Access to China’s services needed

By Tung Chen-yuan and Lin Yu-lung 童振源,林佑龍  / 

Fri, Dec 14, 2012 - Page 8

Negotiations for a trade agreement in services with China are almost finished. The likely result will be that China will go a bit further in deregulation than Taiwan, in order to solve some domestic Taiwanese political problems. However, on the whole, the extent of services trade deregulation between Taiwan and China will likely be rather limited.

Taiwan has not been able to leverage the economies of scale of China’s service sector, nor has it been able to properly open up its service sector to increase its competitiveness. This shows that President Ma Ying-jeou’s (馬英九) administration still views these negotiations from a political perspective and lacks a plan for negotiating for complete economic development. This could mean that Taiwan’s service sector will miss out on an opportunity for growth.

Apart from promising the WTO that it will open up its service sector, China has signed bilateral service trade agreements with Hong Kong, Macau, ASEAN, Singapore, New Zealand, Pakistan, Chile, Peru and Costa Rica, while also signing an early-harvest list with Taiwan as part of the Economic Cooperation Framework Agreement (ECFA), which opened up 11 types of services.

Quantitative analyses of China’s promise to open up its service sector show that it has opened up 37.1 percent of its service sector multilaterally, which is slighter lower than the average of 45 percent in advanced nations, but much greater than the 18 percent average in developing nations.

However, China has been more conservative when it comes to the bilateral opening up of its service sector. Apart from the opening up of its two special administrative regions of Hong Kong and Macau by 10.1 percentage points, China has only opened up bilateral trade in services to other nations by 2.6 percentage points. In addition, China has only opened up its service sector to Taiwan by 1.2 percentage points after signing the ECFA’s early harvest list, highlighting just how limited the opening up of China’s service sector has been.

The ECFA is merely a framework agreement and that makes the restricted opening up of trade in services on the early-harvest list necessary. At present, China has opened up the following service sectors to Taiwan: Computing services such as software implementation and data processing, natural science research and experimentation services, conference services, specialized design services, audiovisual services, hospital services, aircraft repair and maintenance services as well as some financial services. China has also extended the temporary professional licenses for Taiwanese accountants.

It has been reported that negotiations on a cross-strait service trade agreement only include talks on the deregulation of 50 to 60 items and the number of service sectors opened up may be even lower than that. By comparison, more than 80 service sectors have been opened bilaterally between China, Hong Kong and Macau. It can already be determined that Taiwan will not enjoy the same degree of access as Hong Kong and Macau.

Because the government has not released much information about the negotiations, the following suggestions for a negotiation strategy based on China’s opening up to other countries in the past can be made.

There have been reports that the Chinese service sectors that Taiwan will try to gain access to include the wholesale and retail sectors, logistics, finance, tourism, medical treatment, telecommunications, and film and television sectors.

However, Taiwan has not been granted access to many of the Chinese service sectors that other countries have access to, such as the real estate market, market research, management consulting, sports and other entertainment services, which are open to almost all other countries. Nor has Taiwan gotten access to services given to some other countries, such as consultancy services in science and technology, printing and publishing, cleaning services for buildings, environmental services, staff arrangement, intercity transport, travel agencies and travel services.

Apart from demanding that China open up the services that other countries have access to, Taiwan should also try to access those service sectors that China has only opened up to Hong Kong and Macau if it wants its service industry to have room to grow. These sectors include legal, accounting, information technology, telecommunications, construction, distribution, education, finance and social services, as well as hospitality management, tour guiding, qualitative and quantitative environmental testing, inspection of pollutants and various forms of transport services.

Furthermore, Taiwan should also demand that China open the key service sectors mentioned in China’s 12th Five-Year Plan to open up further niches for the development of Taiwan’s service sector. These sectors include finance and modern logistics services, services requiring highly skilled and commercial production, consumer services such as commerce, travel and sports, and newer parts of the sector like cultural enterprises, Chinese medicine, financial insurance and education, medical treatment and sports industries.

Given the information we currently have about the cross-strait negotiations, Taiwan is unlikely to be granted as much access to China’s service sector as Hong Kong and Macau have via their Closer Economic Partnership Agreement with Beijing.

Hopefully the government will think carefully about what it is doing, adopt appropriate negotiation strategies and not rush to complete the talks.

This is the only way Taiwan will be able to use a cross-strait service trade agreement to improve its economy and ease public concerns.

Tung Chen-yuan is a professor at National Chengchi University’s Graduate Institute of Development Studies. Lin Yu-lung holds a master’s degree from the institute.

Translated by Drew Cameron