Ma’s ECFA – a win-win policy or selling out local business?
A question I’ve increasingly asked myself is whether this is a win-win agreement for Taiwan as the KMT and other Pan-Blues would have it, or actually win-win for a handful of big companies and lose-lose for smaller, local businesses. AFP have an article on the ECFA and its potential impact on this part of Taiwanese industry.
Fear in Taiwan as trade pact with China looms
Jimmy Wang’s tiles can compete with the best brands of Europe, but that is of little use to the Taiwanese manufacturer since the most lethal challenge he faces comes from China.
Wang beams with pride as he shows off his ceramic plant in the small coastal town of Kuanyin, an hour’s drive from Taipei, and its Italian-made equipment bought for 500 million Taiwan dollars (15.2 million US dollars).
But when the 50-year-old president of Hiland Ceramic Co. thinks about the threat from the mainland, just 160 kilometres (100 miles) away, he sighs. “I’m not afraid of competition. But I’m concerned about unfair competition,” he says.
Wang is among a growing number of small entrepreneurs on the island fearing what will happen to their businesses once the Beijing-friendly government signs an Economic Cooperation Framework Agreement, or ECFA, with China. Critics fear that the ECFA, a scaled-down trade pact, will open the floodgates for a deluge of cheap Chinese imports, wiping out low-tech industries such as Wang’s.
China’s competitive labour is often cited as key, but there are other factors behind the mainland’s export juggernaut.
One example: Taiwan’s tile makers are required to use natural gas, a relatively clean energy source, to meet strict environmental laws, but their Chinese rivals use coal, which is more polluting but six times cheaper. There are around 50 ceramic plants in Taiwan, and few are safe if the ECFA becomes a reality.
“At least half of the domestic ceramic plants may have to be shut down if China dumps cheap products here,” said Yu Teh-er, the chief secretary at the Taiwan Association of Ceramic Industry.
Despite protests from the pro-independence opposition Democratic Progressive Party and some local industries, the administration under President Ma Ying-jeou insists the trade pact is necessary. Without it, officials argue, Taiwan will not be able to compete on fair terms in China — the island’s leading overseas market.
The 10-member Association of Southeast Asian Nations is scheduled to forge a free trade agreement with China in 2010, while Taiwan’s two major competitors — Japan and South Korea — may sign a similar agreement with China in 2015. If the free trade agreements take effect as scheduled, companies from the 12 countries will be able to sell their products in China without paying tariffs, making action a necessity, Taiwan authorities argue.
“Without measures of our own, Taiwan would be in an extremely unfavourable position on the Chinese market,” said a study from the quasi-official think tank Chung-Hua Institution for Economic Research.
According to customs figures, Taiwan’s exports to China, including Hong Kong, totalled 92.6 billion US dollars in 2008, accounting for 38 percent of the island’s shipments. Taiwan enjoyed a surplus of 60 billion dollars in the trade with its leading business partner. Were it not for China, Taiwan would have had a deficit of more than 40 billion dollars last year.
But apart from economic considerations, Taiwan’s ties with China also have a political aspect, since Beijing sees the island as part of its territory awaiting unification, by force if necessary. “The confrontation over sovereignty between Taiwan and China makes ECFA highly political and controversial even if it does not refer to sovereignty directly,” said Tung Chen-yuan, a cross-strait economy expert at Taipei’s National Chengchi University.
But for many businessmen the most jarring aspect is neither the economic fears nor the political worries — but a feeling that the government does not really care about their plight.
“We have not been approached by responsible government officials to hear our concerns even though the government has said ECFA may be signed early next year,” said Wang, the tile maker.
The apparent lack of consultation seems in line with its attempts to “convince” people of the need for an ECFA, such as by portraying its opponents as ill-informed hicks and its supporters as modern, internationally-aware, highly-educated types. If you really care what people think, you don’t adopt a “four legs good, two legs bad” approach to the strengths and weaknesses of a key policy like the ECFA.
What happens to small/medium business is important for future Taiwanese employment, as they have neither the ability nor probably the desire to move their offices and factories to China to take advantage of lower costs there. Big business, however, will be far more tempted to do that. Whilst an ECFA may boost the profits of larger companies in Taiwan, it may not lower Taiwanese unemployment, even causing it to rise.
There’s also the question of whether it is in Taiwan’s long-term interests to become even more economically bound to China, without the ability to sign FTAs with other countries (as there’s no guarantee China could/would let Taiwan export its goods using China’s FTAs).
This is an academic exercise until the terms of the agreement are decided, but the way things are going it will only fuel suspicion that the proposed agreement is designed to make money for businessmen well connected to the KMT and not benefit the majority of Taiwanese.
I know we have some people here from/with connections to Taiwan, so please let’s have your views.
There are currently no comments highlighted.