In the past, part of the domestic manufacturing industry found it hard to develop and survive in the international marketplace due to price competition from China. As a result, they either folded or moved their operations overseas. The government now wants to open up the service industry to China.
The biggest difference between the service industry and the manufacturing industry is that the former is directly linked to our livelihoods and daily lives. Opening it up using the cross-strait service trade agreement is tantamount to exposing the heart of our economy. The general public will directly feel the effects that this will have. The service industry accounts for a high proportion of GDP and the proposed agreement will have a heavy impact on the Taiwanese people and economy.
Many industries are included in the service trade agreement and many of them are closely linked to our daily lives. Apart from regular service industries, which are labor intensive, the agreement includes the capital-intensive financial industry.
The way in which the agreement takes every aspect of the service industry and lumps it together instills the feeling that this is being done for the interests of certain groups or businesses.
Almost everything — from daily necessities to the entertainment industry — will be opened up, and it also creates a feeling that the heart of Taiwan’s service industry will be controlled by China and even unified with it.
Council of Labor Affairs Minister Pan Shih-wei (潘世偉) has said that after the agreement is signed, Chinese investment will come to Taiwan and that this will make the overall market and the labor market more competitive.
Pan has also stressed that the agreement will not allow Chinese laborers to come to Taiwan for work. However, when Chinese investment enters Taiwan, China will have many opportunities to become the boss of Taiwanese workers.
If Chinese companies employ their usual operational mode, it will be hard to guarantee that the minimum wage of Taiwanese workers will not be pushed down or that the employment market will not become even more competitive than it already is.
If Chinese-owned businesses begin to compete based on low prices and dumping, many of Taiwan’s small and medium-sized enterprises will be crushed, and eventually there is a high risk that many of them will be taken over by Chinese-owned companies.
If the service trade agreement truly is meant to align with the spirit of international trade, then careful assessments should be conducted on which parts of the service industry have a higher comparative advantage and only then should these industries be opened up.
The strength of Taiwan’s service industry lies in its entrepreneurial spirit and unique modes of operation.
These elements are what should be opened up to China as this would benefit Taiwan.
However, before signing the service trade agreement, the government failed to conduct a complete and detailed assessment on which parts of Taiwan’s service sector should be opened up to Chinese investment or which parts of China’s service sector the government would like to be opened up to Taiwanese investment.
The government also did not consult any of the related non-governmental business associations. If the government signed the agreement because the economy is slack and it is in a hurry to prop it up, then no wonder people are questioning its actions and think the decision will make Taiwan’s economic and employment situation even worse than it is now.
Kuo Chen-hero is an adjunct professor of economics at Soochow University.
Translated by Drew Cameron
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