Q+A-Provisions, consequences of China-Taiwan trade deal

TAIPEI Nov 13 (Reuters) - Top negotiators from Taiwan and China plan to hold initial talks next month on a free trade deal that would bring the two rivals closer while opening the often isolated island to trade pacts around the world.

After senior leaders from both sides touch on the pact this week at the Asia Pacific Economic Cooperation summit in Singapore, negotiators will meet in Taiwan next month for further talks. They are due to sign the pact, dubbed the Economic Cooperation Framework Agreement (ECFA), by May.

China has claimed sovereignty over self-ruled Taiwan since 1949, when Mao Zedong's forces won the Chinese civil war and Chiang Kai-shek's Nationalists fled to the island. Ties have warmed since 2008 as the two sides began to talk trade.

Here are contents and possible impacts of the trade pact:

WHICH INDUSTRIES COULD SEE TARIFFS REDUCED AND BY HOW MUCH?

Tariffs would fall to varying degrees, remaining highest for Taiwan sectors that might lose ground to a greater flow of goods from China. Agriculture is completely off the table.

Taiwan has floated to China a confidential list of 700 to 1,000 items for tariff revisions under ECFA, subject to negotiations, analysts say.

Local media say Taiwan officials have aggressively sought tariff cuts for textiles, machinery and petrochemical products, favouring the likes of Formosa Petrochemical Corp (6505.TW).

Auto parts figure high on Taiwan's agenda, analysts say. Standing to gain would be Taiwan parts makers Tong Yang (1319.TW) and TYC Brother (1522.TW).

HOW WILL MARKETS IN CHINA AND TAIWAN REACT TO THE DEAL?

Markets such as the Taiwan Stock Exchange .TWII will firm slightly when the deal is signed but no surge is expected as they have climbed previously on broad sentiment following 18 months of overall Taiwan-China trade ties.

Shares of listed companies from China's Fujian province, which is geographically closest to Taiwan and already enjoys strong transit links, would get a boost in Chinese markets.

Those companies could include Fujian Cement (600802.SS) and the lender Industrial Bank (601166.SS).

But ECFA, largely a framework for future deals rather than a laundry list of specifics, will offer little for investors who look at individual companies or sectors before moving money.

WHO ELSE IS LIKELY TO BENEFIT AND HOW?

Financial services and institutional investors, the island government says. Services are broadly defined, while investment may cover financial markets, real estate or venture capital.

Taiwan-based companies, such as those involved in high-tech or R&D, intent on expansion to China could get a boost from ECFA alone with its new guidelines on legal transparency and protection of investments, including intellectual property.

In China, airlines and hospitality are expected to benefit from rising business demand from Taiwan.

WHAT'S AT STAKE LONG-TERM FOR TAIWAN?

With the signing of ECFA nearly certain as earlier public opposition cools in Taiwan, Taiwan looks forward to signing free trade pacts with other world economies.

By linking to China's huge economy, Taiwan will get an implied blessing from Beijing to talk to the United States, Singapore and other countries about signing separate FTAs. Other governments would be more keen to sign FTAs with Taiwan knowing that the island is tied to China's larger economy.

Unless the trade deal hurts Taiwan's economy, it would empower Taiwan to start discussing knottier issues, including politics, with China as part of a long-term detente effort begun in mid-2008, a senior ruling party official said this week.

"It's a milestone," said Lin Chong-pin, strategic studies professor at Tamkang University in Taipei.

HOW DOES CHINA GAIN FROM THE TRADE DEAL?

In the short term, knowledge.

"For China, they get more exchange of knowledge in sectors where Taiwan has an advantage," said Joanna Tan, an analyst with Forecast Ltd.

Long term, Beijing will hope that the deal boosts the island's economy and so generates goodwill towards China, which in turn could help win Taiwan over to unification of any Chinese-proposed political solution between the two sides. (Additional reporting by Ben Blanchard in Beijing and Claire Zhang in Shanghai; Editing by Ron Popeski)