Tue, Mar 31, 2009 - Page 8 News List

Relying on China is a dangerous road to take

By Wu Rong-i 吳榮義

On March 22, many people attended a forum held by Taiwan Thinktank in Kaohsiung City. They chose to participate in the event because they were worried about the “economic cooperation framework agreement” (ECFA) that President Ma Ying-jeou’s (馬英九) government is about to sign with China and the severe economic downturn and loss of political autonomy that Taiwan could suffer as a result.

From an economic perspective, any form of integration may trigger a decline in autonomy, especially when the economic scale of the two nations in question differ greatly. This is the exact reason why the UK is unwilling to join the “Eurozone.” Despite this, London remains the world’s biggest financial center.

After they both signed a Comprehensive Economic Partnership Agreement (CEPA) with China, the economies of Hong Kong and Macau seemed to prosper. What actually happened is that they lost their autonomy after they were made to rely on China’s economy. Last July Macau’s gaming stocks fell by 20 percent when Beijing announced tighter visa policies and tens of thousands of Macanese lost their jobs. This is a prime example of the dangers of signing economic agreements with China.

From a political perspective, if we were to lose our economic autonomy, the next step would be the formation of a politically based “one-China market.” In the face of much opposition from within Taiwan, the government has repeatedly reaffirmed that an “ECFA is a purely economic issue that involves neither politics nor sovereignty.”

The government has also emphasized that “we will open up our economy in whatever way is beneficial to us and not open up those parts that will be unbeneficial to us.” But academic theories and mounting evidence show that an ECFA is more than a purely economic issue it has deep political connotations.

Politics will always be a factor when a country establishes closer economic ties with another nation. For example, the first free trade agreement the US ever signed was signed with Israel, a country that has contributed little to the US economy. This shows that the US signed this agreement for political, not economic reasons.

Research gained from computable general equilibrium models shows China’s industries and overall exports will be negatively affected after signing an ECFA with Taiwan, so why is China still willing to do so? Obviously, China’s real goal is to use economics and trade to expedite unification.

I am not against Taiwan carrying out economic integration with other countries or areas. However, we need to make sure that things are equal and fair between both parties of any agreement. Taiwan’s biggest problem now is that it is overly reliant on China and it is simply too risky to put all our eggs in one basket. As soon as an ECFA is signed, more of Taiwan’s industries will move to China, where costs are lower. Once we become reliant on China, Beijng will be able to simply pull the plug on our economy to “punish” us if they hear any “rhetoric” from Taiwan that upsets them.

We cannot rely on China, which is a country with lower wage levels than us, to help develop our economy in the long-term. If we do rely on China and develop even closer relations with it, wages in Taiwan will drop and unemployment will rise rapidly. We will become increasingly entwined in Chinese politics. Once this happens, what will we have left to pass on to future generations?

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