Economic liberalization needed

By Tung Chen-yuan 童振源  / 

Thu, Apr 04, 2013 - Page 8

It was in February 2009 that President Ma Ying-jeou (馬英九) put forward the idea of signing a cross-strait Economic Cooperation Framework Agreement (ECFA), saying that it would open the door for the nation to take part in Southeast Asia’s economic integration and enable relations between the two sides of the Taiwan Strait to develop in a positive direction.

However, two-and-a-half years have passed since the ECFA came into effect and although the agreement has created favorable conditions for some industries, its overall benefits have been limited.

While talks on cross-strait trade agreements are proceeding at a snail’s pace, Southeast Asian economic integration has been speeding up and Taiwan is still not part of the process.

There are three large-scale economic integration agreements currently under negotiation in the Asia-Pacific region. They are the Trans-Pacific Partnership (TPP), based on the existing Trans-Pacific Strategic Economic Partnership Agreement and spanning the whole Asia-Pacific region; a trilateral free-trade agreement (FTA) between China, Japan and South Korea in Northeast Asia; and a Regional Comprehensive Economic Partnership, which seeks to integrate Asian economies.

If any of these three agreements are completed, it will radically change the Asia-Pacific’s economic scene. However, Taiwan is not involved in any of them and has not asked to take part in negotiations, which is seriously depleting the nation’s economic advantages.

Taiwan and China signed the ECFA in the middle of 2010. At the beginning of the following year, Taiwan started talks about economic integration agreements with Singapore and New Zealand, and launched negotiations about a cross-strait agreement on trade in services, but as yet, no agreements have been reached.

Singapore and New Zealand together only account for 3.8 percent of the nation’s total trade, and the extent of deregulation under a cross-strait agreement on trade in services may be limited. Even if all these agreements are signed, they will be of limited assistance to Taiwan and will not be enough to get it out of isolation.

In contrast, various countries in East Asia have been speeding up their FTA negotiations. For example, Taiwan’s main competitor, South Korea, has already signed FTAs with nine economic entities, including ASEAN, India, the EU and the US, and is negotiating FTAs with a further eight economic entities, including China. Notably, South Korea is always keen to bring its FTA talks to an early conclusion. Its negotiations with the US only took 15 months and those with the EU were concluded after 27 months.

An FTA is not a framework agreement; it requires both sides to fully liberalize their trade practices. The nation cannot expect other countries to make unilateral concessions in its favor — rather, it may have to make appropriate concessions to less developed economies.

Ma has suggested that Taiwan could join the TPP in eight years’ time, but that looks like pie in the sky, and there has been no sign of concrete planning and progress on the part of the government.

If the Ma government wants to proceed smoothly toward signing FTAs with other countries, it needs the political will to liberalize the economy. The US government and those of EU countries have reminded Taiwan of this on numerous occasions, but the Ma administration is still bogged down by protectionist tendencies.

China is also no longer willing to make further unilateral concessions to Taiwan. Chinese Minister of Commerce Chen Deming (陳德銘), who is expected to take over as chairman of China’s Association for Relations Across the Taiwan Straits, said at a press conference during the Chinese Communist Party’s 18th National Congress in November last year that Taiwan should put the principle of equality into practice by giving most-favored-nation treatment to Chinese goods in cases where its markets are open to similar goods from other countries.

At present, the nation still imposes unilateral restrictions on imports of 2,126 product categories from China, yet it is asking China to make unilateral concessions to it during negotiations about a cross-strait services trade agreement. No wonder Chinese officials involved in the negotiations have privately criticized Taiwanese officials as “brazen and shameless.”

The Ma government should avoid repeating the experience of the ECFA, whose benefits have not been felt by most Taiwanese. The ECFA was only a framework agreement when it was first signed and called on China to make unilateral concessions to Taiwan for the sake of short-term political expediency. This has made the ECFA ineffective. In future, if 90 percent of product categories are targeted for liberalization in a cross-trade agreement, the nation will have to liberalize trade in 9,645 product categories.

For cross-strait commodity and service trade agreements to produce clearly tangible benefits it will require wide-reaching deregulation on an equal basis. If the nation is going to deregulate on such a big scale, the Ma administration will have to be determined to push forward economic liberalization and will need to establish an internal consensus on effective integration.

At present, cross-strait trade negotiations are in trouble because of their slow pace, limited deregulation and demand for concessions from the other side. They have neither brought obvious benefits for the nation’s economic development, nor resolved its isolation.

Taiwan needs the determination to implement all-round economic liberalization and to promote an equal, and far-reaching cross-strait trade liberalization agreement. Only by so doing can the nation take advantage of the situation to ask China to demonstrate goodwill by not obstructing, or even going out of its way to help Taiwan engage in, FTA talks with ASEAN and making a breakthrough in cross-strait relations.

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

Translated by Julian Clegg