Last Sunday’s debate on a proposed economic cooperation framework agreement (ECFA) with China between President Ma Ying-jeou (馬英九), in his capacity as chairman of the Chinese Nationalist Party (KMT), and Democratic Progressive Party (DPP) Chairperson Tsai Ing-wen (蔡英文) centered on two basic positions.
The DPP’s stance was described as isolationist, compared with the KMT’s policy of opening up to China, which was countered as being risky. The two adversaries locked horns on the impact of an ECFA, as well as the decision-making and negotiation processes around it, although little was said on opening up service industries or the impact of foreign investment. All in all, the event was a positive development in Taiwanese politics, being the first time the leaders of the ruling and opposition parties have been able to engage in a rational public policy debate. It was also an opportunity for society as a whole to engage and participate in important policy decisions.
Ma opened the proceedings by defining the DPP’s policy as essentially closing Taiwan off from the world, as opposed to that of his own party, which has a more “open” policy. The DPP’s approach, he said, would see Taiwan marginalized, and offered no alternative to an ECFA. The KMT, by comparison, was attempting to turn Taiwan’s weaknesses around and carve out a position for it on the international scene. He said that the free-trade area formed between China and ASEAN (ASEAN Plus One), which took effect in January, would have a considerable impact on Taiwanese exports, adding urgency to signing a deal with China.
However, when Tsai said that ASEAN Plus One would not actually have a significant effect on Taiwanese exports at all, Ma simply replied that it was necessary for the government to fix the roof before it rained, in anticipation of ASEAN Plus Three in 2012. Tsai appeared to have gotten the upper hand on this point.
Tsai said an ECFA was based on an erroneous concept, and added that the impact of ASEAN Plus One on Taiwan would be limited, as opposed to the impact of an ECFA itself, which would be quite serious. She also said she shared the concerns of the governments of other countries, such as Japan and South Korea, of an East Asian strategic order with China playing a central role. These concerns made her consider it inadvisable to rush into signing a binding economic framework agreement that would lock Taiwan into complete trade liberalization with China. Much more preferable, she said, would be a multilateral agreement within the framework of the WTO, or a bilateral one along the lines of the Trade and Investment Framework Agreement (TIFA) between the US and Taiwan. This would allow Taiwan to maintain its economic autonomy while at the same time liberalizing trade. However, she failed to respond to reservations about Taiwan’s possible isolation in the midst of the economic consolidation of East Asia.
The second point of the debate focused on the assessment of how significant the impact of an ECFA would be on Taiwan’s economy; for this point, it was quite apparent that the government was not well prepared. Tsai said if an ECFA is signed, it would precipitate the biggest shake-up of industry and redistribution of wealth Taiwan had even seen.
Ma responded that Taiwan will have some control of the timetable of an ECFA, although Tsai’s understanding was that the terms of an ECFA were to be fully realized within 10 years, and that this would have a huge impact on Taiwanese industry. The debate then moved on to scrutinizing the effects an ECFA would have, with Ma concentrating on an overall assessment together with its effect on individual businesses, and Tsai focusing on problems with implementing the model as well as the costs to be incurred from the required reorganization of industry.
She accused the government of having inadequate policies in place to deal with the changes, Ma’s response being a standard reply that failed to explain the situation in any way.
The third part of the debate focused on the decision-making process and the problem of transparency. At this point, Tsai went on the attack, with Ma on the defensive. The DPP chairperson criticized the government’s current policy, backed up by policy analysis and examples of businesses that would be put at a disadvantage, with Ma countering that it was important to come up with progressive policies.
Tsai then accused the government of lacking transparency and avoiding public involvement in the process, refusing even to make the public aware of the findings of the Chung-Hua Institution for Economic Research. She said Taiwan’s future was being determined by a small number of people in Ma’s administration, to which Ma replied that his government was willing to accept the oversight of the national legislature, but that the DPP had refused to participate in this oversight process.
Next up was the suggestion that Ma was allowing financial groups to influence policy, with competing commercial interests present in the decision-making body. To this, Ma said the government was being monitored and that an ECFA was being drawn up with the interests of the whole country in mind.
Finally the debate turned to cross-strait negotiation tactics, and both sides had their points. Tsai accused Ma of revealing his timetable and of not being prepared for what would happen if the talks fell through, or of how to deal with Beijing’s political machinations. She also returned to the theme of lack of transparency, comparing the government’s ECFA policy with the furor that erupted after it suddenly decided to allow the import of banned US beef products. Ma reminded her that the DPP had failed to open up dialogue with China when it was in power, and that his own party had succeeded in this regard, adding that the KMT had made breakthroughs both with China and internationally.
It’s a shame, however, that the debate did not really touch on the idea of the impact an ECFA would have on foreign investment or the opening up of the service industries. Investment-driven trade provides the framework for much economic activity in East Asia, and so international investment is going to be very significant in the region. Ma did mention investment flows back from Taiwanese businesses operating in China, and also brought up the findings from my own work, while Tsai mentioned the possibility of more Taiwanese investment in China.
However, there was no systematic narrative or discussion on these. Service industries make up 73 percent of Taiwan’s GDP, and the draft proposal for an ECFA includes liberalization of services between China and Taiwan, so the impact on this sector is going to far outstrip that on the manufacturing or agricultural sectors.
Tung Chen-yuan is a professor at National Chengchi University’s Graduate Institute of Development Studies.
TRANSLATED BY PAUL COOPER
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