Tue, Jan 18, 2005 - Page 3 News List

Pan-blue academics warn on marginalization

GLOOMY OUTLOOK Commenting on a report about the effect of a China-ASEAN free trade bloc, the academics said the government shouldn't sacrifice prosperity to politics

By Caroline Hong  /  STAFF REPORTER

A recent report about the impact on Taiwan of a potential free trade bloc between China and the member states of ASEAN aroused concern yesterday, with pan-blue academics warning that the nation faces marginalization.

An assessment released Saturday by the Chung Hua Institution for Economic Research predicted that the planned creation of the trade bloc would cause nearly a one percent drop in Taiwan's gross domestic product (GDP).

Since China and ASEAN began talks on a free trade accord in early 2002, the government here has been studying the impact of such a pact and how to respond to it. Concerns were heightened when China and ASEAN signed a major trade agreement in November reducing tariffs.

There has also been speculation that Japan and Korea are mulling free trade agreements with ASEAN and China, which has further sparked worries that Taiwan faces a major economic threat in the near future.

Speaking at a discussion held by the National Policy Foundation yesterday, pan-blue academics acknowledged that while a one percent drop in GDP is not terribly worrisome, they believe the figures underestimate the real cost an ASEAN-China free trade agreement would have on Taiwan's economy.

According to Tu Jenn-hwa (杜震華), an associate professor at National Taiwan University's Graduate Institute of National Development, one reason for this is that foreign investment tends to flow more into countries participating in free trade blocs.

Tu cited as an example the EU, which has drawn dramatically more foreign investment since the establishment of its single-market program in 1992 which eliminated non-tariff barriers between member countries.

It is not implausible to expect the same to happen when China and ASEAN form their trade bloc, he added.

Even more worrying to Tu was that in addition to the flight of foreign investment from Taiwan, Taiwanese investors themselves will also be drawn to invest in China and ASEAN countries at their own country's expense.

"If the amount of Taiwan's investments in China doubles [after the trade bloc is established], then domestic investment could potentially drop by 10 percent," Tu said.

In addition, the impact measured by the Chung Hua Institute's analysis did not calculate the risks of Japan's and Korea's possible future inclusion in the trade bloc, said Steve Lin (林祖嘉), an economics professor at National Chengchi University. Because of that, the survey's results are low estimates of potential losses to Taiwan, he said.

Tu said the government should ease its policy on entering trade agreements by distinguishing more between the country's economic and political interests. He cited the example of Taiwan's failure last year to establish a trade agreement with major trading partner Singapore after Minister of Foreign Affairs Mark Chen (陳唐山) rebuked Singaporean Foreign Minister George Yeo (楊榮文) for telling the UN that independence activities in Taiwan may lead to war with China. Tu said that the government should not sacrifice the nation's economic welfare in the interest of political concerns.

Responding to the pan-blue academics in a phone interview, Chen Po-chih (陳博志), chairman of Taiwan Thinktank, said their concerns about the Chung Hua study's conclusions were exaggerated.

"They acknowledge that GDP will drop by only 1 percent, which means most businesses will still be going strong," Chen said. "If businesses aren't going to be affected by the trade bloc, how can investment be affected? That makes no sense."

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