Publisher Rex How (郝明義), who was at the time a national policy adviser to the administration of then-president Ma Ying-jeou (馬英久), on June 20, 2013, wrote an open letter to Ma on the eve of the signing of the cross-strait service trade agreement. With an air of desperation, How wrote that “we have less than 24 hours left.”
After reading How’s letter, we embarked on a nine-month project of meticulously comparing the terms of the service trade agreement with those that China had signed with nine other nations.
We observed that the terms of the cross-strait service trade agreement were extremely unequal and we realized that the fundamental problem was that the Economic Cooperation Framework Agreement (ECFA) — a free-trade agreement that was signed in 2010 — should not have been negotiated “in line with the basic principles of the WTO,” as stated on the first page of the ECFA, because the two sides’ statuses within the WTO were, and still are, explicitly unequal.
China joined the WTO in December 2001 with the status of a developing nation, which allowed it to open up its market to relatively few items, but when Taiwan joined in January 2002, it did so as a developed nation and therefore had to open its market to a relatively large number of items. This explains why the cross-strait service trade agreement required Taiwan to liberalize far more items than China.
Absurdly, the construction of key national security infrastructure such as airports, seaports, tunnels and telecommunications were all set to be liberalized, while cross-border services, which should have been opened up to Taiwan, were not.
For example, China was going to “open up” wholesale, retail and e-commerce services to Taiwan, but prohibit Taiwanese companies from operating such services.
This arrangement would have forced Taiwanese businesses to set up facilities in China, thus hollowing out Taiwan’s economy. E-commerce companies would have to set up their offices in Guangzhou.
More worrying still is that Taiwan’s market liberalization pledges for the items it agreed to open up all included the absurd condition of the “presence of natural persons.” Specifically, this meant that the personnel of Chinese companies that set up offices in Taiwan, including “persons in charge of private businesses, managers or experts” would be permitted to reside in Taiwan for three years and apply for an unlimited number of extensions.
Is this not tantamount to permanent residency?
Furthermore, the definition of “expert” in the agreement was not limited to persons holding specialist professional licenses. This vagueness was essentially throwing the door wide open.
If this unequal cross-strait service trade agreement had been passed, it would have had a direct impact on the livelihoods of the 5,835,000 employees of Taiwan’s approximately 1,148,000 service companies, which have an average of just 5.08 employees, and 85 percent of which are micro-enterprises with fewer than five employees. How could these small enterprises compete with China’s extremely large-scale state-run companies?
Many Chinese staff would have come to Taiwan as “bogus experts” and taken jobs away from Taiwanese workers. Thankfully, the student-led Sunflower movement of 2014 blocked the agreement from being ratified by the legislature.
In recent years, China’s economy has run into difficulties at home and abroad, and the situation continues to worsen. External problems include a trade and technology dispute between China and the US. Democratic nations are seeking to “de-risk” by establishing their own supply chains. These factors have prompted foreign and Taiwanese investors to leave China in growing numbers and return to their native nations or start investing in other nations.
The Chinese government gives priority to maintaining social stability, while promoting a policy of “state-run enterprises advancing while the private sector retreats.” Many Chinese real-estate companies have gone bankrupt. China’s recovery from the COVID-19 pandemic has been slow, leading to record-high unemployment. China is no longer the world factory that it was 10 years ago.
If Taiwanese voters elect the wrong president and legislators in next month’s elections, the unequal cross-strait service trade agreement would be quickly passed, after which large numbers of unemployed Chinese would be sure to come and work in Taiwan.
Having joined the WTO as a developing nation, China has for the past two decades enjoyed the benefits of trade remedies and exemptions to anti-dumping rules. It has received financial and technological aid from the World Bank and agricultural support from the UN Food and Agriculture Organization. Without these advantages, China could not have become the world’s second-biggest economy.
The US Senate Foreign Relations Committee in June approved the Ending China’s Developing Nation Status Act following the passage of a similar law by the House of Representatives in March.
This legislation expresses the US Congress’ annoyance about China not applying to the WTO to have its status changed to a “developed nation.”
In conclusion, we call for the following:
First, if the government and the candidates of various parties sincerely care about the public’s welfare, they should strive for Taiwan and China to resolve trade disputes and conduct negotiations related to the ECFA through the WTO with the equal status of developed nations.
Furthermore, they must not simply accept all the terms of the unequal cross-strait service trade agreement signed by Ma’s administration 10 years ago.
Second, voters should not be intimidated or swayed by the threats raised by China-friendly candidates.
A decade ago, Ma repeatedly told the public that Taiwan’s economy would be doomed to lag far behind that of South Korea if it did not quickly sign the cross-strait service trade agreement. When South Korea announced its average per capita GDP for last year it turned out that Taiwan is ahead of South Korea for the first time in 20 years.
Taiwan’s economic performance has been quite impressive thanks to the joint efforts of the government and public to upgrade the nation’s industrial production and diversify its trade.
The threats Ma raised in the past have not come to pass, and neither will the ones that are being posited today.
Jang Show-ling is an adjunct professor in National Taiwan University’s Department of Economics.
Translated by Julian Clegg
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