After Taiwan and China signed a cross-strait investment protection and promotion agreement on Aug. 9, the two governments said they should be able to sign an agreement on trade in services before the end of this year. However, we still have not seen the government’s blueprint for a cross-strait pact on trade in services. Hopefully, the government will be able to thoroughly review and integrate the advantages for Taiwan’s service sector, rather than implementing a small-scale partial opening because it is in a rush to sign an agreement. By doing so, it could avoid repeating the mistake of the Economic Cooperation Framework Agreement (ECFA), which has failed to bring any noticeable results, and thus also avoid missing another opportunity for Taiwan’s economic development.
The service sector accounts for nearly 70 percent of Taiwan’s GDP, and the number of people employed in the industry accounts for 58 percent of the total employed population, so the opening up of the sector is very important to our economic competitiveness. Take the China-ASEAN Agreement on Trade in Services as an example: China opens its market to ASEAN nations in 26 sub-sectors of five service sectors, including construction, environmental protection, transportation, sports and commerce. In return, the ASEAN countries open their markets in finance, telecommunications, education, tourism, construction, and medical services to China. In terms of the US-South Korea free-trade agreement, the two countries have pledged to open up their markets for cross-border logistics, finance, telecommunications and e-commerce.
According to the WTO’s analysis on the degree of each country’s openness to trade in services, China’s degree of openness ranks at 39.3 percent; its degree of liberalization in bilateral agreements on trade in services stands at 49.9 percent. Still, compared with the EU’s degree of openness of 64.4 percent, the US’ 68.8 percent, Japan’s 59.6 percent, South Korea’s 70.5 percent and Singapore’s 81.5 percent, China is very much lacking.
The nature of Taiwan’s economy is similar to that of the more developed economies, as indicated by the high percentage that the service sector accounts in terms of GDP. By comparison, the sector in China only accounts for about 43 percent of its GDP and it is possible to imagine Beijing will be unwilling to open its markets up to a cross-strait agreement on trade in services.
The Chinese service sector is not that liberalized and less than 20 percent of the country’s education, health and social service sectors have been liberalized. Compared with the degree of liberalization in the US, EU, Japan and South Korea, China lags behind by more than 10 percentage points in the computer, education, tourism, entertainment and auxiliary transportation sectors. Since the nature of Taiwan’s economy is similar to that of the economically advanced nations, Taiwan should demand that China open the above sub-sectors as much as possible.
Taiwan should not sign an agreement on trade in services with China in a hurry, or it might lose the opportunity of exploring the Chinese market to the advantage of its service sector.
China’s 12th Five-Year Plan runs from last year to 2015 and the country hopes to expand its service sector from 43 percent of its GDP to 47 percent. Through the signing of a cross-strait agreement on trade in services, Taiwan should seek to help local businesspeople seize this huge business opportunity, but the government must also remember not to focus on short-term political convenience by asking China to unilaterally open only some service sectors — this could give Beijing an excuse not to open up trade in services.
Tung Chen-yuan is a professor at the Graduate Institute of Development Studies at National Chengchi University.
Translated by Eddy Chang