Taiwan, China Sign Historic Trade Pact

Taiwan and China set aside decades of hostilities Tuesday and agreed to drastically expand flights and allow shipping links across the Taiwan Strait - a potential hotspot that has long threatened to become a war zone.

The historic deal highlighted the dramatic improvement in relations in the past half year between the rivals that split amid a bloody civil war in 1949. They agreed Tuesday to hold high-level talks every six months and focus on building closer financial ties in the next round of meetings.

After signing the pact, Chinese envoy Chen Yunlin smiled and shook hands with his Taiwanese counterpart, Chiang Pin-kung. They sipped champagne and held up two lines of framed calligraphy that said, "Peaceful negotiation creates a win-win situation."

For nearly six decades, Taiwan banned direct flights and shipping with China, fearing China might attack with bombers and warships disguised as civilian vessels.

But the rivals began relaxing restrictions on flights in July when their envoys met in Beijing. They signed a confidence-building deal then that allowed 36 weekly flights from five mainland cities.

Tuesday's agreement - which becomes effective in 40 days - more than tripled the number of weekly flights to 108. It also allows planes to take off from a total of 21 cities. Under the deal, cargo planes can also begin flying the route, with 60 allowed each month.

In the past, cargo ships had to sail to the Japanese island of Okinawa before going to the other side. Tuesday's agreement allows them to sail directly across the 100-mile-wide (160-kilometer-wide) Taiwan Strait.

"The direct shipping will finally help Taiwan become a transport hub in Asia and better explore the mainland market," Chiang told reporters after the meeting. "With each cruise, they won't have to go to Okinawa, and they save about 16 hours and cut costs by between 15 and 30 percent."

A Chinese official, Zheng Lizhong, said the air links will save the airlines about 2 billion New Taiwan dollars (US$60 million) a year. He said the direct shipping links will trim their costs by NT$1 billion (US$30 million) annually.

Chiang said the two sides would seek an agreement that allows banks to set up branches on each side. They would also set up agencies that would help resolve trade disputes, he said.

The agreement also includes measures for greater cooperation on food safety. The deal allows faster recalls of unsafe products and better exchange of information.

The drastic warming in relations began after Taiwanese President Ma Ying-jeou was elected in March, pledging to ease military tensions and forge closer economic ties with China.

Ma's predecessor, Chen Shui-bian, was vilified and shunned by Beijing because he leaned toward independence. His eight years in office were also marred by policy blunders and corruption. China has repeatedly warned that Taiwan has two choices: eventual unification or a devastating attack.

Ma's Nationalist Party has long supported eventual unification with China - a policy that has helped the new president win Beijing's trust. But Ma has promised not to pursue unification talks or move the island toward independence.