ECFA, US beef: More empty words?

By Tung Chen-yuan 童振源  / 

Fri, Jun 22, 2012 - Page 8

Discussing the opposition parties’ recent protest over government policies, President Ma Ying-jeou (馬英九) said the national economy had no future unless the government eased the ban on US beef imports containing ractopamine residues.

The government criticized the opposition for its objection to easing the ban by saying Taiwan’s economic future was at stake. This was a case of choosing the lesser of two evils and the nation had no choice but to compromise for the greater good.

Ma would have Taiwanese believe that because South Korea has signed a free-trade agreement (FTA) with the US, Taiwan is doomed unless it signs one too.

Two years ago, he made a similar claim about the Economic Cooperation Framework Agreement (ECFA) during a debate with then-Democratic Progressive Party (DPP) chairperson Tsai Ing-wen (蔡英文).

It is now possible to see the extent to which the failings of the ECFA expose Ma’s flawed strategy and lack of determination.

First, the ECFA has been of limited use in boosting exports. Last year saw an increase of 8 percent in exports to China and only 9 percent growth in export volume for products on the “early harvest” list. Also, Taiwanese exports to China have fallen to 7.2 percent of the goods China imports, the lowest since 1993.

Despite Taiwan having no similar agreements with ASEAN countries, growth in exports to those nations last year was three times higher than the growth in exports to China. In the first five months of this year, exports to China shrank by 10 percent, compared with a 6.2 percent increase to ASEAN countries.

The ECFA has also not had any discernible effect on attracting foreign investment to Taiwan, while Taiwanese money continues to flow out of the country. When the ECFA was signed in 2010, the amount of foreign investment coming into Taiwan contracted by 29 percent, even lower than that going into Thailand, Indonesia and Vietnam. Last year, foreign investment in Taiwan was US$3.4 billion.

In addition, from 2008 to last year Taiwan experienced considerable cash outflows, the average annual amount being US$27.7 billion, with last year the most serious at over US$50 billion.

It was originally said that signing the ECFA might benefit FTA negotiations with Singapore. However, 18 months after talks with Singapore started, there are no tangible results. Moreover, even if we do sign an FTA with Singapore, trade between the two countries represents just 3.6 percent of Taiwan’s total trade, so the effect of such an agreement would be negligible.

Up to now, Taiwan has still not entered into FTA negotiations with its major trading partners: the US, Europe and Japan.

Council for Economic Planning and Development Minister Yiin Chii-ming (尹啟銘) has said that the ECFA was a framework agreement and never intended to have a significant economic impact. That is certainly not how Ma characterized it during a post-signing press conference. He claimed it was a big step in addressing Taiwan’s economic isolation; that it would make the nation a focus for foreign investment and invigorate domestic investment. In reality, the investment rate for this year is forecast to be 16.2 percent, a historical low.

Two years after the ECFA was signed, Taiwan’s situation has deteriorated. Ma and his government are now saying that the nation’s economic isolation will intensify if it fails to relax import restrictions on US beef.

It is true that Taiwan faces an economic crisis, but the government’s policies are flawed, its strategy is ill-founded and it lacks the resolve to grapple with the nation’s problems.

Will the US really be more willing to sign an FTA with Taiwan if the ractopamine ban is relaxed? Washington has never said as much, it has just reiterated that it would be prepared to resume talks on a Trade and Investment Framework Agreement (TIFA). A TIFA would of course be a prerequisite for a US-Taiwan FTA, but the problem is whether Taiwan will ever be in a position to secure a FTA with the US. Given that the public has serious concerns about the health implications of ractopamine, it is important to know whether, if this compromise is made now, there is a reasonable chance of getting an FTA further down the road.

If the US is willing to hold talks with Taiwan over a possible FTA, would the Ma administration be prepared to completely open up the economy? Even if the legislature relaxed the ban, a US-Taiwan FTA will still be a long way off when Ma finishes his second term. It is even possible that negotiations will not yet have started.

Tung Chen-yuan is a professor in the Graduate Institute of Development Studies at National Chengchi University.

Translated by Paul Cooper