Mon, Jan 24, 2011 - Page 8 News List

Beans are spilled — ECFA is political

By J. Michael Cole 寇謐將

In fact, half a decade ago, Alex Liebman, then a doctoral candidate at Harvard University’s department of government, was telling the annual CAPS-RAND-CEIP conference on the People’s Liberation Army that while Taiwan was being “marginalized” in a new East Asian economic environment that was becoming increasingly integrated, it was not hurting economically.

Although Taiwan was not part of any regional trade agreement — a direct result of Chinese obstruction — it saw equal or even greater increases in its share of trade with China and ASEAN than countries that were signatories to those agreements, Liebman wrote. In other words, regional economic integration and free-trade agreements had little positive incidence on trade volume — the region as a whole saw trade increases with China because the Chinese economy was growing by leaps.

If, as Liebman wrote, regional trade agreements have an insignificant impact on trade, then Ma’s argument that Taiwan had no choice but to sign an ECFA with China lest it be “left out” of an increasingly integrated region following ASEAN Plus Three (ASEAN plus China, Japan and South Korea) was fallacious, as past experience shows us that trade would have continued to prosper even in the absence of such a pact.

Case in point, from 1998 until last year, the only two major economies in which Taiwan’s exports have steadily increased are China and ASEAN, from 22 percent to 45 percent and 10 percent to a little less than 15 percent of total exports respectively. For the same period, total trade between Taiwan and China (plus Hong Kong and Macau) went from US$32.07 billion in 1998 to US$125.7 billion last year (excluding Hong Kong and Macau, trade with China in 1998 was just US$4.9 billion).

Trade between Taiwan and ASEAN, meanwhile, went from US$24.5 billion in 1998 to US$58.3 billion last year, Ministry of Finance statistics show. For this year, trade figures between Taiwan and China are likely to further increase, though this will likely be the result of economic sweeteners by Beijing rather than a direct outcome of the ECFA.

Explaining the utility of trade agreements and regional integration in the absence of actual trade intensification, Liebman said that Beijing has encouraged integration for political purposes — that is, to reassure regional countries amid apprehensions surrounding its phenomenal economic rise, while at the same time reasserting its strategy of “peaceful development.”

Politics, therefore, rather than economics, is at the heart of Beijing’s support for regional economic integration. Integration is a conduit for dialogue, one that places China firmly at the center. Consequently, it would be naive to assume that when it comes to Taiwan — one of China’s “core interests” — Beijing would put politics aside and regard the ECFA as a purely economic agreement.

In fact, the Chinese leadership has made it very clear that the pact’s raison d’etre is first and foremost political, knowing fully well that agreement or not, trade across the Strait would continue to increase as China’s economy rises.

Obama and Clinton may not have intended it that way, but their praise for the ECFA unmasked Ma’s little charade and showed what the trade agreement really is — a means by which to institutionalize dialogue across the Strait, with politics as the ultimate aim.

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