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Taiwan Shadow Government forum on CECA and ECFA

08/03/2009

On 3rd March, Taiwan Shadow Government, founded by former Premier and former DPP Chairperson, Frank Hsieh, held a forum on the Comprehensive Economic Cooperation Agreement (CECA) and the Economic Cooperation Framework Agreement (EFCA) proposed by Ma, Ying-jeou. Frank Hsieh, Ching-chang Yen (Taiwan’s former Ambassador to World Trade Organisation), Rong-yi Wu (former Vice Premier), Kenneth Lin (Professor of Economics at National Taiwan University), Jung-yu Chiu (Professor of Economics at National Central University) were invited to speak at this event. Legislators, Chun-yee Lee and Shiing-jer Twu, Taipei City Councillors, Po-ya Chou, Chien-yi Hung, Mao-nan Chang and Jui-hsiung Chuang also attended and participated in the discussion.

The actual timetable is as follows:

Time Content* and speakers
10:00-10:05 Opening and welcome by Pasuya Yao, Chief Executive of Taiwan Shadow Government & Former Director of General Information Office
10:06-10:21 An overviewby Frank Hsieh, Founder of Taiwan Shadow Government, Former Premier of Taiwan & Former Chairperson of DPP
10:22-10:37 The WTO perspectiveby Ching-chang Yen, Former Ambassador to World Trade Organisation
10:38-10:53 The political framework and ramificationsby Rong-yi Wu, Former Vice Premier
10:54-11:19 The links between ECFA/CECA and national sovereigntyby Kenneth Lin, Professor of Economics, National Taiwan University
11:20-11:35 The economic perspective: myths and realityby Chun-Jung Chiu, Professor of Economics, National Central University
11:35-12:00 Conclusions5 minutes for each speaker

* Shadow Government did not give a title for each presentation. I came up with those titles to give readers an idea of the content of each presentation.

An article in Taipei Times succinctly summarised the key messages conveyed by each speaker. I have listened to all the presentations online and am going to provide a more detailed summary in English to show how each of them reached those points. Speakers’ words appear in black and my own writing or interpretations are in blue.

 

An overview’ by Frank Hsieh

We have seen terms such as CEPA, CECA, ECFA recently. The term always changes before we learn it properly. This means that we do not understand any of them. However, this is an important public policy which is going to affect the country’s future development and is closely associated with our national sovereignty and autonomy. We must fully understand the content of such a policy and its effects and ramifications. The government has the obligation to make sure that the public is fully and accurately informed.

Unfortunately, Ma’s government is pushing for something whose content the public knows very little about. For example, Ma is very vague on the foundation upon which the document is going to be signed. Is it state to state or region to region? To deepen our confusion, every government official who has spoken about CECA or EFCA so far has told us a different degree to which Taiwan will open up to China and allow Chinese products in. They are also inconsistent on the timescale for negotiation and implementation.

Ma claims that under such a framework, our products can be sold to China but China’s products, workers and business will NOT come to Taiwan. We have to bear in mind that any official agreement between states must be mutually beneficial. Why would China agree to something that’s going to benefit Taiwan only, especially when they are facing a sharp fall in exports and a huge increase in unemployment themselves? If that happens, then it’s not free trade. If they are giving so much to the Taiwanese economy, they must have other motives.

Therefore, the government needs to be very careful in its handling of the agreement and be open and transparent about public debate and discussion on the timing, the extent to which Taiwan can open up to China as well as a monitoring mechanism because this will affect the well beings and development of our future generations. The government also needs to patiently wait until we all reach a meaningful consensus. Parliamentary scrutiny and respecting people’s expressed wishes are vitally important. (Ma has already implied that he wouldn’t allow a referendum or parliamentary review on this issue)

Ma has made a lot of promises in the past such as an immediate improvement in the economy and achieving 633 (i.e. 6% economic growth, unemployment rate under 3% and US$30,000 GDP per capita) etc. and broken every single one of them. We need to think about whether we still want to rely on Ma’s promises and whether Taiwan can take that risk.

Some people say that there is an urgent need for this agreement if Taiwan wants to revive its economy as it gets rid of trade tariff. However, they are not exactly clear about how much Taiwan’s GDP can improve as a result. If the increase is only by 0.3, 0.8 or even 0.01%, why should we put our sovereignty at risk?

