A new study by US economist Daniel Rosen forecasts that a proposed economic cooperation framework agreement (ECFA) with China would increase Taiwan’s GDP by 4.5 percent over the next 10 years, but also cautioned that China’s motivation for signing the pact was solely concerned with unification.
“It would be difficult to find any other policy choice that would give that kind of boost,” Rosen told a conference in Washington on Tuesday.
He said, however, that an ECFA was “absolutely not a strategy for assuring [sic] Taiwan’s prosperity.”
Rosen, principal of Rhodium Group, a New York-based research firm and former senior adviser for international economic policy on the White House National Economic Council and director at the National Security Council, said an ECFA would only give Taiwan parity with Indonesia and “everybody else in the region that already has this normal relationship with the PRC [People’s Republic of China].”
“It will not get Taiwan anywhere, but out of the way of a moving bus. It just gets you across the street. Once across the street, Taiwan has to come up with a much more challenging domestic agenda for assuring its own competitiveness,” he said.
Rosen told the conference on the impact of economic integration on cross-strait relations that “If Taiwan does the ECFA then looking out to 2020 we would expect its GDP to be — just as a function of ECFA and no matter what else it does — about 4.5 percent higher than it would otherwise have been.”
Rosen said that if Taiwan does not sign an ECFA and “the region continues apace in its current liberalization undertakings” Taiwan would suffer a 1 percent drop in its economy “as a result of the liberalization others are doing while Taiwan sits on the sidelines.”
Rosen also told the conference, organized by the Center for National Policy, that China’s economic gains from an ECFA would be “extremely modest.”
“When I ask Chinese officials what is their motivation for ECFA, they say that it is pretty much to lay the groundwork for a happy ending. There is no pot of gold at the end of rainbow for China,” he said.
US-Taiwan Business Council president Rupert Hammond-Chambers told the conference that he was much less optimistic about the direction in which ECFA talks were heading.
He said the major motivation for the government of President Ma Ying-jeou (馬英九) was “to spring Taiwan from its isolation on the trade liberalization front.”
An ECFA could give Taiwan the opportunity — if China does not get in the way — of signing bilateral free trade agreements with countries such as Singapore, Malaysia and Thailand, he said.
China’s “overarching goal,” however, was unification with Taiwan and that all of Beijing’s policies, including an ECFA, were “channeled in that direction,” he said.
Hammond-Chambers said there would be “significant difficulties” if, following the signing of an ECFA agreement, Beijing pressured Taipei into addressing political and military issues.
That would put Ma “between an assertive China that wants to talk about these things and the Taiwanese population he represents that is increasingly nervous about doing that,” he said.
“Which brings us back to the US,” he said. “Where will we be at that juncture? Will we have simply taken a step back and said well, China and Taiwan are getting on with it, we don’t have to engage, we don’t have to support Ma, we don’t have to do those material things we have done in the past. Then will we find, two or three or four years down the line, Taiwan really needs us. And by backing off, we have empowered the Chinese to act in a way that is destabilizing.”
Hammond-Chambers said the PRC was absolutely committed to ultimately bring Taiwan and China together and that an ECFA was part of that drive.
The Chinese Nationalist Party (KMT) and a coalition of business interests on Taiwan were supporting an ECFA at a time when the country was suffering economic distress, he said.
“The economic narrative that Ma is able to deliver is very appealing,” Hammond-Chambers said.
“But when you talk to people about military and security issues, their support for ECFA falls off and the coalition breaks up,” he said.
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