The Ministry of Economic Affairs (MOEA) yesterday released an official report on the impact the recently signed cross-strait service trade agreement could have on the nation’s economy, saying that the pact would yield limited macroeconomic benefits because of the low number of sectors that will be fully opened up.
The service trade agreement, inked on June 21 in Shanghai by the Straits Exchange Foundation and the Association for Relations Across the Taiwan Straits as part of the Economic Cooperation Framework Agreement (ECFA), is expected to raise Taiwan’s GDP by between 0.025 and 0.034 percentage points a year. It is also forecast to create up to 11,923 jobs, which would see employment rise by between 0.15 and 0.16 percent.
According to the Chung-Hua Institution for Economic Research (CIER), which collaborated with the ministry in evaluating the pact, the expected macroeconomic improvements would manifest themselves 10 years after the deal is implemented.
“The service trade agreement is supposed to ‘open a door’ for the nation’s economy and help Taiwanese enterprises gain competitiveness in global markets as more trade agreements are signed in different regional trading blocs,” Minister of Economic Affairs Chang Chia-juch (張家祝) told a press conference.
Chang said the government’s efforts to liberalize domestic markets are crucial to Taiwan’s chances of joining the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.
He added that signing the trade pact would do more good than harm to the economy because it could push local enterprises to upgrade their service quality.
However, since the evaluation was based on the Global Trade Analysis Project (GTAP) Model, a research tool widely used by academic and economic researchers for quantitative analyses, they exclude the agreement’s potential qualitative impacts on the country’s economic security, talent mobility and society, CIER said.
National Taiwan University economics professor Kenneth Lin (林向愷) told the Taipei Times by telephone that the CIER should have not used the GTAP Model for the evaluation because “services by nature are non-tradable goods and their quality matters more to consumers than prices.”
“The cross-strait service agreement’s terms do not offer Taiwan and China the same treatment, be it in terms of restriction to the flow of funds or professionals in specific sectors or the number of sectors to be fully opened,” Lin said.
“The majority of the public welcome the Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Cooperation [ANZTEC] because they know the adverse impact it could have on the nation’s economy are limited due to the great difference between the services offered by New Zealand enterprises and Taiwanese enterprises,” he added.
The idea that the more free-trade agreements a country signs, the better its economy will become is fundamentally wrong, Lin said.
He said that local companies would face stiff challenges from their Chinese counterparts because both offer services in the same language.
Given China’s troublesome regulations for issuing work permits to foreign Internet services providers — such as requiring that the company not disagree with Beijing’s policies — Taiwanese e-commerce firms might encounter obstacles when investing in China, Lin said.
The Democratic Progressive Party (DPP) said the report had been compiled belatedly, since the pact was signed on June 21, and appeared to have been hastily conducted, reflecting that the agreement was signed without first gaining a proper understanding of Chinese or local sectors.
The report was not credible for three reasons, DPP Department of China Affairs director Honigmann Hung (洪財隆) said in a press release yesterday evening.
First, the claim that no sector would be negatively impacted was unbelievable, as it was done without evaluating the strengths and weaknesses of each sector, he said.
The report also failed to present the pact’s pros and cons to the public, as representatives from various service sectors asked the government to do, Hung said, adding that it also ignored non-economic impacts, Hung said.
“It’s irresponsible for the government to ignore Beijing’s attempt to absorb Taiwan’s economy with its state capital,” he said.
Additional reporting by Chris Wang