At the moment, some Taiwanese exports to China are charged 5-6% tariff but Chinese exports to Taiwan only carry 0-1%. Taiwan and China are both in WTO and this isn’t fair. Ma and his administration should talk to China about this discrepancy first. They should act in the best interest of the Taiwanese people rather than themselves. They should also put forward strategies for economic and trade development which can make Taiwan more competitive than other South Eastern countries.

 

The WTO perspective’ by Ching-chang Yen

I am going to skip a lot of his presentation because his views on CECA have been nicely written in the article ‘The Dos and Don’ts of CECA between Taiwan and China from a WTO’s Perspective’ (a good excuse for being lazy).

In terms of EFCA, Yen raised the following point:

Ma told us that ECFA is simply a proposed framework under which CECA will form. At the same time, government officials and cross-strait negotiators emphasise the urgent need to have CECA rescue our economy. They claim that the signing of CECA will boost Taiwan’s GDP by 3.3%. However, the reality is that EFCA is merely a title without any content and proposed timescale. It will take a considerable amount of time and effort to negotiate and iron out gaps in tariffs between Taiwan and China under the WTO framework, let alone finally implement the agreement and see the effect. Then how can CECA or EFCA have any immediate positive impact on the economy? If not, why the rush? (Loosely translated: are they pulling a fast one on us?)

The political framework and ramifications’ by Rong-yi Wu

No other country in this world would talk about Free Trade Agreements (FTAs) with Taiwan. Why? It’s because China threatens them. The fact that China does not allow anyone else to have FTAs with Taiwan but wants something similar with Taiwan themselves means they have set a trap: they block all exits except one (where they are waiting right at the end, which means Taiwan won’t have any choice but accept all conditions stipulated by China when it comes). This is like Hong Kong and Macau. They signed Closer Economic Partnership Arrangement (CEPA) with China but no FTAs with any other country.

Wu also talked about the impact of CECA on Taiwan’s employment market and overall economy. Those points have been more clearly illustrated by Tsai Ing-wen in this article, entitled ‘CECA comes with big hidden costs’.

The links between ECFA/CECA and national sovereignty’ by Kenneth Lin

  1. Large corporate groups keep urging the government to sign CECA. They claim that this will help Taiwan sign FTAs with ASEAN members. Ma seems to believe that signing CECA will reduce the obstacles for Taiwan to get into ASEAN and therefore, Taiwan should start with CECA if we want to be more global. However, Ma seems to forget that the biggest obstacle for Taiwan to have FTAs with other countries is China because FTAs are only established between sovereign countries (By letting Taiwan have FTAs with others, China would be allowing themselves and others to accept the fact that Taiwan is a sovereign country). To date, Ma has never made it clear as to what sort of relation Taiwan and China are going to base the agreement on. Is Taiwan going to accept the agreement as a region or a province in order to enjoy the privileges China already has with other ASEAN countries? Let me point out that neither Hong Kong nor Macau, special regions of China, benefit from China’s ASEAN status. If we want to get in on that, Taiwan has to be completely under the Chinese authority (not even a special region like Hong Kong). Therefore, Ma’s rushed proposal is going to make Taiwan’s status even less independent than Hong Kong.The corporate groups pushing for CECA are mainly in the petrochemical industry. In other words, Ma is sacrificing other industries and social sectors to please a single industry (or even a single corporate group) and hiding facts from those who are going to be hit by this policy. E.g. Ma has never been clear and definite about whether Chinese workers, products and produce are going to be allowed to come into Taiwan or whether it involves mutual trust and acceptance of each other’s food safety standards and inspections.
  2. The more two economies are integrated, the less the economic autonomy. There is always a trade off between the two and therefore the government has to strike the right balance between the two.Furthermore, inequality is a huge problem in China. It’s been just about under control with a two figure growth every year over the past few years. However, according to the IMF, China’s economic growth in 2009 is going to be 5%. Social problems and instability due to unemployment and inequality are going to manifest once the growth rate falls under 8%. When the Chinese economy is soon facing serious challenges, Ma’s government is trying to tie Taiwan to China. This will expose Taiwan to even bigger uncertainty.
  3. CECA or ECFA are both designed to remove barriers between two countries in terms of products, labours, technology and capitals. It will push Taiwan into the ‘One China’ framework because Taiwan will have to go through China for any trade with other countries, solely depend on China and be controlled by China. When a country hands the control over the economy to another country, the national sovereignty is also gone. In other words, signing ECFA is pushing Taiwan towards unification with China.Hong Kong signed CEPA with China in 2003. Between 2003 and 2007, Hong Kong’s exports to China increased by 10.4% but China’s exports to Hong Kong increased by 69.2%. Therefore, signing CEPA was like injecting morphine. It was a short term gain but long term pain.

