20100527 Risks of an ECFA without the WTO

Risks of an ECFA without the WTO

By Li Ching-lie 李慶烈
Thursday, May 27, 2010, Page 8

Would an economic cooperation framework agreement (ECFA) violate the principles of the WTO? Would its arbitration follow the judicial remedies of the WTO framework? These questions are crucial when monitoring the government’s plan to sign an ECFA and in trying to avoid a major disaster for the country.

A WTO agreement is a multilateral international agreement. Even a superpower such as the US must accept the binding force of WTO arbitration. By the same reasoning, only through WTO arbitration will Taiwan be able to avoid being swallowed whole by China, with a strong third party helping to resolve any economic dispute. This is the only way to strengthen Taiwan so that the public doesn’t end up losing the shirt on its back — the unfortunate experience of countless Taiwanese businesspeople in China.

WTO arbitration further means that the economic entity called the “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu” plans to remain in the world’s multilateral system. This would also be a declaration that Taiwan will deal with China in the same way other countries do. By doing so, Taiwan can preserve its sovereignty and economic interests, as well as avoid the following potential disasters.

First, if, after an ECFA has been signed, economic conflicts are not dealt with carefully, will China take political, or maybe even military, revenge? This is one of the possible disasters an ECFA could lead to. When dealing with China, Taiwan must not naively disregard the possibility of such disasters.

This is not resorting to sensationalism. The Democratic Progressive Party (DPP) has already said that if the Chinese Nationalist Party (KMT) government does not hold a referendum to decide the ECFA issue, it will push for a referendum in 2012 when presidential elections are held. It is therefore possible that such economic conflict could lead to further hostilities, unless the KMT retains its hold on power.

If an ECFA violates the WTO framework and if there is no strong WTO arbitration mechanism to fall back on, the public, seeing how China offers an ECFA on one hand and military threats on the other, might start to think that it has no choice but to vote for China-friendly parties during elections if it wants to avoid political confrontation or military action.

In the long run, this could mean that China-leaning political parties would continue to hold the reins of power. Is this the reason the government insists on signing an ECFA with China?

No matter what, as long as China is a totalitarian state, the economic restrictions brought by an ECFA that violates the WTO framework would slowly erode human rights and democracy in Taiwan. Closer association will bring changes, and Taiwan’s democratic way of life is certain to experience great changes. In other words, Taiwan would exchange freedom and democracy for the apparent economic benefits of an ECFA. This is another potential disaster that an ECFA could lead to.

Violating the WTO framework to introduce Chinese economic might to Taiwan, turning Taiwan into another Hong Kong and weakening Taiwanese democracy to perpetuate the rule of the Chinese Communist Party (CCP) and the Chinese Nationalist Party (KMT): Are these the reasons why the government all along has been avoiding putting the ECFA — whose details have yet to be disclosed — to a referendum? How much KMT and CCP scheming and plotting and how many potential future disasters are hidden by the constant name changes of this economic pact, from a closer economic partnership arrangement (CEPA) to a comprehensive economic cooperation agreement (CECA), and then to an ECFA.

If an ECFA cannot be explicitly defined as a multilateral international free-trade agreement (FTA) under the WTO framework, and instead will function as a mere cross-strait economic pact based on the so-called “1992 Consensus,” or even a domestic agreement based on Beijing’s “one China” principle, then even if Taiwanese were able to vote freely for the party they support and Taiwanese democracy is able to live on, the signing of an ECFA would plant the seeds for future instability and conflict. This is yet another possible disaster an ECFA could bring. It is obvious that this would lead to a great increase in Taiwan’s military spending. Ironically, this spending could be financed by the economic benefits — if there still are any at that time — earned through an ECFA.

Without fundamental political and military trust, an ECFA outside the WTO framework could be used either as a carrot or as a stick. What will evolve after an ECFA has been signed will depend on who will be holding the reins of power then. It is therefore wrong and dangerous for a small democratic country to place economic concerns ahead of political concerns. Unless there is a strong and neutral third party, Taiwan should deal with political issues first and economic issues second.

Regarding that third party, an ECFA arbitration mechanism can only work within the WTO framework and its judicial measures. As such, an ECFA must be explicitly defined as a multilateral international FTA under the WTO. That is why the ECFA should be called an FTA.

If the ECFA cannot be made an FTA under the WTO framework, then there would be no powerful and fair third party. To avoid any of the disasters mentioned, the government must deal with politics first and economics second. This also echoes the view of former DPP chairman Lin I-hsiung (林義雄) on holding a referendum to decide whether the public favors signing an agreement with China based on the “one China” principle.

After determining how Taiwanese voters view the “one China” policy, the government can then negotiate an ECFA in line with the public will. Such a procedure would avoid the possible political repercussions and military disasters the above-mentioned economic policies could lead to.

It would also mean that any cross-strait agreement decided by the people would have public backing and thus could be used to secure Taiwan’s de facto independence and sovereignty, economic interests, democracy and freedom.

Li Ching-lie is a professor of electrical engineering at Tamkang University.