Many economists strongly oppose the government-proposed economic cooperation framework agreement (ECFA) with China, saying it would lead to the migration of local businesses and undermine Taiwan’s sovereignty.
At an academic forum organized by the Taiwan Economic Association (台灣經濟協會) and the Economic Research Center at National Taiwan University (NTU) on Friday, professors of economics panned the cross-strait trade pact as poisonous to Taiwan’s economy.
Kenneth Lin (林向愷), a professor of economics at NTU, underscored the adverse impact of signing an ECFA with China on domestic investment, something the government has failed to consider, he said, by citing the “hub-spoke” scenario described by Nobel laureate Paul Krugman.
“Implementing the ECFA with China without signing free-trade agreements [FTA] with other major countries would lead Taiwan to fall into a ‘hub-spoke’ trap, with China being the hub and Taiwan the spoke,” Lin said.
“Under this distribution network, a preferential trade arrangement exists both between Taiwan and China and between China and ASEAN, but there is none between Taiwan and ASEAN,” he said.
As a result, Taiwan would be further marginalized and the result could be “a second business exodus,” as local businesses are forced to move to China to enjoy the preferential trade arrangements with ASEAN that Taiwan doesn’t have as a result of Chinese interference, he said.
Wang To-far (王塗發), an adjunct professor of economics at National Taipei University, told the forum that an ECFA was virtually a replica of the closer economic partnership agreement between Hong Kong and China and an attempt to complete the “one-China” market.
“Signing an ECFA means that the Taiwanese economy will rely even more on China and allow the Chinese government to control Taiwan’s economic development,” Wang said. “If cross-strait economic and trade policies were to be unified in the one-China market, would Taiwan’s sovereignty still be assured?” he said.
Steve Lin (林祖嘉), an economics professor at National Chengchi University, however, said that many opposed an ECFA for political reasons rather than economic concerns, adding that Taiwan cannot disconnect from the global economy just because many countries have already signed FTAs with each other.
In addition to the controversy surrounding the signing of an ECFA with China, the economists criticized the model used by the Chung-Hua Institution for Economic Research (CIER) that assessed the ECFA as unsuitable for economic conditions in Taiwan.
Chen Shih-meng (陳師孟), a part-time economics professor at NTU, said that the model falsely assumed Taiwan’s economy always has full employment and as such failed to reflect economic reality.
Kenneth Lin agreed, saying that the assessment, which found that the inking of a trade pact with China, would lead to an increase of 1.6 percent in GDP and the creation of more than 260,000 jobs, couldn’t be taken seriously.
“While the GTAP [global trade analysis project] is being used by many nations in the world, it doesn’t necessarily mean that it is applicable to Taiwan ... [The CIER] inputted unrealistic assumptions which then enabled them to jump to conclusions that are favorable to the government’s stance,” Wang said.
CIER research fellow Liu Da-nien (劉大年) admitted that there were restrictions to the GTAP model, but stressed that the government should and indeed would do all that it could to mitigate the negative effects of implementing an ECFA with China.
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