Government responsibility to industry

By Kuo Chen-hero 郭振鶴  / 

Sat, Jul 27, 2013 - Page 8

The number of votes for the governing and opposition parties in the past few presidential elections has differed by less than 10 percent, and was only 6 percent for last year’s election. A significant portion of the population works in the service industry, and so if this continues, the issue of the service trade pact may well lose the ruling party its power.

The signing of the cross-strait service trade agreement is a thorny issue. At first it looked as if the government intended to sign the agreement no matter what, which made the public suspect it was trying to do everything behind closed doors. Subsequently, it was forced by public pressure to rush out a comprehensive report concerning the impact and the influence it was to have on the economy and on industry.

The report on this impact and influence, commissioned from the Chung-Hua Institution for Economic Research by the Ministry of Economic Affairs, really does not seem to show any discernible negative impact on Taiwan. It would have us believe that the export of domestic services to China would see an increase in revenue of NT$12 billion (US$400 million), representing a growth rate of 37 percent and the creation of around 12,000 jobs.

People were not convinced by this report, which was unable to dispel their doubts about the pact; indeed, the findings of the report were met with suspicion across the board, with the general public, including those working in the services industry, finding its results unpersuasive.

The government ought to stop and think why the service sector in this country, which accounts for around 68.5 percent of GDP, is so opposed to this service trade agreement. These objections are not being made simply for the sake of opposing the government. There must be significant doubts behind them and it is not impossible that signing this short-sighted pact will result in the ignominious surrender of our interests.

The government ought to be sensible and objective about this, and listen to the concerns being voiced by the public. For the problems that we might face after the agreement has been signed, we need to consider thoroughly how these might best be dealt with, rather than descending to hurling abuse and making criticisms that are in no way constructive.

First of all, we need to find a form of common ground here in Taiwan so that voices from all quarters are addressed, the respective strengths and vulnerabilities within industries are analyzed, and so that there is active communication.

When a consensus has been forged between the governing and opposition parties we can then draft the relevant measures and perhaps even make appropriate amendments to the treaty with China.

At this stage the government must not do anything to exacerbate the situation or continue to ignore public opinion. It needs to make sure that every problem is addressed in advance.

The service trade agreement covers many industries, all of which have their own particular characteristics.

The government ought to make a careful evaluation of each individual industry, and conduct a SWOT — strength, weakness, opportunity, threat — analysis, to discern which industries have problems that need to considered. What limits do they have? Which industries’ imports and exports most benefit us? Our domestic industries have great local characteristics and brands. After deregulation, will their survival and development be affected? Has the government made sure it is clear on all this?

Take distribution, for example. Commercial competition between wholesale and retail is based on distribution strategy. It is often said, whoever controls distribution, controls the market. In this too, the government should look at the distribution service sector separately from how it approaches other industries. Distribution directly affects the consumer, so the problems arising from deregulation in this sector will be even more sensitive.

The government has said that we stand to gain more from the service trade agreement than we will lose. A government simply cannot conduct matters by sacrificing this or that industry. It cannot say that if a certain industry is to fall by the wayside then so be it. Did the government discuss the pact with the sectors that were to be affected by it? The government should have announced a set of measures for these sectors, such as preventing malicious price-cutting competition by Chinese companies and improving Taiwan’s industrial environment. As soon as Chinese companies make inroads here, there will be much more room for China to conduct talks with Taiwan and we could lose everything all at once.

The government’s authority is founded upon the support of the public. When the government loses this support, it simultaneously forgoes its mandate. The government seems to be incapable of grasping this point when dealing with certain issues, the service trade pact being the most important example. The government is incapable of understanding the public’s will. If the government continues to not learn its lesson, the Chinese Nationalist Party (KMT) is likely to see power slip away.

Kuo Chen-hero is an adjunct professor of economics at Soochow University.

Translated by Paul Cooper