Fri, Apr 30, 2010 - Page 8 News List

An ECFA is not related to regional trade groups

By Lai I-chung 賴怡忠

The debate on a proposed economic cooperation framework agreement (ECFA) 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) was supposed to clear up many questions about what the pact actually entails. The debate did, however, highlight the relationship between an ECFA, other free-trade agreements (FTAs) and economic consolidation in East Asia. Ma said that, in the wake of 59 FTAs signed in Asia, Taiwan needs to sign an ECFA with China to avoid being marginalized. The question is: What does signing an ECFA have to do with economic consolidation in East Asia?

When we talk about East Asian economic consolidation, we refer to ASEAN plus China, ASEAN plus Japan, ASEAN plus South Korea, and other countries signing up to the ASEAN-Plus-One model. There’s no suggestion that China is actually going to be at the center of these individual agreements. Actually, the countries who stand to lose most from an ASEAN-Plus-Three agreement are the ASEAN countries themselves, because they will be sidelined by the inclusion of China, Japan and South Korea. This is the primary reason that, with the emergence of the three individual ASEAN-Plus-One agreements, they have turned away from a single ASEAN-Plus-Three arrangement.

Ma says China has signed nine FTAs, and that failure to sign an agreement with China would isolate Taiwan from an East Asian economic zone, but look at who these signatories are: Pakistan, Peru, Chile, Singapore, New Zealand, Costa Rica, Hong Kong, Macau and ASEAN. There are also ongoing negotiations with Iceland, Norway, the Gulf Cooperation Council, comprised of the six Arab states of the Persian Gulf), and the Southern African Customs Union. With the exception of the ASEAN region, which of these would you call a major economic bloc? Talks on an FTA with Macau broke down in 2007, and the US, Japan and the EU are not considering negotiating such an agreement with China. In addition, the Confederation of Indian Industry is openly opposed to the idea. If Ma hadn’t rushed into signing an ECFA, South Korea would not have gone into negotiations with China about an FTA. If China is really trying to consolidate the Asian economy with these FTAs, how do you explain why it has chosen the countries listed above?

Ma is playing up the importance of ASEAN Plus China, but in 2006, Thailand complained that its agricultural industry had received little discernible profit from the ASEAN-Plus-China FTA early harvest list. Last year, Indonesia also advocated postponing the agreement’s implementation.

Non-inclusion in a free-trade zone does not constitute marginalization. The ASEAN Free-Trade Area was established in 1992, and since then, there has been a conspicuous rise in Taiwanese exports to ASEAN countries, year on year.

The signing of an FTA does not give a cast-iron guarantee against marginalization. The Central America Free Trade Agreement, signed in 2004, had no appreciable impact on the economies of Central American nations, just as Cambodia and Laos have failed to come through their economic difficulties as a result of the various ASEAN-Plus-One agreements.

Without careful preparation and attendant policies, blindly rushing into an FTA could spell disaster. This is why there have been so many calls for the contents of an ECFA to be made public. This debate was an opportunity to do that, but Ma dodged the issue by bringing up the importance of the East Asian economic bloc. What is he thinking?

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