It is not difficult to understand why misgivings about signing an economic cooperation framework agreement (ECFA) with China continue to mount even after the government last week released an impact study of the deal predicting positive results.
Simply put, the bottom line is a four-letter word: jobs. Ordinary people care more about whether they would still have a job after the signing of any cross-strait trade deal than they do about economists’ predicted increases in the nation’s annual GDP.
Economists at the Chung-Hua Institution for Economic Research (CIER), commissioned by the Ministry of Economic Affairs to conduct a study on an ECFA’s potential impact, said on Wednesday that the deal could increase Taiwan’s annual GDP growth by between 1.65 percentage points and 1.72 percentage points. The ministry claimed the increase might be even bigger if a multiplier effect is taken into consideration.
While the general pubic still has only a vague idea of the contents of the ECFA, the surprise in people’s responses to the CIER study lay not so much in their reaction to expected GDP growth or the projected increases of between 257,000 and 263,000 jobs per year, but in their reaction to the possible negative impacts on domestic manufacturers of products like towels, shoes, bedding and ceramics, on which the ministry did not elaborate.
It is normal to see discussions about the pros and cons of the ECFA or a formal free-trade agreement (FTA) with China. Such deals may allow some Taiwanese businesses, such as those in the petrochemical sector, to gain tax breaks from China. They may also facilitate export-oriented manufacturers and large corporations to take advantage of China’s massive market.
However, there is concern among a substantial number of Taiwan’s working population in locally-based industrial segments and small and medium-sized enterprises that they will be negatively affected by the deal because of a flood of cheaper Chinese goods on the market. These people will feel the deal’s negative effects in the near future.
People in Taiwan have long accepted the notion that free trade and market liberalization will create both competitive advantages and potential disadvantages. They certainly know trade-offs will have to be made in negotiating an ECFA, as with any trade agreement, based on the experience gleaned from Taiwan’s bid to join the WTO and talks with other trading partners.
It is also very clear that an ECFA with China would have political implications, as its establishment would be a prelude to a Taiwan-China FTA, which would hopefully imply China’s implicit acceptance of Taiwan signing similar trade pacts with other countries in the region, or even the US and in Europe.
The government should not emphasize just the positive side of cross-strait trade normalization. It should not blame the opposition parties for their opposition to an ECFA or speaking on behalf of the potential disadvantaged, because that is exactly how democracy works in a country like Taiwan.
Instead, a responsible government would introduce an emergency aid program for vulnerable segments before the ratification of any cross-strait trade pact. In addition to funding a social safety network for the disadvantaged, the program should aim at assisting local industries to upgrade and enhance long-term competitiveness.
The government should also tell the public why it thinks a cross-strait trade deal would not force Taiwan to tilt toward China or fall into the “one China” trap. For the sake of the national interest, the government should invite the opposition parties to help devise a timely safety mechanism to prevent these scenarios from happening.
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