2010 / 1月
Chang Chiung-fang /tr. by Scott Williams
"The ECFA [the proposed Economic Cooperation Framework Agreement with mainland China] is like a rose with thorns," says Premier Wu Den-yih. "Optimists see the flower; pessimists see the thorns."
Wu promises the government will "pay heed to both the flower and the thorn; see both the opportunities and the risks," and says that its various departments will work together to maximize the benefits and minimize the costs.
Only if the public can be persuaded to overcome its fear and support the government as it reaches for this flower, will Taiwan have the chance to harvest a long-anticipated bounty-another period of economic growth and transformation.
As we go to press, the fourth round of cross-strait talks between Chiang Pin-kung, chairman of Taiwan's Straits Exchange Foundation, and Chen Yunlin, chairman of the mainland's Association for Relations Across the Taiwan Straits, are slated to get underway in Taichung on December 22 against a backdrop of protest by the Democratic Progressive Party (DPP), which has been calling for the government to protect the livelihoods of Taiwanese workers and to break open the black box in which it has been conducting negotiation.
Following on the third round of Chiang-Chen talks, which resulted in nine agreements and one consensus, the fourth will include the final discussions and signing of agreements on fishing-labor cooperation, standards for product testing and certification, and the inspection and quarantine of agricultural products.
However, the DPP and its allies are working to make the Economic Cooperation Framework Agreement (ECFA)-unfinished, unsigned and not on the agenda at this round of talks-into the biggest political controversy since the debate over the importation of American beef. In an effort to scuttle cross-strait talks and upset the Ma administration's China policy, the green camp has been calling for a 100,000-person march and for hounding Chen Yunlin wherever he goes.
What exactly is the ECFA? Is it really that complex? Are the risks truly so great? Let's take a look.1. Why should Taiwan sign an ECFA with China?
When the China-ASEAN free-trade agreement (FTA) comes into force in 2010, tariff-free trade between the two entities will place Taiwanese exports to both at a severe disadvantage.
Taiwan's main goal with the ECFA is to protect its manufacturers by winning tariff-free access to the Chinese market for Taiwanese goods. (The mainland market currently accounts for some 40% of Taiwanese exports.) Once the two sides sign, Taiwan may also find it easier to sidestep Chinese obstructions to its negotiation of FTAs with other nations.2. Who will protect workers' livelihoods once the ECFA is signed?
All trade agreements are built around reciprocal relationships. If Taiwanese goods are to enter the mainland tariff-free, reciprocity requires that we open up our own market and increase the number of mainland goods granted tariff-free status. (Vis-a-vis agricultural goods, with Taiwan continuing to resist opening its market to mainland imports and the mainland being patient, negotiations on this issue can be put off for a time.)
Basically, ECFA is expected to benefit Taiwanese exporters and harm manufacturers for the domestic market. Taiwan's major exporters to the mainland-the steel, plastic, machine tools, and textiles industries-will be the greatest beneficiaries. Domestic-demand manufacturers such as makers of towels, hosiery, ceramic tiles, and footwear are likely to be the biggest losers. It is this inequity, this building of one industry's prosperity on the suffering of another, that has driven the endless contention over the ECFA.
Will signing the ECFA encourage large numbers of small and medium-sized enterprises to relocate production to the mainland, and so increase Taiwan's unemployment rate? Disagreement abounds. Wang Ju-hsuan, minister of the Council of Labor Affairs (CLA), believes that economic policy needs to be understood in terms of its long-term impact. While some individual businesses and industries will benefit, others will suffer. "But," she argues, "it will in aggregate increase employment."
Hsu Shih-hsun is the chairman of the Department of Agricultural Economics at National Taiwan University and does research for the CLA. He predicts that if Taiwan fails to sign the ECFA, ASEAN's free-trade agreements with China, Japan, and Korea will cost us 47,000 jobs. He further predicts that signing the ECFA will create 105,000-125,000 new jobs, with the greatest impact coming for low- and middle-income workers in the service sector.
But some industries will suffer as a result of the agreement, and the government has made their protection a priority.
