The process of negotiations surrounding the cross-strait service trade agreement was handled behind closed doors and its contents were not revealed until just before the signing of the agreement. The result has been a strong public backlash and with reference to Taiwan’s anemic economy, many people have described the agreement as the straw that will break the camel’s back.
The Taiwanese government took steps to ease regulations governing investments in China by Taiwanese manufacturers, which undermined the domestic industry and led to rising unemployment, falling salaries and a widening wealth gap. This threw the Taiwanese economy into crisis.
The signing of the service trade deal is going to make things even worse. If ratified, it would not only create a new wave of capital outflow, it would also leave the door to the Taiwanese market wide open. Chinese enterprises bringing in cheap Chinese goods — the next agreement to be signed is to be a goods trade agreement — other inferior products and cheap labor will dominate the market and squeeze out small and medium-sized Taiwanese companies from the service sector.
Domestic demand is limited, and more competition would only bring with it vicious price-cutting and downward pressures on quality. The majority of Chinese businesses are owned or controlled by the state, and even the chairpersons of listed companies are appointed by the Chinese Communist Party (CCP). These firms do not focus on efficiency like many private companies do and they are ready to slash prices simply to boost their market share. Taiwanese companies may not be able to resist such tactics, and in the end, this will lead to a reshuffling of the nation’s service sector. There will be a new boss in town.
From being small-business owners, Taiwanese would become employees of Chinese companies. This is the truth that lies behind the government’s deregulation of Chinese investments despite the desire to create employment opportunities.
Even more frightening is that the service trade agreement could be a shortcut for the many Chinese that want to move to Taiwan. It completely ignores Taiwan’s needs, there are no professional restrictions and the capital threshold is low. This could lead to the biggest influx since the Nationalist government fled to Taiwan in 1949.
While the Taiwan Solidarity Union (TSU) opposed the Economic Cooperation Framework Agreement (ECFA), many people took it all too lightly and believed President Ma Ying-jeou’s (馬英九) honeyed words and even thought that Beijing would offer Taiwan some advantages. Time has shown that there were no advantages to be had and that there were no guarantees for Taiwanese businesspeople investing in China under the deal.
The same applies to the service industry, as can be seen by the cases of the Shin Kong department store in Beijing and the SOGO department store in Chengdu. Since Taiwanese have already tasted the bitter fruits of the ECFA, why would they fall for the same trick again? Why would they let Ma walk all over them again?
The service trade deal is an unequal agreement. The scope of the Taiwanese and the Chinese economies are not on a par: the Taiwanese economy is free, while the Chinese is a planned economy in which the state controls the vast majority of companies. This is why ostensibly mutual deregulation in reality means unilateral Taiwanese deregulation. Chinese businesses may enter Taiwan without any restrictions at all, while Taiwanese companies that want to enter China are faced with layer after layer of obstacles.