WTO Accession, "Greater China" Free Trade Area and Economic Integration across the Taiwan Strait

This paper evaluates the impact of China's WTO accession on trade and economic relation across the Taiwan Strait and its implications for rest of the world by a recursive dynamic, 17-region, 25- sector computable general equilibrium (CGE) model with import embodied technology transfer, trade policy induced total factor productivity (TFP) growth, and explicit treatment of TRQ of agricultural products. The simulation results shown that China will gains the most from its WTO entry. It will emerge as one of the world largest manufacturing center during its integration into the world economy. Taiwan will become an upstream supplier for China's massive manufacturing productions. Taiwan will gain more economically by further integrate its economy with China via greater China FTA or other means after its WTO entry. The economic dependence of Taiwan on China will further increase and enable China to replace the US as the number one of its export market. A greater China FTA will further reduce the cost of vertical integration among manufacturing industries across the Taiwan Strait and enhance the efficiency of production factor allocation within the three Chinese economies, thus enable them become a stronger competitor of manufactured goods, especially for labor-intensive products, electronics and low-end capital-intensive products in the world market.