Services agreement lacks clarity

By Chen Hurng-yu 陳鴻瑜  / 

Thu, Apr 03, 2014 - Page 8

Conflict over the cross-strait service trade agreement has stirred social unrest for weeks now, as supporters and opponents stubbornly stick to their own views. The main text of the agreement was recently made public, but important appendices have yet to be released. This is a commentary on the parts of the accord that have been made public so far, in the hope that it can be used as a reference when it is reviewed again.

First, much of the wording in the draft agreement lacks clarity. Many parts of the text are direct translations from English and do not read naturally, making it hard to understand. There are too many such examples to list them here.

Second, the main text of the agreement does not list the regulations for how service trade liberalization will be carried out and how far-reaching it will be; instead, these regulations are included in Attachment 1. This has caused a lot of concern, because Attachment 1 of the agreement, which pertains to which service industries will be opened up, has been listed as confidential, which means the public do not have access to it. Strictly speaking, the parts of the service sector that are to be opened up should be listed in the main text of the agreement, while related rules and regulations should be listed in detail in an attachment. A look at the service trade agreements China has signed with ASEAN members shows that they all follow this principle.

Third, the service sectors that will be liberalized should be opened up gradually. Generally, the first group of sectors to be liberalized are those that will not have a large effect on employment, so as to minimize the negative impact on an economy. Only once the effects of that stage of liberalization have been observed is a second group of sectors opened. However, nowhere in the draft of the cross-strait service trade agreement can such measures be seen.

Fourth, certain parts of the agreement are unclear. For example, Article 10 limits what is referred to as “foreign balance of payments.” Does this refer to the foreign balance of payments of a country as a whole or to the foreign balance of payments of the service sector? If there is an imbalance in the foreign balance of payments, then we are talking about debt. From the information available, Article 10 of the draft seems to imply that those who owe debt can get away with not paying it.

Fifth, while it is an agreement concerning trade in services, many parts of the pact pertain to investment in the service sector. However, the agreement has no regulations concerning equity ratios, the different levels of staff involved — for example, managers or general staff — nor does it include any information about the numbers of employees to be hired, the types of tax investors should pay, or the amount of time they will be allowed to stay in Taiwan. What is worse, there is currently no legislation to regulate these aspects.

The Mainland Affairs Council has stated that the agreement will not allow Chinese to work in Taiwan, and the Ministry of Economic Affairs has said that it is not to be used in place of rules concerning employment and residency and, as a result, temporary movement of people between China and Taiwan will not influence the employment markets on either side. However, the draft agreement allows both sides to establish representative offices within each other’s borders. If Chinese are to invest in Taiwan, there is no way they will be investing money alone. It is possible that managers of Chinese companies and their staff will also come to work in Taiwan. Can Taiwan impose restrictions on this? Rules and regulations regarding this should be included in the main text of the agreement.

Finally, the ministry said in its explanation to the legislature that the agreement will allow Taiwanese businesspeople to increase their shareholding ratios — including becoming sole investors — in Chinese service businesses and expand their scope of operations. The ministry has also said that China’s deregulation will increase Taiwanese business owners’ control over their Chinese business, expand their field of operations and make things easier to forecast and more time-effective. However, this line of thought is questionable. Since the signing of the Economic Cooperation Framework Agreement (ECFA), large-scale manufacturers have moved their operations to China. If Taiwan were to sign a service trade agreement with China, big players in the service sector might do the same. This could result in a hollowing-out of Taiwanese industry. Who would fill this vacuum — Chinese investors? This is a worrying prospect.

Amazingly, the ministry is making this its policy goal, without seriously considering what advantages the agreement holds for Taiwan or convincing the public that it is advantageous to Taiwan. Ministry officials keep on saying that the agreement will be beneficial to those involved in the service industry and facilitate their investment in China, as well as allowing young people to work across the Taiwan Strait. However, by making such comments, the ministry is not only shirking its official responsibilities, it is also undermining the self-confidence of Taiwanese. This is yet another thing that worries the young generation.

The government has repeatedly said that the service trade agreement will give Taiwan preferential market access to China and that it will encourage other countries to sign trade pacts with Taiwan. What this means is, ultimately Taiwan will have to obtain Beijing’s approval before signing similar agreements with other countries. This is happening already and the government is tacitly accepting it. Signing a service trade agreement with Beijing will be tantamount to putting a rope around our own necks.

During the Black May protests in Thailand in 1992, in which supporters and opponents of a new constitution clashed violently on the streets of Bangkok, King Bhumibol met with the leaders of both sides and demanded that they end their conflict. He said that there is not a single law in the world that cannot be changed, and yet they were fighting in the streets, making Thailand an international laughingstock.

The government must handle the demonstrations wisely if things are to end well.

Chen Hurng-yu is a professor in the Graduate Institute of Asian Studies at Tamkang University.

Translated by Drew Cameron