Elephants’ demise due to PRC effect

By Huang Tien-lin 黃天麟  / 

Sat, Nov 16, 2013 - Page 8

At the end of the Brother Elephants’ farewell game last Saturday, the team circled the field in a tear-filled farewell. We should not blame the team or the players for this outcome, because this was a natural result of Taiwan’s economic marginalization. If it was not for the fact that most people’s salaries have fallen back to the same level that they were at 16 years ago, bringing spending power down as well, teams would not be complaining that there are not enough spectators. The decline of professional baseball in Taiwan is a reflection of the nation’s recent economic history.

If you do not believe me, just take a look at recent economic figures. The Cabinet recently announced that third-quarter economic growth stood at a mere 1.58 percent, making Taiwan Asia’s worst performer, despite the lie at the beginning of the year that growth would exceed 4 percent. Then, on Nov. 7, the Ministry of Finance announced that exports fell by 1.5 percent last month. In addition, economic indicators have been flashing “yellow-blue” — a sign of near recession — for three consecutive months, although it would be more correct to say that they have done so for the past 26 months. There is a reason why the Brother Elephants went under.

Such stagnation is not accomplished overnight. In 2001, the government gave in to massive pressure from big business and pro-Chinese media and opened up more than 7,000 items in the manufacturing industry to investment in China. This was the beginning of Taiwan’s economic marginalization by China and the contraction of domestic development.

Between 1992 and 1999, the average investment rate in Taiwan — domestic investment divided by GDP — was 25.56 percent. That then dropped to an average of 21.48 percent for the period 2001 to 2007. The all-out deregulation under the government of President Ma Ying-jeou (馬英九) and the Economic Cooperation Framework Agreement (ECFA) integration policy sped up this trend and the average for the period from 2008 to last year dropped to 20 percent, which is not a normal level for a country.

It is not that companies are not investing, the problem is that they are investing in China, and it is not that they do not understand the importance of research and development and innovation, but that they have invested their capital in China to increase volumes, thereby sacrificing the chance to upgrade.

The value-added rate — value added divided by total output value — in Taiwan’s manufacturing industry dropped from 31.21 percent in 2001 to 24.18 percent 10 years later. Dropping value-added rates affect salaries. Between 1992 and 1999, annual real salary growth still averaged 2.69 percent. That average dropped to 1.77 percent for the period from 2000 to 2007 and then to a minus-0.44 percent for 2008 to 2011, which was when the all-out deregulation and the implementation of the ECFA took place.

Between January and August this year, average real salaries decreased by another 0.94 percent and are now lower than in 1998. Little wonder the economy is depressed.

The end of the Brother Elephants and the suicide of taxi driver Liu Chin-yi (劉進義) in mid-September, reportedly out of frustration at the government’s mishandling of the economy, may seem completely unrelated to each other, but they both have to do with the economy. Excessive investment in China and the outflow of production centers from Taiwan has taken away almost 2 million Taiwanese managers and workers. With the lack of the consumption created by the absence of 2 million people, taxi drivers now lack customers and baseball teams lack spectators. The result is that taxi drivers’ monthly income has dropped from NT$40,000 to NT$20,000 and baseball teams are running deficits.

Ma often says that the opening up to China has brought with it 2.58 million Chinese tourists, but we must not be deceived by Ma’s habit of only counting the positives and ignoring the negatives. Leaving actual sums aside, if 2.58 million Chinese tourists come here for five days to spend money, that equals 12.9 million days of consumption. This is only a 46th of the 600 million days that 2 million Taiwanese managers and workers would be spending in China for 300 days per year — deducting a conservative estimate of the number of holidays they will spend in Taiwan. This does not even include the losses from falling domestic consumption caused by the decrease in domestic real salaries that is the result of the outflow of business. In short, this has fed corporations and starved the public.

Taiwan can open up to and integrate with the whole world, but what it cannot do is open up unreservedly to China or even discuss integration. Because Taiwan and China share a language and a culture, and because the difference in size is so huge, integration will immediately create a center-periphery effect in which the center — China — absorbs the periphery — Taiwan. The signing of the ECFA only served to speed up this process.

With this lesson fresh in the mind, can we really afford the cross-strait service trade agreement?

Huang Tien-lin is a former national policy adviser.

Translated by Perry Svensson