On June 5, the American Chamber of Commerce (AmCham) in Taipei released its Taiwan white paper for this year.
After 20 years of the nation’s self-imposed isolation, the white paper points out the key issues Taipei needs to address if it wants to enter the global market to compete for new business opportunities as the world economy gradually recovers.
In short, the government should loosen regulations and stop its excessive market interference.
AmCham believes that a freer and more open business environment will be a more effective way to deepen the nation’s economic and trade partnership with the US, and that using cross-strait economic cooperation as leverage will be crucial to economic recovery.
To build a better business environment, the first key point is to ensure the stable and sustainable competitiveness of the industrial economy.
AmCham therefore particularly stressed the necessity of a secure energy supply and suggested that the nation continue to use nuclear-generated electricity.
It also suggested that construction of the Fourth Nuclear Power Plant in Gongliao District (貢寮), New Taipei City, should not be stopped, that the decommissioning of the three nuclear power plants currently in operation be delayed to provide sufficient energy and that this should be the first priority to retain local and foreign capital.
Another crucial variable that hurts the nation’s cost advantage and quality of competitiveness is the set of policies and regulations on the development and utilization of human capital.
Due to the nation’s restrictive policies on foreign workers and temporary worker services, many international companies investing in Taiwan are unable create the golden mix of high, middle and low-level workers, so in the end, they have no choice but to leave.
The excessively protectionist legal system actually reduces job opportunities for medium and higher-level talent.
The second key point hindering a better business environment is excessive consumer protectionism, or “public welfare protectionism.”
This often causes bureaucrats to act like “market police,” which destroys the core of the free-market system: the price mechanism.
For example, standardized contracts that include posters and advertisements as well as long trial periods and strict refund policies are a violation of the symmetry and rationality of rights and obligations between buyers and sellers in a free market, and they do not bring substantial benefits to consumers.
The third key point considers the nation’s outdated management of and rigid restrictions on the service trade industry. As a result, the service sector has stagnated.
In particular, the financial service industry is steeped in the regulatory thinking of a conservative agricultural society and places too many restrictions on product and service innovation, making it difficult for the sector even to survive these days.
Negotiation over the Taiwan-US Trade and Investment Framework Agreement has been postponed because issues related to the opening of the service sector account for two-fifths of the total issues in the talks.
This kind of barrier is also an unavoidable core issue in the nation’s free-trade agreement talks with other countries and any attempts to participate in regional integration.
Moreover, the delay to the legislature’s approval of the cross-strait service trade agreement clearly shows that the nation is isolating itself.
The fourth key point is to hasten regional economic integration and the signing of free-trade agreements, including the Regional Comprehensive Economic Partnership, as well as Taiwan’s entry into the Trans-Pacific Partnership (TPP).
AmCham suggested that the nation make negotiations over a bilateral investment agreement with the US its top priority, because such an agreement would be a stepping stone for entry into the TPP.
However, the premise is that government leaders and populists should be prepared for a greater opening up of the local market in exchange for a greater opening up of the counterpart’s market to Taiwan.
As President Ma Ying-jeou (馬英九) has said, Taiwan must create favorable conditions for its entry into the TPP and it is not only appropriate, but also necessary, to begin with self-improvement.
AmCham’s suggestions are the complete opposite to current mainstream opinion.
Nevertheless, if the nation wants to break through its current economic difficulties, the actions suggested by AmCham are absolutely necessary.
Bert Lim is the president of the World Economics Society.
Translated By Eddy Chang
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