On July 26, when speaking on the subject of Taiwanese entrepreneurs attempting to make investments in China, President Chen Shui-bian (
In response, champions of the "go West" policy and pro-unificationists have argued that since the government is unable to deal with the matter effectively, it should simply give Taiwanese enterprises a free hand.
Clearly, it does not require any profound economic knowledge to counter such an argument.
If the police were unable to catch a bunch of burglars, for example, should they increase their efforts to bring them to justice, or should they instead simply legalize crimes against property?
But the supporters of the "go West" policy are right when they say that the power of the market is unstoppable. The government's efforts to stop Taiwanese businesses from "going West" will inevitably fail.
However, time plays a crucial role in allowing an economy to adjust itself. If the relocation of businesses to China were to take place over a period of one year, Taiwan would be unlikely to be able to deal single-handedly with issues including economic adjustment, employment levels, social welfare and taxation. But if it were to take place over 10 years, that is a different matter as Taiwan's economy would have enough time to make the necessary adjustments. If the government doesn't attempt to contain Taiwanese businessmen's urge to go west, we do not know what type of disaster the nation will have to face as a result.
As for the actual operation, effective management of the "go West" policy is really about the legitimacy of the government's control over the economy.
The total absence of economic regulation is not necessarily fundamental to an economy's operation, for economic freedom should not infringe on the economic freedom of others -- hence regulations against manipulation of the market.
The idea of freedom in economic behavior, even when referring to everyday activities, is conditional. We can trade freely domestically, but we must still conform to requirements regarding specifications and quality, and must also pay tax.
The same principle can be applied to the "go West" policy and cross-strait trade. Free trade is not the same as commercial anarchy. While making investments in China, Taiwanese businessmen should also abide by Taiwan's laws.
If a certain enterprise jumps on the "go West" bandwagon without stating how the capital is going to be used in China or invests illegally in industries that compromise Taiwan's economic interests, or uses the investments to evade tax, then clearly there is a failure of efficient management throughout the entire system.
In this situation, it is necessary that we conduct a thorough review of the policy, rather than make rash promises of further liberalization, for this can only lead to a betrayal of Taiwan's interests.
Lin Kien-tsu is director of the department of business management at Tamkang University
TRANSLATED BY DANIEL CHENG
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