Fri, Jul 09, 2010 page3

• FEATURE: Traditional merchants bracing for ECFA

  DIHUA DESPAIR While the government has talked up the possible benefits of the pact, firms in what was once Taipei’s busiest shopping hub have little hope for the future

  • By Vincent Y. Chao / STAFF REPORTER
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  A quick walk around Dihua Street, formerly one of Taipei City’s most bustling shopping areas, shows boarded up windows, empty buildings and half-finished store displays.

  There are fewer than a dozen customers in sight, a figure vastly outnumbered by the number of stray dogs prowling the streets. It’s a sorry sight for a street famous for its Chinese medicine, Lunar New Year products and traditional foodstuffs.

  Business picks up around temple festivals, holidays and especially the week before Lunar New Year when hundreds of frantic shoppers line up for the most popular stores amid scores of street hawkers. However, business owners say that figure has been in constant decline over the past three years.

  “Business here has been slow, but we don’t expect things to pick up. Not with Chinese competition just around the corner,” said Tailor Yeh (葉信成), the owner of a small clothing manufacturer.

  Small businesses like Yeh’s company, Ying Shiang Fabric, dot the tiny nooks and crannies off Dihua Street. It’s a mix of wholesalers, small manufacturers and refiners. Most are found inside bland concrete buildings and few have been open for anything less than 60 years.

  The area is one of the last holdouts still producing tea leaves, foodstuffs, traditional medicine, fabrics, clothes and household items — goods identified as part of Taiwan’s traditional industries — in modern Taipei.

  However, some business owners are worried that this era could be coming to an end because of the Economic Cooperation Framework Agreement (ECFA) signed with China last week. There are fears that the pact will lead to a continued increase in low-cost Chinese competition in the next few years.

  President Ma Ying-jeou’s (馬英九) administration says the trade pact will help Taiwan’s export-reliant economy and maintains that through the ECFA, Taiwanese goods will flow more freely to China; already one of Taiwan’s largest trading partners.

  However, the owner of a herbal medicine company, surnamed Lu (呂), says that the flip side of that claim is that small businesses like his will now face increasing competition from Chinese products as trade is liberalized.

  His company both manufactures and sells its own brand of traditional herbal medicine. Most of his original materials are imported from China and other Southeast Asian countries and are refined and sold on the market. Lu says that recently he has felt he has no choice but to also carry a number of Chinese brands as they gain in popularity in other stores because of their low prices.

  While traditional medicine was not included among the first wave of cross-strait tariff reductions announced on Tuesday last week, officials have not ruled out including it as part of further negotiations, scheduled to take place every six months.

  “That’s the problem … no one of us knows for certain which industry is next,” said Lu, who did not want to give his full name.

  “In the meantime, many of [Taiwan’s] companies are already packing up and moving to China as they don’t feel our economy is getting any better,” he said.

  Yeh said his orders for custom-made suits have virtually dried up in the past two years. He used to make suits and uniforms in batches for schools and companies. Now he says he is lucky to receive even one order.

  “The government is crazy if it thinks that more competition will help us,” Yeh said. “I’ll tell you what will happen in the coming years: Our businesses here will fold and so will the small clothing companies in Wufenpu (五分埔) and Ximending (西門町).”

  These claims have not been rejected outright by the government, but it does say that most claims about the ECFA’s negative impact have been blown out of proportion. During a debate with Democratic Progressive Party (DPP) Chairperson Tsai Ing-wen (蔡英文) on the ECFA in April, Ma announced the creation of a NT$95 billion (US$3 billion), 10-year fund to support the sectors hurt by the ECFA.

  The Ministry of Economic Affairs says the fund will be split into three different types of subsidies depending on how severe an industry is likely to be impacted by the ECFA.

  However, an owner of a refining business that makes value-added sugar products said that only when he starts seeing this money being distributed will he start believing the government’s promises.

  “Otherwise, it’s likely just another one of their lies as usual,” said the man, who only wanted to be known by his surname, Chang (張).

  His business, which employs 10 people, is one of the busiest on the street. Workers are busy loading boxes of sugar for coffee and sweeteners for deserts onto a truck.

  However, Chang says that the bustle is still a far cry from three years ago.

  “The government continues to say that the economy will get better … but so far our businesses are still struggling, so everybody’s salaries continue to go down,” he said.

  Just down the road at Lung Chi Shredded Meat Products, a manager surnamed Wu (吳), says that he is unsure how exactly the ECFA will affect his business.

  “Either way, I don’t see anything good coming out of this,” he said.

  Sitting at a table and reading a newspaper, he says that business has been in constant decline over the past two to three years. Lung Chi’s primary clients — restaurants and bakeries — have been ordering less shredded pork products because of the economic recession.

  However, he says that his company, which employs less than a dozen employees, is too small to take advantage of any openings into the Chinese market provided by the ECFA. Even if it could take advantage of reduced tariffs, he says that he would likely still focus on the Taiwanese market.

  “It’s a whole different set of regulations out there,” he said.

  Many small companies like his would not benefit from the trade agreement, the primary beneficiaries will be large corporations from both Taiwan and China, he said.

  While agricultural goods like shredded pork products were not included in the first round of trade liberalizations under the ECFA, concerns have been raised by opposition parties that the products could be included in future negotiations because of Chinese pressure.

  Citing WTO regulations, the DPP argued that up to 95 percent of cross-strait trade would have to be completely liberalized within a decade after the ECFA is signed — a figure that the government has denied.

  However, the owner of Fu Chi Famous Tea, surnamed Wang (王), said that even if all these tariff reductions were implemented, they aren’t sure how they would be able to sell their products — specialty tea leaves — in China.

  China pledged to decrease trade tariffs for six different types of tea products from Taiwan as part of the initial negotiations. Taiwan is also expected to remove tariffs for Chinese tea products after future talks, reports say.

  Wang said that she did not oppose the customs reductions, since her store carries a small number of Chinese tea products already.

  “I’m not against cross-strait trade, Taiwan does need more interaction with the world,” she said.

  However, she said it was still hard to support the deal, because for small businesses like hers, “it is really a lot of trouble trying to export tea to the Chinese market.”

  If the government wanted more small business owners to benefit, they would need to do a better job of promoting the agreement and explaining to the public what exactly what it entails, she said.
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