An economic cooperation framework agreement (ECFA) may include cooperation in several areas, including industrial, agricultural and service industries, as well as capital and labor affairs. Regardless of how far reaching the aspects of an ECFA, the main goals will be to lower customs tariffs and deregulate markets. From this perspective, the direct consequences of such an agreement will be to increase the flow of products across the Taiwan Strait. This is also the perspective from which I want to discuss the impact of an ECFA on Taiwan’s trade status.
Taiwan’s economic development model is focused on exports. Without the export surplus, Taiwan’s economy would be in big trouble. Because the nation has maintained a trade surplus in recent years, it has also maintained a competitive edge.
In 2006, Taiwan’s trade surplus reached US$21.3 billion, in 2007 it was US$27.4 billion, in 2008, US$15.2 billion, and in January to August last year it reached US$19.5 billion. As a result of growing cross-strait trade exchanges, however, trade between Taiwan and China makes up an increasingly larger portion of the nation’s total foreign trade. In 2008, Taiwan’s China-bound exports reached US$99.57 billion, while imports stood at US$32.88 billion, giving Taiwan a trade surplus of US$66.69 billion. In the period from January to November last year, Taiwanese exports to China reached US$75.22 billion, while imports were US$22.87 billion, giving Taiwan a trade surplus of US$52.35 billion. Deducting this trade surplus with China from Taiwan’s total trade surplus converts the surplus into a deficit. In disregarding the principles of risk diversification, Taiwan is too dependent on its trade with China.
If Taiwan and China enter into an ECFA and lower customs tariffs to a certain level, cross-strait trade would be further intensified and this could bring large volumes of Chinese products into Taiwan. That in turn could gradually serve to eliminate the nation’s trade surplus. As Taiwan’s trade surplus with China decreases, the nation will experience a trade deficit. That would have dire consequences.
The East Asian financial crisis in 1997 erupted because Thailand and other Asian states were experiencing trade deficits that set off a chain reaction of financial collapse. These states were only able to save their economies thanks to capital infusions by the IMF and the World Bank. Taiwan is not a member of these financial institutions, so where could the nation turn if the same thing were to happen to the Taiwanese economy.
The current cross-strait trade relationship should really be in Taiwan’s favor, so it should be China that comes to Taiwan asking for an ECFA to balance cross-strait trade, while Taiwan should be procrastinating to maintain its advantage. This is not what is happening. Instead, it is Taiwan that is eager to implement an ECFA. This also carries many political implications that could cloud thinking on the issue.
There are those who say that the Taiwanese economy will suffer because ASEAN and China have already formed a free-trade area, and that if Taiwan and China sign an ECFA it would help bring Taiwan closer to being able to participate in ASEAN trade.
The situation is not as bad as that. The original six ASEAN states formed a free-trade area in 2006, lowering customs tariffs to below 5 percent. This did not have a great impact on Taiwan and the nation’s trade surplus with ASEAN is actually increasing. Trade with ASEAN nations has been growing since 2003, and Taiwan enjoys a trade surplus. When the global economic crisis hit in 2008, Taiwan’s foreign trade contracted — with the exception of its trade with ASEAN nations, where the nation still has a trade surplus of US$12.9 billion.
It is to be expected that the signing of an ECFA will see cheap Chinese goods flow into Taiwan. We must pay attention to whether that increase will lead to a trade deficit that would hurt even more small and medium-sized enterprises, setting off a wave of unemployment. We should also pay attention to whether the government is aware of the importance of diversifying risk and whether it has prepared a rescue plan.
Chen Hurng-yu is a professor at National Chengchi University’s department of history.
TRANSLATED BY PERRY SVENSSON
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
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
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