One possible outcome is that Taiwanese who work in China do not wire their profits to Taiwan. The Taiwanese government will never be able to collect tax from those investments.
Taiwanese investors in China could also face hindrance while following off-the-table rules. Although the pact clearly specifies that Chinese and Taiwanese investors can develop joint ventures, it does not guarantee who has the right to own intellectual property of any service, for example. Taiwanese investors’ developed or developing technologies might be transferred to Chinese investors. The pact does not contain adequate protection measures.
Unfortunately under the pact, Taiwan’s service sectors could face difficulties in markets due to oversupply, and this is what matters the most among all potential problem.
Over the past years, large enterprises, with their abundant financial resources, have been heavily investing in Taiwanese retail stores as they see huge sales potential in this market.
As a result, many traditional and small-sized retail stores were forced to shut down because they could not deal with the severe competition with limited resources. Once the pact is approved by the Legislative Yuan, increasing Chinese investment is likely to force local service providers to leave their markets.
Another possible scenario is that thousands of people lose their jobs or apply for positions provided by Chinese investors.
Overall, the service trade agreement might enable talent and funds to be exchanged or used jointly. However, in addition to the possibility of a higher unemployment rate or that the number of the nation’s small and medium service providers might decrease, the government should keep in mind that the pact might bring “invisible impacts” that are fundamentally unrelated to the economy.
TT: What are these possible invisible impacts?
Jang: I mean cultural impacts.
The government has been bragging about the Chinese government’s preferential treatment for Taiwanese and emphasizes that because there is no “cultural entry barrier,” people on both sides of the Taiwan Strait can do business with each other using the same language and sharing the same ethnicity. The government has also said that service trade agreement can not only tackle nearly every market entry barrier including land use, business income tax, tariff or labor issue, but also enhance interaction between enterprises in Taiwan and China. The problem is that Taiwanese and Chinese have different lifestyles and values, especially concerning democracy, freedom and human rights.
Under the agreement, Taiwan’s publishing market is restricted from opening up to Chinese investors. However, it is not unimaginable that Chinese investors could affect Taiwan’s society. Their way of managing companies or selling products may be unacceptable to Taiwanese. No one expects to see any form of restriction to be placed on Taiwan’s freedom of speech, but when it comes to business, employees must follow their employers’ orders to make a living.
Illegal music CD or movie DVD duplication, as well as intellectual property counterfeiting cases, are banned in Taiwan, but, no one can guarantee that Chinese investors will not import such “normal” Chinese habits to Taiwan. Not to mention non-stop incidents of environmental pollution, violation of law or corruption that are taking place in China.