Tue, May 04, 2010 page8

• Ma’s strategy built on factual errors

  • By Lin Cho-shui 林濁水
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  From a purely entertainment point of view, President Ma Ying-jeou (馬英九) came away the winner of last week’s debate on an economic cooperation framework agreement (ECFA) with China. His message was packaged with an easy-to-understand populism that his counterpart, Democratic Progressive Party (DPP) Chairperson Tsai Ing-wen (蔡英文), could not match.

  From a more professional perspective, however, it was Tsai who elevated the debate to the level of economic and political strategy in East Asia. This is the sort of approach one would expect from a national leader, but Ma paid it absolutely no attention. Tsai also talked about Taiwan’s competitive advantages, the way Taiwan and other East Asian nations complement each other and income redistribution trends.

  Ma made several errors when discussing these subjects. Tsai outshone Ma in terms of the scope of her arguments and the accuracy of her information.

  It is hard to believe how many factual errors Ma made.

  First, he said China is the world’s biggest market. While China is a large and rapidly growing market, its market is roughly the same size as Japan and only a quarter the size of the US in terms of GDP. Furthermore, the EU is bigger than China and the US combined.

  Second, Ma said we must put more than just a few eggs in our biggest basket. To be precise, Taiwanese investment in China accounts for 70 percent of the nation’s overall foreign investment and trade with China accounts for 40 percent of all Taiwan’s foreign trade. With such high percentages, how can that be reasonably considered putting only a “few” eggs in the China basket?

  Third, Ma said that while other nations are actively engaged in the process of economic integration Taiwan is not, and as a result is becoming increasingly isolated economically. He also alleged that Taiwan lost eight years of economic growth under the DPP government. However, in terms of export dependency and investment ratios, Taiwan is the No. 1 country in the world when it comes to economic integration with China.

  Fourth, Ma said that once ASEAN Plus One (China) comes into effect, the products Taiwan sells to China could be replaced. In reality, however, it is Japanese and South Korean products that compete directly with Taiwanese products in China, while competition from ASEAN countries is negligible. It is estimated that the implementation of ASEAN Plus One will have only a 0.035 percent impact on Taiwan’s GDP.

  Fifth, Ma said ASEAN Plus Three (China, Japan and South Korea) is moving ahead and is likely to come into effect in a year or two. However, China is trying to use ASEAN Plus Three as a political and economic tool to control East Asia and it is therefore strongly opposed by other counties.

  Japan has even insisted on replacing it with an ASEAN Plus Six (ASEAN Plus Three, India, Australia and New Zealand) agreement while the main player, ASEAN, wants multiple “ASEAN Plus One” agreements instead of ASEAN Plus Three. Against this backdrop, the implementation of ASEAN Plus Three is unlikely to be as quick as Ma apparently thinks.

  Finally, Ma said that even if restrictions are lifted on the more than 800 Chinese agricultural products currently banned from Taiwan, this would still be less than the 900 items permitted for import by the DPP administration. He also said that an ECFA would have less of an impact on Taiwan than WTO accession.

  In fact, the Chinese agricultural products approved for importation by the DPP were those that Taiwan does not produce. In contrast, the 800 Chinese agricultural products that are still barred are sensitive items produced in both Taiwan and China. The same applies to industrial products.

  How is it, then, that the impact of ECFA on Taiwan would be less than that of accession to the WTO?

  As it is well beyond the scope of this article to list all of them, this is just a small selection of the factual errors Ma made in the debate. The examples chosen address fundamental economic issues, not theoretical errors. It is truly concerning that Ma could get these things so wrong.

  Ma’s reasons for wanting to sign an ECFA are based on a series of mistakes and a lack of strategy.

  The DPP believes that the signing of an ECFA is unavoidable, but also that it will have a dramatic impact on wealth redistribution. As such, the party wants to employ the same strategy used by East Asian nations to resist ASEAN Plus Three, insisting that a gradualist approach is adopted to extend the process and lessen its negative impact.

  However, Ma lacks the ability to think strategically. The result of his misunderstanding and eagerness to press forward with an ECFA is having wider repercussions. For example, South Korea is becoming increasingly nervous because many of Taiwan’s exports compete directly with South Korean products. As a result, South Korea now feels the need to change strategy, which could in turn force Japan to reconsider its own position and potentially jeopardize its grand plan for an ASEAN Plus Six and ASEAN Plus One. This could result in the success of China’s ASEAN Plus Three plan, which would have two major consequences.

  First, it would greatly enhance China’s political and economic power in East Asia, and Taiwan, having offended East Asian nations, would be further weakened.

  Second, it would reduce the time Taiwan has to deal with the inevitable social impact of an ECFA, which would make its implementation even more painful. For a while, Ma tried to trick the public into believing China would continue to offer “concessions” on agricultural products indefinitely after an ECFA is signed. However, after being questioned by academics and experts, government officials were forced to admit that restrictions on such products would have to be lifted after 10 years and that 90 percent would be made tariff-free in accordance with WTO free-trade principles.

  Ma tried to sidestep this issue by saying that import restrictions on these Chinese products would not be lifted during his term in office. In other words, Ma would reap the political benefits of the “early harvest” list and leave his successor to deal with the later fallout.

  Ma’s brilliant argumentative technique helped cover up his lack of economic and political strategy and the fact that the theoretical foundation of many of his arguments was filled with holes. Ma, a bad negotiator relying on secret dealings, insists on pushing ahead as quickly as possible. His victory will be Taiwan’s loss.

  Lin Cho-shui is a former Democratic Progressive Party legislator.

  TRANSLATED BY DREW CAMERON

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