The government is inept, not evil

By Lin Cho-shui 林濁水  / 

Mon, Oct 29, 2012 - Page 8

Former health minister Yaung Chih-liang (楊志良) has said that the Labor Insurance Fund’s (LIF) NT$7 trillion (US$239 billion) deficit is the result of the deceitful activities of a fraud ring organized by two political parties, their legislators and big business. He may have used strong words, but certainly not too strong.

Twenty years ago, former legislator Ju Gao-jeng (朱高正) said that politics is “an advanced game of deceit.”

At the time, Taiwanese democratization was just getting underway and with every star politician still having a shining halo around their head, Ju’s statement was sneered at by everyone. However, today everyone is terrified by the impending bankruptcy of the LIF and no one dares challenge Yaung’s assertion.

Political deceit permeates every corner of Taiwan. The Labor Insurance Fund, the Civil Servant Pension Fund and the Health Insurance Fund are all about to go bankrupt, all for the same reason.

Very few people disagree with the view that President Ma Ying-jeou (馬英九) won the presidency thanks to two great lies: his “6-3-3” election pledge and the so-called “1992 consensus,” which he claimed were the only ways to solve Taiwan’s economic problems.

Both these lies are built on a common “theoretical” foundation: Trade liberalization is required to break through the Democratic Progressive Party’s (DPP) isolation of Taiwan and create prosperity by hitching Taiwan’s economy to China’s.

This may seem to make sense, but the economic strategy of South Korea over the past decade — which after having previously fallen behind Taiwan has now overtaken it — has been to direct all its efforts toward signing free-trade agreements (FTAs) with the US and the EU.

The general principle of this approach is that trade liberalization, while having a strong negative impact on weaker domestic industries due to a rise in imports, will cause stronger domestic industries to surge forward thanks to growing exports. This leads to a positive development and elimination process among businesses that creates the best possible overall effect.

Those sacrificed in the process will be cared for through a set of welfare policies. These were the general expectations when Taiwan joined the WTO, and huge amounts were set aside as subsidies for weaker companies.

However, South Korea was not satisfied with WTO membership and went one step further by signing FTAs with other countries.

Seeing South Korea’s strategy, Ma wanted to emulate it.

In choosing this strategy, South Korea was well aware that liberalization, in addition to offering great benefits, also incurs great costs. For example, they allowed the import of US beef despite strong local protests. However, decisiveness and daring is something that the Ma administration lacks.

During the first round of talks regarding the Economic Cooperation Framework Agreement’s early harvest list, the government did not dare push for the inclusion of panels, upstream petroleum products, advanced precision machinery, finished cars and other products where Taiwan enjoyed an advantage.

When it came to weaker industries, the government was unwilling to allocate a budget to help them through the transitional period as it did when Taiwan joined the WTO and instead only asked China to forego some of its benefits to help protect these industries.

China’s policy was both clear and bold: Do not give any advantages to superior Taiwanese industries, and let Taiwan protect industries that had lost their international competitiveness, terming it “foregoing benefits.”

This early harvest list was the exact opposite of the strategies other countries followed when negotiating FTAs. The reason for this is that the government lacked the competence to choose between economic liberalism and protectionism when the two clashed and instead greedily tried to obtain the advantages of both and the shortcomings of neither.

Having approved this list, which was enough to make business leaders cry, the Ma administration put on a happy face as it said that China had agreed to forego many benefits, once again playing the ringleader of the fraud ring. To make things worse, the opposition conceded that this was a very nice early harvest list.

The same thing occurred with the “three links.” The original plan was that following the opening up of the three direct links, the principles of a free economy would allow Taiwanese ports to become a transshipment hub for the Asia-Pacific region. However, due to the government’s inability to let go of Greater China economic nationalism, cross-strait sea routes were designated as domestic routes, thus excluding foreign ships.

The result was that the 97 percent of Taiwanese ships that fly a flag of convenience, as well as Maersk and other big shipping companies, were excluded from the cross-strait sea routes, causing Maersk to stop renting port space and blowing a hole in the transshipment hub dream. However, Ma continued the deceit, calling the opening of the three links a great success.

This inability to take decisive action under pressure and attempts to please everyone for the sake of minimal gains has done irreparable damage. In the end, the government has been forced to cover up its mistakes and continue the charade.

It is the long series of such major policies that has created this political fraud ring. It leaves one wondering if the government has turned into a gang of fraudsters not because it is evil, but because it is cowardly and incompetent.

Lin Cho-shui is a former Democratic Progressive Party legislator.

Translated by Perry Svensson