It has been a year since the Economic Cooperation Framework Agreement (ECFA) was signed.
Fresh economic data from the first half of this year show that neither in terms of export competitiveness, the ability to attract foreign investment and generate domestic investment, or overcoming difficulties in taking part in the East Asian Economic Integration Regime, has the ECFA had the effect that President Ma Ying-jeou (馬英九) said it would have at a press conference on July 1 last year.
It also shows that Taiwan’s economic vitality continues to decline and this is very worrying. The government should take a good look at the strategy for Taiwan’s integration into the global economy and speed up the promotion of structural changes to Taiwan’s domestic economy so as to strengthen Taiwan’s international competitiveness.
In terms of export competitiveness, Taiwanese exports to China grew by only 10 percent in the first half of this year, 51.9 percentage points less than the same time last year. Only 18.8 percent of exporters of the products on the ECFA early harvest list made use of the preferential tariffs available for those products, while the growth rate of exports to China for all products on the early harvest list was only 13.3 percent.
Also, because Taiwan’s exports to China declined by much more than exports to other nations, exports to China fell from 43 percent of Taiwan’s overall exports last year to 40.5 percent this year. This is 0.3 percentage points lower than during the first half of 2008, before the global financial crisis.
In terms of Taiwan’s share of the Chinese import market, Taiwan had a 12.9 percent share in 2003. This gradually dropped and by last year, Taiwan’s share had shrunk to only 8.3 percent. During the first half of this year, this figure dropped again, to 7.4 percent. Looking at the situation in terms of half-year time frames, it shows that Taiwan’s share in the Chinese market has continued to fall from 11.1 percent in the first half of 2006 to 8.2 percent in 2009.
However, after ASEAN Plus One (China) came into effect, Taiwan’s share in the Chinese market increased to 8.6 percent in the first half of last year, but this dropped again to 7.4 percent in the first half of this year after the ECFA early harvest list went into effect, the lowest figure since 1993. The ECFA obviously has done nothing to reverse the trend of Taiwan’s weakening competitiveness in the Chinese market.
In terms of attracting foreign direct investment (FDI), after Ma came into office, FDI in Taiwan dropped by 46.4 percent in 2008 to US$8.2 billion, and by another 41.8 percent in 2009 to US$4.8 billion. Last year, even though the global financial crisis had subsided, this number dropped another 20.6 percent to a mere US$3.8 billion, only just over half the average of US$7.14 billion during the eight-year administration of the Democratic Progressive Party (DPP). Taiwan’s share of global FDI dropped for three consecutive years, from 0.37 percent in 2007 to 0.20 percent last year. In the first half of this year, FDI in Taiwan grew by only 2.3 percent to US$2.27 billion, still a relatively modest amount. Because of a highly competitive international environment, there has been no substantial increase in foreign investment in Taiwan even a year after signing the ECFA.