With the legislature set to start reviewing the cross-strait service trade agreement this week, the Democratic Progressive Party (DPP) has vowed to keep a close eye on proceedings and reiterated its demand that the pact be renegotiated, while the Chinese Nationalist Party (KMT) maintains that the deal must be approved by the end of the current legislative session.
With both sides having strong opinions on the matter and refusing to budge, it is important that all parties get back to basics. Perhaps all legislators should ask themselves the following questions: If the trade agreement is passed, how will it benefit the average income earner? Will real wages increase as a result? Will it benefit small and medium-sized enterprises and micro-sized businesses? Will it facilitate Taiwan’s access to Trans-Pacific Partnership (TPP) negotiations and the Regional Comprehensive Economic Partnership (RCEP)?
Regarding the first and second questions, experience shows that the service trade pact will not be good for average wage earners, which are the vast majority of Taiwanese. When President Ma Ying-jeou’s (馬英九) administration was promoting the Economic Cooperation Framework Agreement (ECFA), it said the pact would help keep the supply chain in Taiwan and also help attract foreign investment.
However, after the ECFA came into effect in September 2010, the ratio of exports produced overseas by Taiwanese companies increased from 50.93 percent to 54.08 percent as of December last year. From 2010 through last year, the nation received just US$19.3 billion in foreign investment, compared with the period from 2006 through 2009, when that figure exceeded US$42.5 billion. In other words, local industries kept moving operations overseas even after the ECFA was signed.
Furthermore, foreign investment has continually dropped, which is why the average real wage fell from NT$45,168 in 2010 to NT$44,739 last year. Given that the cross-strait service trade agreement is one of four major pacts under the ECFA umbrella, it is easy to see what will happen to real wages if this agreement comes into effect.
Regarding the third question of whether the service pact will benefit small and medium firms, the Ma administration has said that the deal would help open the Chinese market to the local the service sector. However, the vast majority of Taiwanese service providers are comparatively small in relation to their foreign peers, especially when compared with Chinese competitors.
Such local businesses also lack the capital, experience and skills to engage in multinational trade. Even if the service trade pact brings business opportunities to Taiwan, only large firms, which account for a small portion of the nation’s enterprises, will be able to profit, while their smaller counterparts will be left to deal with the challenges posed by an army of large Chinese competitors entering the service sector.
Turning to the fourth question, the Ma administration keeps saying that the legislature must approve the service deal as soon as possible because that will influence how other countries view the nation’s determination to join the TPP and the RCEP.
However, it has not said which countries have expressed doubts about Taiwan’s resolve to join these trade blocs.
Furthermore, in its recently released Trade Policy Agenda for this year, the US lists many bilateral trade issues that have to be resolved, but the cross-strait service pact is not mentioned once. Why would this be the case if the US is concerned about Taiwan’s commitment to joining the trade blocs?