After a series of under-the-table dealings conducted by the Chinese Nationalist Party (KMT), a service trade agreement with China was inked on Friday last week.
The immediate responses of Taiwan’s opposition parties and the public have been focused on what sort of impacts this agreement will have on the nation’s industries. By focusing on the economic side of things, they are totally missing the point that this agreement will have devastating political ramifications for Taiwan.
The name of this agreement itself is one full of political considerations aimed at misleading Taiwanese. Economic agreements between countries are mainly of two types: “trade” and “investment.”
Trade agreements are used in the manufacturing industry, while investment agreements are used mainly in the service sector because services are intangible and most can only be provided on the spot in the target country. Tangible goods, on the other hand, can be produced in one country and then sold overseas.
As a result, this latest cross-strait agreement should be more correctly called a “service investment agreement” instead of a “service trade agreement.”
President Ma Ying-jeou’s (馬英九) administration has no shortage of economic experts and they should be extremely clear about the true nature of this agreement.
The main reason why the government is trying to mislead people is because an investment agreement involves the exchange of people or labor, while a trade agreement involves the exchange of goods only.
To make it even clearer, the real plan behind this service trade agreement is to make it easier for Chinese to move to Taiwan in large numbers.
During these most recent negotiations, the majority of the things that China demanded Taiwan open up were “non-licensed” and “free-to-enter” parts of the service sector, with these including services like hairdressing, food and beverage, the transportation of goods, storage services, publishing and funeral services.
These “non-licensed” parts of the service sector have never been the main focus of international trade talks, mainly because these industries have a low-output value, requiring a relatively low level of skill. Combined with the fact they are labor-intensive, they thus have a minuscule impact on a country’s economic development.
Apart from China, it is very hard to imagine any other country that would demand that the Taiwanese government open up similar parts of the service sector for their nationals to invest in.
So, how is it that these “non-licensed” parts of the service sector became the main focus of this most recent round of cross-strait trade talks?
Once economic consideration is taken out of the equation, all that can be left is mere political scheming.
In the majority of countries, as long as a person has “legal residency status,” they can engage in any “non-licensed” job they want in the service sector.
To be precise, ever since trade started between Taiwan and China, countless numbers of Taiwanese businesspeople have been investing in businesses similar to the “non-licensed” type in China.
Because of the Chinese Communist Party’s “one China” policy, Taiwanese businesspeople do not have any problem when it comes to “legal residency status” in China.
While Taiwanese businesspeople are able to freely enter and leave China, there have been many obstacles to Chinese workers moving to Taiwan.
The real purpose of this services trade agreement is to use the name of “investment” to cover up the truth of Chinese laborers gaining legal entry into Taiwan.
With this agreement, Chinese laborers will be able to use investment as a way of obtaining legal residency status in Taiwan.
Investment in the service sector will merely be a front, with a massive influx of low-waged Chinese laborers being the real motive.
With this political motive in mind, it is very easy to see why China demanded that Taiwan open up the “non-licensed,” lower-level parts of the service industry.
First, China demanded that Taiwan open up parts of the service sector that are more labor-intensive because this will allow large amounts of Chinese laborers to move over to Taiwan.
Second, by opening up the less-skilled parts of the service sector, even average Chinese laborers without any specialized training will be able to move to and live in Taiwan.
Eventually, this agreement will end up mainly covering industries that require small amounts of capital, with families of average means in China being able to invest and move over.
It is foreseeable that once this agreement comes into effect, the nation will be hit with a massive influx of Chinese nationals, who use the name of “investment” to move and even settle down here, even when the firms they originally invested in stop operation.
This being the case, they will be able to continue to enjoy the nation’s various public services and infrastructure, even though they do not pay any taxes.
The small investments they make to move over to Taiwan will be of no help to the nation when it comes to the accumulation of economic capital.
The unskilled labor they provide will also be of no use to increasing the quality of Taiwan’s service sector.
Also, once the nation is hit with a huge influx of low-waged Chinese workers, unemployment, which is already a huge problem in Taiwan, will spread from the manufacturing sector to the service sector.
Ma is clear about the repercussions of a cross-strait agreement in service trade and this is why he is trying to use what he calls a “trade agreement” to pull the wool over people’s eyes.
He is obfuscating the huge social costs that an actual “investment agreement” is about to bring to Taiwan.
This is also why the government has focused on what parts of the service sector will be opened up and the related conditions for doing so.
Meanwhile, the opposition parties and the public have unfortunately limited their focus to trade issues.
They have only raised questions about the impacts this agreement will have on our industries, while totally ignoring the disastrous political ramifications it is likely to spell for the nation.
Tario Ong is a Canada-based commentator.
Translated by Drew Cameron
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