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Taiwan must adapt to the post-ECFA era
By Bert Lim 林建山
Saturday, Aug 07, 2010, Page 8
A report in a Chinese-language newspaper a few days ago
suggested that fans of Taiwan, hatai, are becoming as popular as South Korea
fans, hahan, in the Asian market and even overtaking them.
Taiwan’s reputation has improved significantly in recent years as a result of
the sheer quality of the technology and products it makes. This has given rise
to the so-called hatai phenomenon, basically a liking of all things Taiwanese,
which has given a boost to Taiwanese branded goods and services. The global
reputation and status of “Made in Taiwan” (MIT) labeling is now roughly
comparable to that of Japanese-made goods about 15 years ago.
The signing of the Economic Cooperation Framework Agreement (ECFA) in June is
going to be a significant factor in this paradigm shift. It will magnify the
hatai effect already evident in China and, through Chinese connections, have an
impact in other advanced economies. This will ensure Taiwan has a bigger profile
in the world market following President Ma Ying-jeou’s (馬英九) “Golden Decade,”
which ends in 2020. The development of the former will be instrumental in
facilitating the latter, and if this happens, Ma will have gone a long way to
achieving his vision for the future of Taiwan.
Since the ECFA has now been signed, cross-strait production will be much more
coordinated than before, at all levels of the value chain — from upstream
suppliers and producers to downstream providers, together with all the
peripheral products and services supporting them. This is true for both
high-tech and low-tech products. In future, many of these products and services
will be labeled “Made in China” (MIC) or MIT, depending on whether they are made
for the domestic market or export. Such a consideration will, naturally,
constitute an important economic policy decision.
There are already a lot of products on the market along the eastern seaboard in
China that are Taiwanese on the inside and Chinese outside: high-tech products
with Taiwan-designed innards and Chinese casing or packaging. These are then
marketed under the MIC labeling, with its reputation for quality items at
reasonable prices. This phenomenon is particularly noticeable with low-tech
traditional products, which means they can now be sold at relatively higher
prices.
It is important to be aware exactly which products this involves. For now they
are mostly sold in China, but in future they will be marketed in other
countries, especially markets that are sensitive to the cost of main components
and where demand for high-priced Taiwanese goods is gradually declining.
The ECFA also means there will be more Chinese goods tagged with a Taiwanese
label on the market. That they are being sold under the MIT brand means that it
will become possible to charge more for cheaper Chinese-made goods in mature
markets. This will enable Taiwan to significantly diversify its exports,
broadening Taiwanese branded goods and services, while adding new channels and
strengthening existing ones in which Taiwan can compete on the global market.
Both permutations will significantly reinforce the international impact of the
hatai phenomenon. It will also enhance Taiwan’s ability to market its goods,
giving producers more leverage to cross over into different market sectors.
The government is trying to attract foreign investment in an attempt to
strengthen Taiwan’s position as an intermediary linking the West and Asia. This
is a valuable opportunity, which could bring huge benefits and one Taiwan should
do everything to optimize.
Bert Lim is president of the World Economics Society.
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