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ECFA will need good governance
By Thomas Lee 李桐豪
Tuesday, May 25, 2010, Page 8
Faced with the challenge of a new free-trade area formed by ASEAN and China,
known as ASEAN Plus One, Taiwan’s government has stepped up efforts to promote
the signing of an economic cooperation framework agreement (ECFA). However, the
government’s strategy has come under fire from the opposition on various
grounds.
In addition to the belief that an ECFA threatens Taiwan’s sovereignty,
opposition figures have listed a number of reasons to oppose a trade deal with
China. These include the risk of excessive economic and trade reliance on China;
stagnation of workers’ wages; rising unemployment; an adverse economic impact on
agriculture; unsafe Chinese products and a growing rich-poor divide in Taiwan.
The reasons given for opposing an ECFA can be divided into two categories — the
effect that signing or not signing such an agreement will have on Taiwan’s
economic development and how to deal with the economic and social problems that
may arise once an ECFA has been signed.
To date, 276 regional trade agreements have been registered with the WTO and
gone into effect. Figures compiled by the Asian Development Bank show that as of
January 2007 there were 192 free-trade agreements in the Asia-Pacific region.
Evidently, Asia-Pacific countries are freeing up regional trade, whereas Taiwan
has free-trade agreements with only five Central American countries. These
figures indicate that as Asia’s trade policy framework is gradually rewritten
Taiwan is becoming increasingly marginalized.
In the process of Asian economic integration, the two biggest regional economies
— China and Japan — have become regional trade hubs. Exporters and consumers in
these and other countries in the region benefit from free trade.
Taiwan’s situation is very different. If Taiwan does not end up as a
free-trading country and fails to take its place in the trade race, it will be
in no position to play the role of even a peripheral country, meaning it will
lose out.
The signing of an ECFA, then, is inevitable. First, China is Taiwan’s biggest
export market. Second, an ECFA can serve as a template for agreements with other
countries. The main thing is that Taiwan should not focus solely on an ECFA, but
seek to sign agreements with more partners, especially Japan, Europe, the US,
Singapore and other advanced countries. This approach would make Taiwan a
connecting point between Japan and China and between Asia and the rest of the
world.
It is also important that the government informs the public about the progress
it makes in trade negotiations with other countries so that people can judge
whether there is a chance of signing other free-trade agreements after inking an
ECFA with China.
An ECFA will indeed lead to restructuring in Taiwan’s domestic industries and
these changes will give rise to social problems related to employment, wealth
distribution and so on. The government needs to plan its response to these
problems before they arise and assign the civil service the task of turning
crisis into opportunity.
Based on experience, one cannot be entirely optimistic about the government’s
ability to handle these issues. Take for example the subsidies provided to the
agricultural sector after Taiwan joined the WTO. A total of NT$87.9 billion
(US$2.72 billion) of the government fund established by the Agricultural
Development Act (農業發展條例) to compensate the agricultural sector for losses due to
imports has already been spent, leaving only NT$30.4 billion. Despite this, the
sector is still vulnerable to the possible effects of an ECFA. It must be asked,
therefore, whether the government’s budget of NT$95 billion to deal with
domestic industrial restructuring and workforce displacement after the signing
of an ECFA is adequate.
The biggest area of doubt for most people is whether the government is capable
of handling the problems that will be encountered on the path to
internationalization and liberalization. The administration’s handling of the
dispute over US beef imports illustrates why the public has little faith in the
government’s competence.
If President Ma Ying-jeou (馬英九) wants public support for an ECFA, the best way
would be to first reform the civil service to make government more effective.
Only when people have confidence in the government’s ability can the obstacles
to the successful implementation of an ECFA truly be eliminated.
Thomas Lee is a professor in the Department of Money and
Banking at National Chengchi University.
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