While discussions on the proposed cross-strait economic cooperation framework agreement (ECFA) are focused on what effects the agreement is likely to have on Taiwan’s economy, everyone has overlooked the potential effect on the trade activity of other Asian countries.
This effect will cancel the ECFA’s economic and trade benefits for Taiwan. Worse, it will make the ECFA a strong counterproductive factor that will stifle Taiwan’s trade and lead to its marginalization.
What I am talking about is the domino effect of such an agreement. Put simply, other Asian countries, worried about the threat posed to their exports by the ECFA’s trade diversion effect, will seek to offset this effect by signing a string of free-trade agreements (FTA).
In October, South Korea changed its long-held opposition to a China-South Korea FTA and agreed to the two countries actively negotiating just such an agreement. As some South Korean analysts explained, this surprising turnaround was prompted by the threat a cross-strait ECFA poses to South Korean exports to China, such as LCD display panels.
Japan, too, is making moves in response to the ECFA proposal. At a recent meeting of finance and trade ministers from Japan, China and South Korea, it was decided to start up government-industry-academia joint research on an FTA in the first half of the year. So, although an ECFA is concerned with trade and business across the Taiwan Strait, it may unexpectedly prompt the signing of an FTA between Japan, China and South Korea, something that has been on the drawing board for a long time. That could be followed by the establishment of an East Asian Free-Trade Area (EAFTA), that includes ASEAN nations, China, Japan and South Korea (ASEAN+3), something that Taiwan has feared for a long time.
Discussions about the feasibility of an EAFTA were held at October’s ASEAN+3 summit in Thailand. Previously, it was generally thought that there was not much chance of an ASEAN+3 FTA because of differences between China, Japan and South Korea, but now some Japanese analysts are suggesting that the planned ECFA between Taiwan and China could become a motive force for Asian integration.
Whether such a development will be good for Taiwan depends mainly on whether Taiwan can be a part of the East Asian integration process. More precisely, it’s a question of whether Taiwan can join the EAFTA. If Taiwan is prevented from joining it because of China’s interference, then Taiwan’s quest for an ECFA will have the self-destructive result of hampering exports. East Asian integration without Taiwan would lead to Taiwan’s complete marginalization.
Therefore, in trying to avoid the threat of an ASEAN+1 (China) FTA, Taiwan has prompted an even greater threat — that of an ASEAN+3 EAFTA. Some businesses that are urging an early signing of an ECFA expect that it will make them more competitive in China. What they have not thought about is that signing an ECFA will not only fail to give them an advantage in the Chinese market, but will also cause them to lose out in all other markets in East Asia.
For China, on the other hand, an ECFA will enable it to attain a strategic position in the East Asian region that has long eluded it. Since 2001, China has made the establishment of a Southeast Asian free-trade area the supreme guiding principle of its economic and trade strategy, with the aim of using this free-trade area to expand its influence in Southeast Asia.
Despite progress in signing an FTA with ASEAN, however, China has for a long time been unable to move forward on an FTA with Japan and South Korea, mainly because of historical conflicts between the countries, as well as their misgivings about China. Clearly, an ECFA between Taiwan and China will help China break this deadlock, making such a pact the master key to China’s overall economic and trade strategy.
China will use the ECFA to push for the ASEAN+3 EAFTA, with the ultimate aim of consolidating its leading position in the East Asian region. Clearly, signing an ECFA would bring enormous benefits to China, much greater than the benefits Taiwan stands to gain from it.
Equally, China would suffer more from not signing an ECFA than Taiwan would, and that is a bargaining chip in Taiwan’s hands. There is no need, then, for Taiwan to bow and scrape, and give China whatever it wants. If we don’t use this bargaining chip now to ensure that the pact includes a guarantee that Taiwan will be able to sign FTAs in the future, then, once the agreement is completed, Taiwan will have no further chance to obtain such an undertaking from China.
The government should not naively think that China, having signed an ECFA, will then automatically stop blocking Taiwan from signing FTAs with other countries. Taiwan’s negotiators should not refrain from dealing with this issue at the ECFA negotiations for fear of causing unnecessary complications. It is unrealistic to think that this issue can be left to the future, so we should not be panicked into making the wrong decision now.
If this problem is not dealt with in the ECFA text, it will give China the green light to go on obstructing Taiwan and the result will be that all the positive effects of an ECFA will become negative. It would make the signing of an ECFA worse than pointless by putting Taiwan’s economy in a more difficult situation than ever before. We should expect better than that from any government.
So, in the course of the ECFA negotiations, the most important thing for Taiwan is not the ECFA itself, nor is it short-term gains or lower tariffs. The key point is to include in the pact a guarantee of Taiwan’s right to sign FTAs. Only if that is done will the ECFA be of benefit to Taiwan’s economic development.
Chao Wen-heng is an associate research fellow at the Taiwan Institute of Economic Research.
TRANSLATED BY JULIAN CLEGG
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under