Impacts of the cross-Straits Economic Cooperation Framework Agreement on the grouper fish markets in Taiwan and mainland China : A stochastic simulation analysis

Purpose – The purpose of this paper is to assess the effects of the Economic Cooperation Framework Agreement (ECFA) on the grouper fish markets in Taiwan and mainland China. Design/methodology/approach – A stochastic simulation model is developed in such a way that the oligopoly or monopoly power of grouper fish exporters plays a role for having different impacts of the ECFA. Findings – Taiwan's grouper sector benefits considerably from the implementation of the ECFA tariff reductions. Export of the Taiwanese grouper fish to mainland China and the overall gross revenue of the Taiwanese grouper fish farmers are simulated to increase up to 4.04 and 4.54 percent, respectively, due to a 5 percent tariff reduction implemented by the ECFA. The authors further find that a larger degree of grouper fish exporters’ market power would result in the ECFA having a lesser impact on the Taiwanese and mainland Chinese grouper fish markets. Practical implications – The findings suggest that Taiwan and mainland China should further negotiate reduction in tariffs over other agricultural products and/or other product categories. Originality/value – This study is the first empirical analysis to examine how the grouper industries on the “Early Harvest List” have responded to the ECFA tariff reductions.