At the 22nd APEC leaders’ meeting in Beijing, all member economies agreed to push for the establishment of a free-trade area of the Asia-Pacific (FTAAP). However, APEC is a relatively loose mechanism, and both the proposed Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) have advanced further than the FTAAP. This means that the establishment of the FTAAP might not come soon enough if Taiwan is relying on its participation to avoid becoming marginalized.
More seriously, China and South Korea recently announced the completion of free-trade agreement (FTA) negotiations, that will see tarriffs removed on more than 90 percent of goods. The two countries are set to sign their FTA early next year.
According to Ministry of Economic Affairs data, the agreement will cause Taiwan’s GDP to drop by 0.5 percent per year and its exports to drop by NT$112.5 billion (US$36.3 billion). Formosa Plastics Corp chairman Lee Chih-tsuen (李志村) has even said that young people’s starting salaries might decline from NT$22,000 to NT$15,000 per month.
Taiwan is certainly facing a predicament, and the question is how the government should go about resolving the problem.
In recent years, the Chinese-language United Daily News has held many seminars on Taiwan’s economic development and liberalization, hoping to create dialogue between the government, industry and academia aimed at reaching a consensus and forming concrete proposals. However, the nation continues to languish in the doldrums. As a result, the newspaper has decided not to hold any more seminars.
President Ma Ying-jeou (馬英九) and his top economic and trade officials attended the newspaper’s seminar last year, saying that the government was ready to push for economic and trade liberalization. At the event, I warned attendants that the marginalization issue was likely to be apparent again this year, because I did not really see the government’s determination and strategy for promoting economic and trade liberalization.
The Chinese Nationalist Party (KMT) has been in power for more than six years, and the challenge posed by Taiwan’s economic marginalization is even greater than it was during the previous Democratic Progressive Party (DPP) administration.
An average of 5.5 economic integration agreements took effect across the world per year during the DPP’s rule from 2000 to 2007, but an average of 29.7 economic integration agreements took effect per year under the Ma administration from 2008 till last year.
The Ma administration says that the DPP is responsible for Taiwan’s economic marginalization. It is true that the legislature has failed to approve the cross-strait service trade agreement mostly due to the DPP’s opposition to the pact, but the question is whether most Taiwanese support the agreement.
According to a poll conducted by the Taiwan Indicators Survey Research (TISR) in April, the percentage of respondents opposed to the agreement was 12.4 percentage points higher than the percentage who supported it. According to a poll conducted by TVBS in July, opponents surpassed supporters, by 13 percentage points.
Then there is the question of whether the agreement would boost Taiwan’s economy significantly. According to the ministry’s estimation, the agreement would increase the nation’s GDP by only 0.025 to 0.034 percent. Since the Ma administration lacks the determination to realize large-scale cross-strait economic and trade integration, one wonders how Taiwan would benefit from the signing of such cross-strait agreements.
In terms of bilateral service trade agreements, Taiwan is opening 68.5 and 75.1 percent of its service trade to New Zealand and Singapore respectively, but it is only opening 30.4 percent of its service trade to China.
To go one step further, even if the legislature approves the service trade agreement and the proposed cross-strait trade in goods agreement, the question is if Taiwan would be able to join the TPP or RCEP. New Zealand and Singapore together account for just 3.8 percent of Taiwan’s exports, and this is far from enough to resolve the risk of Taiwan becoming marginalized.
On the other hand, the cross-strait agreements make Taiwanese worry whether economic and trade integration would erode the nation’s political and business autonomy. Unfortunately, the Ma administration has made no response to the public’s concern so far.
According to a TISR survey conducted in March, 21.2 percent of respondents said that the service trade agreement would do more harm than good to national security and sovereignty, while 50 percent said the pact would bring more losses than gains. A TISR survey conducted in June found that 34.7 percent of respondents said the agreement would do more good than harm, while 43.2 percent said the pact would do more harm than good.
As Ma places all responsibility on the opposition, he is simply avoiding accountability without resolving the problem, which continues to rapidly deteriorate. Perhaps the Ma administration should first reach an internal domestic consensus and change its global economic integration strategy, while treating opposition to such agreements as a constant.
Those in power should meet their responsibilities and come up with effective solutions, not idealistic rhetoric.
Tung Chen-yuan is a professor at the Graduate Institute of Development Studies at National Chengchi University.
Translated by Eddy Chang
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