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
There is much evidence that the Chinese Communist Party (CCP) is sending soldiers from the People’s Liberation Army (PLA) to support Russia’s invasion of Ukraine — and is learning lessons for a future war against Taiwan. Until now, the CCP has claimed that they have not sent PLA personnel to support Russian aggression. On 18 April, Ukrainian President Volodymyr Zelinskiy announced that the CCP is supplying war supplies such as gunpowder, artillery, and weapons subcomponents to Russia. When Zelinskiy announced on 9 April that the Ukrainian Army had captured two Chinese nationals fighting with Russians on the front line with details
On a quiet lane in Taipei’s central Daan District (大安), an otherwise unremarkable high-rise is marked by a police guard and a tawdry A4 printout from the Ministry of Foreign Affairs indicating an “embassy area.” Keen observers would see the emblem of the Holy See, one of Taiwan’s 12 so-called “diplomatic allies.” Unlike Taipei’s other embassies and quasi-consulates, no national flag flies there, nor is there a plaque indicating what country’s embassy this is. Visitors hoping to sign a condolence book for the late Pope Francis would instead have to visit the Italian Trade Office, adjacent to Taipei 101. The death of
By now, most of Taiwan has heard Taipei Mayor Chiang Wan-an’s (蔣萬安) threats to initiate a vote of no confidence against the Cabinet. His rationale is that the Democratic Progressive Party (DPP)-led government’s investigation into alleged signature forgery in the Chinese Nationalist Party’s (KMT) recall campaign constitutes “political persecution.” I sincerely hope he goes through with it. The opposition currently holds a majority in the Legislative Yuan, so the initiation of a no-confidence motion and its passage should be entirely within reach. If Chiang truly believes that the government is overreaching, abusing its power and targeting political opponents — then
The Chinese Nationalist Party (KMT), joined by the Taiwan People’s Party (TPP), held a protest on Saturday on Ketagalan Boulevard in Taipei. They were essentially standing for the Chinese Communist Party (CCP), which is anxious about the mass recall campaign against KMT legislators. President William Lai (賴清德) said that if the opposition parties truly wanted to fight dictatorship, they should do so in Tiananmen Square — and at the very least, refrain from groveling to Chinese officials during their visits to China, alluding to meetings between KMT members and Chinese authorities. Now that China has been defined as a foreign hostile force,
RSS