Taiwan’s share of the Chinese market continued to fall last year, despite increasing bilateral trade, calling into question the effectiveness of the cross-strait Economic Cooperation Framework Agreement (ECFA), local researchers said yesterday.
While about 40 percent of Taiwanese exports continue to flow to China, that number represented a significant drop from last year and comes amid sharply slowing growth in that category — a trend not seen with Taiwan’s other major trading partners.
Researchers studying the ECFA, signed in June last year, said the controversial trade deal had in most cases failed to deliver many of its envisioned benefits for Taiwan’s struggling manufacturing industry.
“The ECFA was seen as helping Taiwan engage in free-trade agreements with other countries and increase the competitiveness of exports to China, creating investment at home and attracting foreign funding,” Tung Chen-yuan (童振源), a professor at National Chengchi University, told a discussion hosted by the thinktank Taiwan Brain Trust, which is generally perceived to be more sympathetic to the pan-green camp. “But almost a year after it was signed, the initial achievements are fewer than expected.”
Ministry of Finance trade data shows Taiwan’s exports to China grew at 14.3 percent quarter-on-quarter in the first three months of this year, significantly lower than the 75.6 percent growth in the same quarter last year. While Taiwan saw a major rebound in exports following the global financial crisis, the growth was seen in exports to the US and Europe, not to Japan and China.
In fact, Taiwan’s share of the Chinese market fell to 7.4 percent in the first quarter of this year from 8.4 percent in the same period last year, continuing a five-year trend, CEIC China Database statistics showed.
“The ECFA’s early harvest list has been in effect since the start of the first quarter of 2011, but [Taiwan’s] market share in China still fell to 7.4 percent, the lowest point since 1993. It shows the ECFA hasn’t really changed the fact that Taiwan is losing competitiveness in the Chinese market,” Tung said, referring to a list of initial tariff reductions.
Figures on foreign investments also suggest that President Ma Ying-jeou’s (馬英九) administration was “perhaps too optimistic in its ECFA predictions,” Tung said, and added there isn’t “any indication that it could pick up.”
Foreign investment in Taiwan has decreased for three straight years, dropping from a recent high of NT$15.4 billion (US$545.4 million) in 2007 to NT$3.8 billion last year, according to data from the Ministry of Economic Affairs. Taiwan attracted NT$1 billion in the first quarter this year, a 34.4 percent quarter-on-quarter decrease.
Similarly, capital outflows have continued to outpace inflows over the past two years, reversing gains made during a sudden spike in 2008, according to Tung, citing central bank figures.
Since the ECFA was signed in the second quarter of last year, US$32.8 billion more in outflows than inflows have left Taiwan. In the third quarter of last year, outflows outpaced inflows by US$12.9 billion, while falling to US$3.3 billion in the final three months. However, that number rose again to US$16.6 billion in the first three months of this year, after the early harvest list came into force.
“The ECFA didn’t have the immediate effect of attracting more foreign investment to Taiwan, according to the numbers,” Tung said. “The export of large amounts of capital brings with it a brain drain that also reduces the -competitiveness of Taiwan’s internal market, damaging economic growth.”
Despite the disappointing figures, the government continues to promote the agreement, other participants in the discussion said.
Former Mainland Affairs Council chairman Joseph Wu (吳釗燮) said not enough attention has been paid to China’s political motives and whether the arrangements with China infringed on Taiwan’s sovereignty.
Lai I-chung (賴怡忠), a researcher at Taiwan Thinktank, called the government “reckless” for signing agreements with Beijing on a one-by-one basis, “without a comprehensive plan.”
Lai added there were also questions about the legality of the process, with cross-strait negotiations conducted by the non-profit Straits Exchange Foundation (SEF) and China’s Association for Relations Across the Taiwan Strait.
The discussion was held one day after the American Chamber of Commerce in Taipei advised Taiwan to look beyond exporting to China.
However, on Tuesday, SEF officials praised “warming cross-strait ties,” including the ECFA, for helping contribute to Taiwan’s 10.89 percent economic growth last year.
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