A report published by the Chung-Hua Institution for Economic Research (CIER) showed that the effects of trade diversion and trade creation from signing an economic cooperation framework agreement (ECFA) with China would not be beneficial to Taiwan’s overall economic development.
After the signing of an ECFA, China’s exports to Taiwan would increase. Taiwan’s exports to China would increase, too, but this would have the effect of crowding out Taiwan’s exports to the US, Japan, Southeast Asia and Europe. This trade diversion would result in Taiwanese manufacturers losing market share to Chinese firms, which have lower production costs.
At the same time, it would make Taiwanese industries that enjoy comparative advantages heavily reliant on the Chinese market. The overall effect would be to make Taiwan’s economy even more dependent on China than it already is.
Besides, under the impact of zero tariffs under an ECFA, Taiwan’s electrical, electronics, medical equipment and other industries would be certain to shift their production to China to take advantage of the cluster effect, leading to a decline in production in these sectors in Taiwan. China would be the one to benefit from the trade diversion in these fields. Taiwan wants to develop its biotechnology sector, in which medical equipment is the field with the most potential. Unfortunately, as the institution’s report showed, the medical equipment sector is one of those that would suffer from the impact of an ECFA.
Electronics forms the foundation of modern technology, as well as the information and networking sectors, and is the cornerstone of a modern defense industry. These are the industries that attract Taiwan’s technical and scientific elite. They cause relatively little pollution but offer high profit potential. They are also areas in which Taiwan competes well with Europe, the US and Japan. It is hard to understand, therefore, why the Taiwanese government is willing to give up these industries in favor of high polluters like chemicals, plastics, machinery, upstream textiles, petrochemicals, catalysts and steel.
The CIER report does say that Taiwan’s chemicals, plastics, machinery, upstream textiles, petrochemicals, catalysts and steel industries would benefit from the trade creation effect of the proposed ECFA, but these are all relatively high-pollution industries with high external costs.
Besides, Taiwan does not have advantages in these industries compared with other countries. Over the past 50 years, these sectors have not been the focus of Taiwan’s development or professional training. So, while developing these sectors may gain Taiwan a share of the Chinese market, it would also make Taiwan a concentrated location for high-polluting industries within the greater China economic sphere.
One of the main reasons put forward by the government for signing an ECFA with China is that it would benefit the textiles sector. However, industries listed in a report published by the Ministry of Economic Affairs on July 27 as likely to suffer from the impact of an ECFA include many textile products such as stockings, shoes, underwear, towels, knitwear, bedding and swimwear, and these findings were confirmed by the CIER report.
Taiwan’s home appliance makers use Japanese technology, import components from China and assemble their products in Taiwan. With no tariff protection under an ECFA, this model would break down under competition from cheap equipment made in China.
Hsu Chung-hsin is an associate professor of law at National Chung Cheng University.
TRANSLATED BY JULIAN CLEGG
In the event of a war with China, Taiwan has some surprisingly tough defenses that could make it as difficult to tackle as a porcupine: A shoreline dotted with swamps, rocks and concrete barriers; conscription for all adult men; highways and airports that are built to double as hardened combat facilities. This porcupine has a soft underbelly, though, and the war in Iran is exposing it: energy. About 39,000 ships dock at Taiwan’s ports each year, more than the 30,000 that transit the Strait of Hormuz. About one-fifth of their inbound tonnage is coal, oil, refined fuels and liquefied natural gas (LNG),
To counter the CCP’s escalating threats, Taiwan must build a national consensus and demonstrate the capability and the will to fight. The Chinese Communist Party (CCP) often leans on a seductive mantra to soften its threats, such as “Chinese do not kill Chinese.” The slogan is designed to frame territorial conquest (annexation) as a domestic family matter. A look at the historical ledger reveals a different truth. For the CCP, being labeled “family” has never been a guarantee of safety; it has been the primary prerequisite for state-sanctioned slaughter. From the forced starvation of 150,000 civilians at the Siege of Changchun
The two major opposition parties, the Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP), jointly announced on Tuesday last week that former TPP lawmaker Chang Chi-kai (張啟楷) would be their joint candidate for Chiayi mayor, following polling conducted earlier this month. It is the first case of blue-white (KMT-TPP) cooperation in selecting a joint candidate under an agreement signed by their chairpersons last month. KMT and TPP supporters have blamed their 2024 presidential election loss on failing to decide on a joint candidate, which ended in a dramatic breakdown with participants pointing fingers, calling polls unfair, sobbing and walking
In recent weeks, Taiwan has witnessed a surge of public anxiety over the possible introduction of Indian migrant workers. What began as a policy signal from the Ministry of Labor quickly escalated into a broader controversy. Petitions gathered thousands of signatures within days, political figures issued strong warnings, and social media became saturated with concerns about public safety and social stability. At first glance, this appears to be a straightforward policy question: Should Taiwan introduce Indian migrant workers or not? However, this framing is misleading. The current debate is not fundamentally about India. It is about Taiwan’s labor system, its
RSS