President Ma Ying-jeou (馬英九) expressed hope on Sunday that the two sides of the Taiwan Strait would be able to sign an economic cooperation framework agreement (ECFA) by the end of this year or next year at the latest.
When considering this issue, Ma should take into account the fact that China’s position in the global economy is changing quickly.
After losing its low cost advantage, China has been replaced as the “world’s factory” by India and Mexico.
Ma could learn a lot by reading a recent article by economics professor Kenneth Lin (林向愷) called “Only by rejecting an ECFA can Taiwan avoid being marginalized” and published in the Liberty Times (the Taipei Times’ sister publication) on Sunday.
According to AlixPartners, an international business consulting firm, India and Mexico have taken over China’s role as the “world’s factory” over the past six months.
NARROWING GAP
In addition, the cost gap between the US’ and China’s manufacturing industries has narrowed to a mere 6 percent.
In the past, multinational companies could save more than 30 percent of costs if they purchased or manufactured products in China, but those days are gone.
In light of these changes, it’s questionable whether Taiwan must rely on China and whether it is wise to do so.
In his article, Lin makes extensive use of quotes from last year’s Nobel laureate in economics, Paul Krugman, in the areas of regional trade relationships, the hub-and-spoke effect and choice of industrial location.
Lin also cited Krugman’s 1991 book Geography and Trade, which discussed how Canada increased its economic and trade autonomy to reduce its reliance on the US.
He went on to reference a 1996 paper by Krugman suggesting that countries with smaller markets should reduce the cost of trade with countries outside their economic integration zone to reduce the impact of their domestic industries relocating to countries with bigger markets within that zone.
Lin’s article might be the most comprehensive piece published in the local media discussing the ECFA issue from Krugman’s perspective since his recent visit.
ECONOMIC AUTONOMY
Putting aside the unification and independence issue, the primary and unshirkable responsibility of the head of state is the effort to build economic autonomy. But the ECFA is a blueprint for much closer cross-strait economic and trade relations.
If there are worries that the agreement would cause Taiwan to compromise its economic autonomy, then we must discuss this issue more openly and work hard to create a stronger consensus.
We should also legitimize this policy through a referendum, just as many other countries debate and hold referendums before signing free trade agreements.
SHARED COMMUNITY
Although different groups will hold their own opinions on Kaohsiung Mayor Chen Chu’s (陳菊) reference to “President Ma Ying-jeou of the national government” during her visit to China last week, this development carries a certain significance in that it helps to build a consensus on Taiwan as a shared community.
Ma should approach the ECFA issue with an open mind and take into consideration the views of all Taiwanese, including the opposition.
Lin Kuo-hua is a political commentator.
TRANSLATED BY EDDY CHANG
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