agreement so as to protect the rights and interests of these Taiwan businesses.

(2) Notification within 24 hours in cases involving limitations of personal freedom: General investment agreements do not cover personal freedom and safety protection. Since these are the issues of great concern to Taiwan businesspeople, the two sides have agreed in principle after several rounds of negotiations to require notification within 24 hours in cases involving limitations of personal freedom, which will be made promptly between the competent operational units of the two sides. The specific arrangements of related provisions still need further discussion and confirmation by the two sides.

(3) Commercial dispute resolution stipulations included in the Agreement: The government has secured inclusion of government-to-government, people-to-government, and people-to-people dispute resolution methods under the Agreement. According to the 2010 statistical data provided by the Straits Exchange Foundation (SEF), 65 percent of the economic and trade disputes involving Taiwan businesses in the Mainland were P-P type. Therefore, after our government’s communication with the Mainland, both sides agreed to include P-P dispute resolution in the mechanism, clearly specifying that investors on both sides may resolve commercial disputes through arbitration. This is a major progress in the negotiations and one that will provide practical protections for Taiwan businesses. However, the detailed stipulations still need to be further confirmed by the two sides.

4. Negotiation progress and follow-up work

On October 9 this year (2011), the competent operational units of the two sides carried out talks on operational issues again and made additional progress. However, the two sides have also recognized the need for communication and coordination, both internally on each side as well as mutually between the two sides, in order to fully complete the Agreement and finalize related procedures. After subsequent communications between the SEF and the Association for Relations Across the Taiwan Straits (ARATS), the two sides announced that the Seventh Chiang-Chen Talks were to be held from October 19 to 21. It was also decided that there would be insufficient time to sign the Investment Protection Agreement at this round of the Chiang-Chen Talks. In order to inform various sectors on developments of the Agreement, the two sides would publicly announce related phased results at the Seventh Talks, in reference to past practice. The two sides are still working on the concrete content of the Agreement and will actively negotiate to facilitate the soonest possible signing of the Agreement.

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