Wed, Jul 07, 2010 - Page 8 News List

The ‘early harvest’ list numbers do not add up

By Lin Cho-shui 林濁水

Premier Wu Den-yih (吳敦義) recently commented on “the beauty” of Taiwan’s Economic Cooperation Framework Agreement (ECFA) early harvest list.

President Ma Ying-jeou (馬英九) and his government view the ECFA as an enormously important undertaking and the early harvest list as a massive victory.

However, US economist Lester Thurow cast a damper on the government’s joy when he said the ECFA is not all that important and that the key to Taiwan’s competitiveness lies in innovation.

After hearing Thurow’s comments, the Ma administration, which has consistently placed its hopes on China, said that now the ECFA has been inked, the government will present innovative industry strategies this month.

The problem is that most countries start with an industry development strategy and then negotiate trade agreements with other nations based on that strategy. That’s what China did when negotiating the ECFA with Taiwan.

Beijing is now taking energy conservation and carbon reduction seriously and recently announced that some export tariff rebates will be canceled for industries that consume vast amounts of energy such as the iron and steel industries. It was thus only natural for China to generously allow Taiwan to include iron, steel, cement and metal products in the early harvest list.

Because Beijing is upgrading its industries, its industrial strategy is aimed at replacing old industries with newer ones. Panels, high-end machine tools, petroleum refining and solar power are all important industries for future development. That is why China ignored Ma’s requests to include the first three of these items on Taiwan’s early harvest list. As for solar power, China has crucial raw materials such as rare metals and silicon, which were also excluded from Taiwan’s early harvest list.

Panels were not included because this will force Taiwanese businesses to invest in the Chinese panel industry. Materials such as polyamide, polycarbonate, polyoxymethylene, polybutylene terephthalate and polyphenylene oxide, synthetic rubber and synthetic fibers, as well as select high-end precision machinery items were also excluded in order to give China more control in upgrading these areas as it sees fit.

In addition to economic strategies, China has political strategies, and put in a great deal of effort to come up with a set of positive numbers to win over the hearts and minds of the Taiwanese. Petrochemicals were not listed on the early harvest list, along with the aforementioned resins, plastics and fibers.

Instead, Beijing reduced tariffs on products already as low as 1 or 2 percent and allowed some machine tools in areas where Taiwan is no longer competitive, just to make the numbers look better without making any real effort.

China had its political and economic strategy clear from the start and sent experts to negotiate with Taiwan. In contrast, the Ma administration set a deadline for signing the pact and allowed government officials to become too passive.

Only now is the government confident enough to turn around and promise the rolling out of a new industrial strategy. Unfortunately, even this strategy is in danger of being controlled by China. The government is highlighting the numbers on the list in an attempt to demonstrate that it has done its due diligence, when the truth is that it has sold itself and the rest of us down the river by allowing China to get exactly what it wanted.

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