Chung-Hua Institution for Economic Research chairman Cyrus Chu (朱敬一) published an article in the Chinese-language United Daily News on April 19 entitled “Reducing taxes to save the economy is rubbish” (降稅救經濟是放屁!). The article fulminated against academics and politicians who support the nonsensical idea that the economy can be saved by lowering taxes.
Chu says it would be surprising if businesspeople did not want tax reductions, but if senior government officials think lowering taxes will save the economy, those politicians who mistake nonsense for the truth deserve to be blamed.
As Chu says, only businesspeople and entrepreneurs have the opportunity to whisper in the ear of senior government officials. The disastrous policies they have promoted in the past, based on self-interest, are too numerous to mention — the proposed tax reduction is just the most recent example.
Not long after the Democratic Progressive Party (DPP) came to power, these people won the ear of then-president Chen Shui-bian (陳水扁) by saying deregulation was better than restrictions and that the isolation of Taiwan was a bad idea. They pushed to “recreate an economic surge” and restrictions were lifted on investment in China for 7,078 industrial products. This policy failed because businesspeople took advantage of cheap Chinese labor rather than upgrade their operations. Economic momentum faded and Taiwan’s international competitiveness fell. Unemployment soared, per capita income dropped and the DPP lost the 2008 presidential election.
Taiwanese businesspeople also promoted the idea of the three direct cross-strait links as a way to save Taiwan. This resulted in the “small three links” and direct cross-strait chartered flights. When President Ma Ying-jeou (馬英九) took office, he too believed that this was the way to go and this lead to the transformation of direct flights into domestic Chinese flights, undermining Taiwan’s sovereignty. Have direct flights saved Taiwan?
Taiwan has seen some Chinese tourists and investment during the past two years, but China has taken more than it has given. Taiwan has provided productive capital, for example, in the form of factories, while China’s contribution to Taiwan has been speculative investment in the stock market and real estate. As a consequence, real income has hit a seven-year low, unemployment is now the highest among the Four Asian Tigers, real estate prices are exorbitant and suicides are increasing.
The media has recently been full of reports on how an economic cooperation framework agreement (ECFA) will save the economy. It is understandable that industry would seek to promote an ECFA, since it does away with customs tariffs. Businesspeople are of course seeking to optimize their own self-interest, as Chu suggested. The more interesting question is why is China trying to stop Taiwan from signing free-trade agreements (FTA) with Asian countries, while, wanting to sign an ECFA with Taiwan as quickly as possible?
Is an ECFA purely an economic issue? Of course not. Once Taiwan signs it, and if China continues to prevent Taiwan from signing FTAs with other countries, then Taiwan is in hoc to China. This is the crucial issue.
Furthermore, would Ma accept an offer from China not to block Taiwan from signing FTAs with other countries if it accepts the “one China” principle? To do so would be a major step toward fulfilling China’s dream of making Taiwan a part of China. An ECFA could then be more appropriately called the “eventual colonization framework arrangement.” The question is, to what extent is such an outcome acceptable to the Taiwanese public?
Huang Tien-Lin is a former national policy adviser to the president.
TRANSLATED BY WU TAIJING
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