An economic cooperation framework agreement (ECFA) may include cooperation in several areas, including industrial, agricultural and service industries, as well as capital and labor affairs. Regardless of how far reaching the aspects of an ECFA, the main goals will be to lower customs tariffs and deregulate markets. From this perspective, the direct consequences of such an agreement will be to increase the flow of products across the Taiwan Strait. This is also the perspective from which I want to discuss the impact of an ECFA on Taiwan’s trade status.
Taiwan’s economic development model is focused on exports. Without the export surplus, Taiwan’s economy would be in big trouble. Because the nation has maintained a trade surplus in recent years, it has also maintained a competitive edge.
In 2006, Taiwan’s trade surplus reached US$21.3 billion, in 2007 it was US$27.4 billion, in 2008, US$15.2 billion, and in January to August last year it reached US$19.5 billion. As a result of growing cross-strait trade exchanges, however, trade between Taiwan and China makes up an increasingly larger portion of the nation’s total foreign trade. In 2008, Taiwan’s China-bound exports reached US$99.57 billion, while imports stood at US$32.88 billion, giving Taiwan a trade surplus of US$66.69 billion. In the period from January to November last year, Taiwanese exports to China reached US$75.22 billion, while imports were US$22.87 billion, giving Taiwan a trade surplus of US$52.35 billion. Deducting this trade surplus with China from Taiwan’s total trade surplus converts the surplus into a deficit. In disregarding the principles of risk diversification, Taiwan is too dependent on its trade with China.
If Taiwan and China enter into an ECFA and lower customs tariffs to a certain level, cross-strait trade would be further intensified and this could bring large volumes of Chinese products into Taiwan. That in turn could gradually serve to eliminate the nation’s trade surplus. As Taiwan’s trade surplus with China decreases, the nation will experience a trade deficit. That would have dire consequences.
The East Asian financial crisis in 1997 erupted because Thailand and other Asian states were experiencing trade deficits that set off a chain reaction of financial collapse. These states were only able to save their economies thanks to capital infusions by the IMF and the World Bank. Taiwan is not a member of these financial institutions, so where could the nation turn if the same thing were to happen to the Taiwanese economy.
The current cross-strait trade relationship should really be in Taiwan’s favor, so it should be China that comes to Taiwan asking for an ECFA to balance cross-strait trade, while Taiwan should be procrastinating to maintain its advantage. This is not what is happening. Instead, it is Taiwan that is eager to implement an ECFA. This also carries many political implications that could cloud thinking on the issue.
There are those who say that the Taiwanese economy will suffer because ASEAN and China have already formed a free-trade area, and that if Taiwan and China sign an ECFA it would help bring Taiwan closer to being able to participate in ASEAN trade.
The situation is not as bad as that. The original six ASEAN states formed a free-trade area in 2006, lowering customs tariffs to below 5 percent. This did not have a great impact on Taiwan and the nation’s trade surplus with ASEAN is actually increasing. Trade with ASEAN nations has been growing since 2003, and Taiwan enjoys a trade surplus. When the global economic crisis hit in 2008, Taiwan’s foreign trade contracted — with the exception of its trade with ASEAN nations, where the nation still has a trade surplus of US$12.9 billion.
It is to be expected that the signing of an ECFA will see cheap Chinese goods flow into Taiwan. We must pay attention to whether that increase will lead to a trade deficit that would hurt even more small and medium-sized enterprises, setting off a wave of unemployment. We should also pay attention to whether the government is aware of the importance of diversifying risk and whether it has prepared a rescue plan.
Chen Hurng-yu is a professor at National Chengchi University’s department of history.
TRANSLATED BY PERRY SVENSSON
The gutting of Voice of America (VOA) and Radio Free Asia (RFA) by US President Donald Trump’s administration poses a serious threat to the global voice of freedom, particularly for those living under authoritarian regimes such as China. The US — hailed as the model of liberal democracy — has the moral responsibility to uphold the values it champions. In undermining these institutions, the US risks diminishing its “soft power,” a pivotal pillar of its global influence. VOA Tibetan and RFA Tibetan played an enormous role in promoting the strong image of the US in and outside Tibet. On VOA Tibetan,
Sung Chien-liang (宋建樑), the leader of the Chinese Nationalist Party’s (KMT) efforts to recall Democratic Progressive Party (DPP) Legislator Lee Kun-cheng (李坤城), caused a national outrage and drew diplomatic condemnation on Tuesday after he arrived at the New Taipei City District Prosecutors’ Office dressed in a Nazi uniform. Sung performed a Nazi salute and carried a copy of Adolf Hitler’s Mein Kampf as he arrived to be questioned over allegations of signature forgery in the recall petition. The KMT’s response to the incident has shown a striking lack of contrition and decency. Rather than apologizing and distancing itself from Sung’s actions,
US President Trump weighed into the state of America’s semiconductor manufacturing when he declared, “They [Taiwan] stole it from us. They took it from us, and I don’t blame them. I give them credit.” At a prior White House event President Trump hosted TSMC chairman C.C. Wei (魏哲家), head of the world’s largest and most advanced chip manufacturer, to announce a commitment to invest US$100 billion in America. The president then shifted his previously critical rhetoric on Taiwan and put off tariffs on its chips. Now we learn that the Trump Administration is conducting a “trade investigation” on semiconductors which
By now, most of Taiwan has heard Taipei Mayor Chiang Wan-an’s (蔣萬安) threats to initiate a vote of no confidence against the Cabinet. His rationale is that the Democratic Progressive Party (DPP)-led government’s investigation into alleged signature forgery in the Chinese Nationalist Party’s (KMT) recall campaign constitutes “political persecution.” I sincerely hope he goes through with it. The opposition currently holds a majority in the Legislative Yuan, so the initiation of a no-confidence motion and its passage should be entirely within reach. If Chiang truly believes that the government is overreaching, abusing its power and targeting political opponents — then
RSS