The hottest economic issue at the end of last year was direct links. Simplistic or even twisted media reports have misled many Taiwanese people into believing that such links would provide a panacea to arrest the nation's economic decline and rising unemployment.
Due to China's vast population, wage increases in the country will be limited in the short or medium term. This, and the low taxes on land under Beijings's communist system have facilitated China's transformation into the world's powerhouse for traditional industries. As a result, conventional industries outside China -- and even some in the high-tech sector in need of labor or basic skills -- are being forced to lower costs to stay competitive. The eagerness of Taiwanese businesses, under the pressure of globalization, to set up factories for mass production in China simply follows this trend.
But do their expectations tally with national interests?Unfortunately, the answer is no. The trumpeting of direct links, charter flights and so on may well be nothing more than grandstanding by politicians.
To understand how direct links will affect Taiwan's traditional industries, I conducted some surveys of the textile industry, one of the principal traditional industries. Of the 15 midstream companies surveyed, eight held negative views about direct links, six were positive and one declined to comment. Four of the 15 companies have set up shop in China.
The positive views that emerged from this survey in terms of the likely effects of direct links on investments and employment were: First, only by operating in China in the context of a global business strategy can businesses minimize investment risks and create a niche for themselves.
Second, only when products can be transported directly and transportation costs are drastically lowered will domestic investments and employment opportunities increase.
In contrast, their negative opinions were: First, prospective investors in the Taiwan market will adopt a wait-and-see attitude toward the cross-strait political situation, postponing investment for the time being. In the meantime, those companies concerned primarily with labor costs will accelerate their move to China, creating a huge demand for capital to finance operations across the strait.
Second, domestic investment will decrease and unemployment will continue to climb.
The respondents' answers also reflected the fact that China's decision to open up only Fuzhou, Fujian Province, to direct air-passenger transportation will make for a less beneficial direct link than that which already exists between Hong Kong and Taipei because Hong Kong is a major international flight hub whose link with Taiwan enables Taiwanese businesspeople to fly from Hong Kong to anywhere in China and beyond. Fuzhou airport's range of flight connections pales in comparison.
From this point of view, direct flights between Taipei and Fuzhou are of little significance. Respondents concluded that allowing goods to be transported directly to China would be more beneficial than allowing passengers to travel non-stop.
My college students were shocked when I presented the survey results to them since most TV reports and newspapers have claimed that direct links could salvage the economy and spare them the worry that graduation may mean unemployment.
I would hope that politicians do not govern simply on the basis of what they read in the newspapers. Policy must be made with mature consideration to serve the interests of all the people.
Tsai Chi-yuan is an associate research fellow at the Academia Sinica.
Translated by Jackie Lin
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