Sun, Oct 14, 2001 page8

• Sovereignty the major WTO issue

  • By Ker Chien-ming 柯建銘
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  According to the chairman of China's WTO negotiating team, Long Yongtu (龍永圖), when China and Taiwan officially enter the organization at the ministerial meeting in Qatar in November, the two sides should strengthen economic and trading ties within the framework of the WTO, something that would be quite helpful in promoting economic development on both sides of the strait. This will be a tumultuous change indeed for the future development of Taiwanese society.

  The Economic Development Advisory Council's (EDAC) Cross Strait Panel made a number of pertinent decisions in full consensus. These decisions include: the substitution of "active opening, efficient management" (積極開放,有效管理) for the "no haste, be patient" policy, the development of offshore banking units (OBU) as capital regulatory centers for Taiwanese businessmen overseas and on the mainland to be able to directly transfer money to Chinese financial institutions, allowing domestic banks to establish branch offices in China, allowing Chinese investment in Taiwan, establishing offshore capital markets, negotiating an opening of direct links to match entry into the WTO, establishing an offshore transshipment center during the transitional period, evaluating and establishing special economic and trade operation areas (經貿營運特區), and opening up Taiwan to Chinese tourism.

  All these decisions are strides toward progress, but the most meaningful among them are the ones where the initiative lies with Taiwan, for example the elimination of the "no haste, be patient" policy, allowing domestic banks to set up branch offices in China, allowing Chinese tourism and investment in Taiwan. These measures embody the resolution and sincerity with which the authorities want to open Taiwan.

  Offshore transshipment centers, special economic and trade operation areas and offshore capital markets, however, also embody another main point, and that is that even though EDAC was willing to directly and actively deal with the China issue, "offshore management" is still the leading principle. In short, this is a kind of compromise in order to avoid the sovereignty issue. Evaluating the current situation, however, it is worth discussing if offshore management really can become an effective transitional technique.

  First of all, these terms have been shouted ever since the tenure of former president Lee Teng-hui (李登輝), and people are already well aware of their meaning. Even though an offshore transshipment center is already in operation, the regulations saying that goods cannot enter the country without going through customs have turned it into a decorative policy at best. If, however, goods were allowed through customs, then there would be little difference between the present policy and direct transportation links. This is where the difficulty with the offshore transshipment center lies.

  Regarding the special economic and trade areas that Wang Yung-ching (王永慶) has been loudly proposing: they were being planned under the previous government, but why don't they ever materialize despite all the talk? The main reason is clearly seen when benefits are compared.

  The special economic and trade areas as originally proposed are only a repetition of the old export-processing subsidy policies, allowing the use of mainland workers and extending preferential water, electricity and tax conditions. But which Taiwanese manufacturer would be interested in these special areas when the Chinese government offers even better conditions and more efficient services?

  The concept of offshore capital markets is similar to the so-called offshore banking units, but throughout the world, the following places are the only ones with the ability to become so-called offshore banking units.

  First, powerful economic centers such as New York and London. Since they already hold a central position, they don't have to worry that outsiders mess up the financial order.

  Second, places with a high degree of financial freedom such as Hong Kong and Singapore.

  Third, virtual financial centers such as the British Virgin Islands and the Cayman Islands.

  They belong to the countries where the economic centers are located and provide tax-evasion opportunities for multinational corporations.

  Taiwan, however, still maintains a high level of control over its financial policies. The southeast Asian financial crisis scared the Central Bank, and the original plans of the Council for Economic Planning and Development (CEPD, 經建會) to a complete opening of capital in- and outflows in 2001 were stopped. It really is difficult to imagine planning another offshore capital market with such a high degree of freedom on Taiwan.

  In reality, the main reason that there are so many offhsore projects is due to the continued inability to begin discussions about direct links. The most bizarre thing is that Long Yongtu once again emphasized that direct links were an important issue in the negotiations over the General Agreement on Trade and Services (GATT) and are in the WTO, and necessarily must be discussed. But how can the subject be broached?

  Judging from reports by Chinese economic and trade authorities to the Chinese leadership recently gathered by the National Security Bureau (國安局), the sovereignty question is still a central issue as the two sides enter the WTO. China estimates that a "one country, four seats" situation will develop after China and Taiwan have entered the WTO (China, Hong Kong, Macau and Taiwan will all become members), and mutual trade and economic relations will belong to the realm of international economic relations.

  Once the two sides enter into a trade dispute, it will have to be solved by WTO rules, which have the character of international law. That will create an equal country-to-country situation, the situation that China most of all wants to avoid. It is also due to this that China holds the subjective hope that after entry into the WTO, interactive economic and trade relations will follow the economic model of one sovereign China with the Taiwan customs territory being part of it. Cross-strait trade problems would in that case tend to be resolved through mutual consultation, with China doing its utmost to avoid negotiations under the multi-faceted framework of the WTO, which only would lead to an attack on the sovereignty of "one China."

  This evaluation by national security authorities only displays in even more detail China's attitude toward dealing with cross-strait economic and trade issues within the framework of the WTO.

  The most central part of the current cross-strait economic and trade situation is still interference induced by the sovereignty issue. If we fail to face this part head on, and if the opposition and ruling parties fail to communicate to create a consensus, I'm afraid that hopes that the CEPD can come up with a solution for cross-strait economic and trade issues will fall flat on its face.

  Ker Chien-ming is a legislator for the Democratic Progressive Party.

  Translated by Perry Svensson
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