Sun, Dec 27, 2009 - Page 8 News List

Pros, cons of a cross-strait ECFA

By Lin Wuu-long 林武郎

The Ma administration’s push for an ECFA is pragmatic. However, it has not alleviated growing concerns over Taiwan’s increasing economic dependence on China or over Chinese efforts to use economic measures to unify with Taiwan under Beijing’s “one China” policy.

More recently, just over 70 percent of people surveyed wanted a referendum on an ECFA. Taiwanese therefore want the right to decide on an economic union just as Europeans had the right to vote on joining the EU.

Opponents to an ECFA raise several points.

One convincing point involves sovereignty. As former president Lee Teng-hui (李登輝) has suggested, an ECFA could be part of a Chinese plot to hijack Taiwan economically and thus enforce unification. Lee has also stressed the correctness of the policy direction during his presidency that Taiwan ought not engage in direct talks with China until it has democratized.

Second, there is growing concern over the possible negative impact on small and medium-size enterprises. The organizing secretary of the Hong Kong Confederation of Trade Unions, Vincent Sung (宋治德), said during a symposium in Taiwan that the Closer Economic Partnership Arrangement (CEPA) signed by Hong Kong and China in June 2003 had only benefited multinational corporations and a minority of special interest groups, and had not revitalized the local manufacturing industry nor generated an increase in wages. In Hong Kong, employment in manufacturing fell from 170,000 in 2003 to 140,000 in 2007, while exports fell by 1.1 percent in 2006 and by 19.1 percent in 2007. He urged Taiwan’s government to consider this point before signing an ECFA with China.

Third, opponents to an ECFA are not just ideological. Their reservations are also built on practical aspects of investment. The following illustrates three different, but related, matters.

China prohibits individuals from investing abroad. That is, almost all Chinese investment abroad uses state-owned capital, which draws on the political influence of the Chinese Communist Party. In case of China’s strategic withdrawal of investment, Taiwan must be prepared to take over key businesses in the interests of national security.

Two, South Korea has often been cited in the debate because that nation and Taiwan have had similar processes of economic development. Taiwanese businesses have diverted investment from the domestic market to China. As a result, domestic investment as a percentage of GDP has averaged less than 20 percent over the past eight years.

By contrast, the percentage in South Korea was between 25 percent and 30 percent, or 5 percent to 10 percent higher than Taiwan. The DPP has thus been proposing something similar to the present South Korean government’s policies on limiting investment in China and reducing the impact of low Chinese wages. To a certain extent, the DPP’s position is similar to Lee’s “no haste, be patient” policy in 1996.

Three, according to the core-periphery theory, it is feared that China will gain from the hollowing out of capital and technology in Taiwan. The theory predicts that in interaction between a big economy and a small economy that share the same language and culture, all production components for capital, talent and technology in the small economy will gradually gravitate to the larger economy. Even distinguished Japanese writer Kenichi Ohmae, known for unending praise of China’s economic growth, warned that it would be unwise to allow China unlimited or unregulated investment in Taiwan.

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