    Hong Kong was not an independent country but Taiwan is. Taiwan’s leaders have to seriously think about how to protect Taiwan’s independence and economic autonomy. The current government is locking Taiwan into China and throwing away Taiwan’s control over her own future.

  4.  Ma has to follow the European Union model where all major decisions are made through fair referenda in countries in question.

 

The economic perspective: myths and reality’ by Chun-Jung Chiu

Prof. Chiu started by pointing out the lack of research figures and statistics the government provides to back up their plans and policies like three big links, ECFA or consumer vouchers. He went on to explain:

The government told us that consumer vouchers would increase our GDP by 1.32% but the actual GDP figure is still very grim. The most worrying thing is that they never explained how they reached the figure 1.32%. Why wasn’t it 1.33% instead? As an academia, I must express my scepticism and worries about Ma’s government.

There’s an important logic I would like to emphasise: economic integration with another country is never 100% beneficial and the same goes with economic independence and autonomy. In order to integrate with another system, compromises and sacrifices must be made. Therefore, no one would suggest that economic integration is a must. For example, the United Kingdom is not part of the Euro zone. Why not? Well, they wanted to be initially but were put off in 1992 (Note from CJ: On Black Wednesday, the UK government had to withdraw the British Pound when they failed to keep up with the Euro). They have remained out of the Euro since. Britain’s determination to keep a distance did not prevent other countries from joining in the Euro simply because it suited those countries better. It (economic integration) in itself is a double edged sword.

Conclusions:

I am not going to repeat what was already said but summarising the points elaborated in the closing remarks.

Ching-chang Yen:

Every international trade agreement or arrangement has political implications because in order to implement the agreement, governments have to work out the level of which each department and sector can accept. (i.e. Ma’s notion that ECFA is a purely economic agreement is unrealistic.) The US and South Korea signed a FTA and both accept each other as a sovereign and independent country. Even under such a friendly atmosphere, the import of US beef still caused a political storm within South Korea. When China unilaterally grants certain privileges to Hong Kong and Macau, it must carry certain political implications as well.

Rong-Yi Wu:

At the moment, approximately 40% of Taiwan’s exports go to China and Taiwanese investments in China represents 60% of our total investments in foreign countries. In 2007, out of the 4 million Taiwanese going abroad, half of them visited China. There are 2 million Taiwanese business people and workers in China. Taiwan is already economically associated with China very closely. We need to spread our trade and investments to other countries. In fact, our economic association with China is the reason why we are struggling so much (more so than other Eastern Asian countries).

Chun-jung Chiu:

1. If China genuinely wants closer economic cooperation with Taiwan, they should not set any political pre-requisite (i.e. under One China policy).

2. Any agreement between Taiwan and China has to be negotiated and signed under the WTO framework.

3. China should not suppress Taiwan’s international space and Ma should not rush to sign it.

2 Comments leave one →
  1. 05/08/2010 04:48

    I stumbled onto your site while looking for more information on the ECFA, thank you for your insights. As someone who is ethnically chinese but grew up as a global nomad, and is now living in mainland China, I’ve begun to question the way Sinicization has been wielded by those in power on those that are different. Therefore, I’ve been tracking Taiwan’s political forays over the years with great interest. I do not know where independence or reunification is in Taiwan’s future, but I understand the great unease and urgency with which Taiwanese debate these issues. It is with the same unease I comtemplate the way I am viewed by those that assume that I also identify as “Chinese” and accept the current way of life on the mainland.

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