The disastrous effects of the Economic Cooperation Framework Agreement (ECFA) appear to be spreading. Taiwan’s overall economic indicator in August flashed a yellow-blue light, signifying a slowdown, for the first time in two years. Despite this, President Ma Ying-jeou (馬英九) and his government continue to tell us that the ECFA is beneficial to the economy and that the post-ECFA period will be a “golden decade” for Taiwan.
However, the figures suggest that, precisely because of the ECFA and the Ma administration’s policy of tying Taiwan’s economy to that of China, the nation is headed for a long period of stagnation. People are going to have a hard time and the misery is likely to be prolonged.
There are some aspects of this issue worthy of reflection.
The first point is that the rate of export growth has fallen for several years now. In order to get the ECFA signed as quickly as possible, Ma’s administration decided to act in concert with one of the key aspects of China’s 12th five-year plan, which is to seek a breakthrough in emerging strategic industries. To that end, it has permitted Taiwan’s cutting-edge technology companies to invest in China, along with entrepreneurs who have access to advanced farming know-how. As a result, Taiwan’s exports to China are slowing as products made in China gradually take their place.
Exports to China in August were only 7.9 percent up on the same month last year. This compares very poorly with South Korea, whose exports to China grew by 21.2 percent over the same period. If Ma’s China policy continues unchanged, Taiwan’s share of China’s import market will fall further and job opportunities in Taiwan are certain to diminish accordingly. With too many hands available to do too little work, real wages are bound to fall and the only thing to go up will be the misery index.
The second thing to worry about is the outflow of agricultural know-how, which is causing farmers’ incomes to fall. On the face of it, the ECFA “early harvest” list of goods and services eligible for immediate tariff concessions or exemptions appeared to involve China conceding benefits to Taiwan, but actually the benefits nowhere near make up for the massive losses arising from the outflow of farming know-how. Competition from the “Taiwanese farmers’ enterprise parks” that have been set up in various parts of China has already led to a big fall in Taiwan’s agricultural and fisheries exports to Japan, and to a growing cross-strait trade deficit in farm produce.
The average income for farmers last year was NT$884,000 (US$29,100), which is NT$70,000 less than three years ago. If that trend continues, the agricultural sector could go bust, at great cost to society as a whole.
The third point is that financial resources keep flowing out of Taiwan and into China. The post-ECFA financial sector rush continues apace. One result is that financial institutions have recently been vying to raise capital, but their fund-raising projects keep running aground. This is a sign that Taiwan’s financial resources are ebbing away.
Although NT$93.8 billion has already been raised through Taiwan depository receipts to fund Ma’s dream project of an Asia-Pacific capital-raising center, only 15 percent of that has remained in Taiwan.
This trend is becoming so serious that before long the westward march of Taiwanese banks is going to make it harder for small and medium-size enterprises in Taiwan to get the loans they need, and those who suffer the most will be blue-collar workers, as usual.