Wang says that the CLA will do its utmost to uphold the rights of workers. In addition to "absolutely not permitting mainland Chinese laborers to work in Taiwan," the CLA will strive to prevent sensitive industries (such as towels and ceramic tiles) from being included on the ECFA's "early harvest" list (a list of industries to have their tariffs gradually reduced), and to provide businesses and workers with more time to adapt.
The government will also budget NT$95 billion over 10 years to help workers and businesses transition into new fields. It plans to spend half of this money on protecting workers, and has already settled on 10 major assistance measures, including allowances for temporary work, living expenses, and rent intended to minimize the agreement's impact on laborers.3. Will the ECFA make Taiwan more dependent on mainland China?
Huang Kunhui, chairman of the Taiwan Solidarity Union, is critical of the ECFA. He argues that it constitutes a suicide pact that orients Taiwan solely towards the Chinese market, worsening Taiwan's dependency on China.
These doubts are echoed by the general public. A piece entitled "Should Taiwan Fear the Dragon" in the September issue of CommonWealth magazine pointed out that the issues of "work" and "sovereignty" were major components of the Taiwanese public's "Sinophobia."
The magazine surveyed more than 2000 individuals for the article and found that 75% feared losing their jobs to mainlanders, while 70% worried about damage to Taiwan's sovereignty. Their greatest fear, however, was that Taiwan's economy would become totally dependent upon the mainland.
With the mainland currently ranking both as Taiwan's biggest market and its biggest manufacturing base, this fear does not appear unreasonable. But mainland China is now inarguably the economic locomotive of Asia, and perhaps of the world. Even the Chen administration, which was dedicated to opposing China, was powerless to halt the rapid growth in cross-strait trade. Over the past 10 years, Taiwanese trade with China has increased 1,630%, versus increases of just 24% and 73% in trade with the US and Japan, respectively.
As Wang Jiann-chyuan, vice president of the Chung-Hwa Institution for Economic Research, has said, signing the ECFA necessarily implies "a boxing in of Taiwan and opposition to independence." But Taiwanese businesses can avoid getting stuck in China if they use the ECFA to enhance their competitive superiority and extend their global reach.
President Ma Ying-jeou has repeatedly stated that China and Taiwan need to sign the ECFA so that Taiwan can participate in regional integration and establish FTAs with its major trading partners. Taiwan and North Korea are currently the only two nations in the Asia-Pacific region that do not participate in such FTAs. If Taiwan is to avoid marginalization, it must get over its likes and dislikes and deal directly with China.What is being negotiated?
An online survey by 104 Job Bank for its report on key issues for the 2010 job market showed that office workers considered the signing of the ECFA one their three greatest concerns. In fact, office workers felt even more threatened by the ECFA than businesses did-while 44.4% of office workers believed that the ECFA was more of a threat than an opportunity, only 34.5% of businesses felt this way.
This fear has been fed by an abundance of political machinations, implied threats, and dubious information. An early December survey by CommonWealth on national sentiment for 2010 showed that 67% of respondents "didn't understand or didn't fully understand" the ECFA. Only 30% claimed to understand the agreement.
With the majority of the public not understanding the agreement, support instead breaks down along party lines. Some 85% of the supporters of the KMT and its allies believe the ECFA will benefit Taiwan. Only 18% of supporters of the DPP and its allies feel the same way.
Overall, the government has done too little to explain the ECFA. It still cannot plainly state the likely costs and benefits of signing versus not signing the agreement. Part of the reason for this state of affairs is that the government doesn't want to show its cards before negotiations get underway. Another part is that with formal negotiations still pending, everything remains up in the air.
But the opposition wants the government team to report the actual contents of the agreement to the public, while insisting that there be no secret cross-strait talks prior to making such a report. The acceptance of such conditions would put negotiators in a real bind.
It's still too early to say whether the ECFA will develop as expected. In any case, the agreement remains an expedient means of accessing the East Asian regional framework and fair competition. What will Taiwan gain by signing? What will we lose? That's going to depend on the investment climate in Taiwan and our own economic strength.
As Vice President Vincent Siew has said: "The ECFA is a tonic. By maximizing its strengths and minimizing its weaknesses, we can revitalize Taiwan.