20131003 Lack of clarity hinders trade deal

Lack of clarity hinders trade deal

By Du Yu 杜宇

The contentious cross-strait service trade agreement is still being debated back and forth, with the governing party and the opposition all voicing their own take on the issue, each having their own agenda. Meanwhile, the public remains confused as to exactly what the repercussions of signing the agreement will be.

The Chinese Nationalist Party (KMT) insists that the advantages of the pact outweigh the disadvantages and that it is a remedy that will inject some life into the nation’s moribund economy.

The opposition, on the other hand, argues that the composition of the pact remains unclear, that the potential side effects are not inconsiderable and that swallowing this pill will drive the economy to sink further into malaise.

With the recent controversy over allegations of improper lobbying by the legislative speaker, the passage of the agreement in the legislature has become even more problematic.

To facilitate its passage, the branches of government involved will have to be mindful of the need to improve communication and reciprocity between themselves.

Following intense media coverage and a concerted public relations exercise by the government over the past few days, certain sectors of the economy that have been led to believe that the agreement will offer more business opportunities — finance, e-commerce, entertainment, information technology and medical treatment — are naturally quite keen for it to be passed without delay. However, there has been less discussion on the extent of the negative impact on sectors that might be directly hit by the agreement, or what preparations — such as subsidies, low-interest loans to finance industrial upgrading, skills training for those wanting to move into other sectors — the government has in place to mitigate this impact.

Regarding these sectors, most of the talk has centered around how the government will deal with the situation and how it has set aside a budget of close to NT$100 billion (US$3.38 billion) for that purpose. However, there seems to be little sincere willingness to address the problem head on.

The assessment report on the effect of the agreement only deals with the estimated impact on the economy as a whole and does not touch on the impact on specific sectors.

This does little to assuage the concerns of the many businesspeople who are worried about the implications of the agreement.

The government has been keen to point out that many of the 64 sub-sectors Taiwan has agreed to open up to China as part of this agreement — such as wholesale, retail, manufacturing and textiles — were already included in the list of sectors open to Chinese investment that the Ministry of Economic Affairs announced in 2009 and that the number of Chinese enterprises that will come to Taiwan to invest, and the amount of investment that they are likely to make, is of no real cause for concern.

The trouble is there has been much water under the bridge since then.

At the time, the deregulation only applied to Chinese investors coming to Taiwan, not the other way around, with a raft of restrictions in place, such as investment being confined to current industries, Chinese investors not being permitted to hold more than 50 percent or to have a controlling stake and the need for specialist reviews of industrial cooperation strategies.

In addition, cross-strait exchanges and the degree of economic and trade reliance were nowhere near as involved back then as they are now.

The government proposes deregulating sectors in China that Taiwanese companies were allowed to invest in to allow Chinese companies into Taiwan, and to relax current conditions and contingencies.

The minute it allows this, it will open the floodgates to the might of the world’s second-largest economy (last year, China spent as much as US$65.2 billion on overseas mergers and acquisitions).

Chinese officials will be able to exploit this investment to influence Taiwan’s technological talent and economic institutions and force the government to further relax the restrictions in place.

When this happens, it will not be as simple as some Taiwanese government officials say — that companies might have a Chinese boss instead of a Taiwanese one — but rather Taiwan will sacrifice its sovereignty in the end. This is the result the public is most fearful of.

Neither are these concerns unfounded: It is not a case of Chicken Little fearing the sky is falling when an acorn lands on its head.

If the government wants to disperse the current controversy over the service trade agreement, it should take concrete action — through two-way communication — to convince the public that the government will be able to keep things under control and to mitigate any losses that may occur.

The principle of fairness is one of the pillars of free trade. The reason some sectors — publishing and printing, entertainment, hair and beauty among them — have raised objections to the proposals is that it is difficult to see evidence of fairness in the service trade agreement given the considerable differences between Taiwan and China in terms of the playing field, their economic situations and the sheer size of their economies.

Of course, it is often the case that trade is unfair, but the important thing is that both partners gain some benefit from it. The Taiwanese economy essentially consists of predominantly private enterprises existing in a free market economy with few restrictions.

China operates a government-controlled market with its own game rules, and doing business there involves submitting to certain restrictions, including obtaining government approval, operating in specific areas and according to specific practices, and other regulations on the administrative level.

The public has yet to receive any concrete explanations or assurances from any government official to dispel any concerns they may have. The government still has much to do on furthering its negotiations with China to cater to the public’s wishes before it can gain their support for the agreement.

The jobs of many of the more vulnerable people are at stake in these negotiations. Government officials need to be more prudent and attentive and show a little more empathy.

To ensure that it obtains the best deal for Taiwanese, the government needs to set aside its posturing and communicate with legislators from all parties, as well as with civic groups and non-governmental organizations, to work toward the greatest common ground and the best ways to help those most affected. Only then will it be able to clear away all the obstacles in its path.

Hopefully, the government will learn from this experience, establish a more open, transparent way of negotiating and reinforce legislative oversight so that Taiwan can pull itself out of its current malaise and continue on its way forward.

Du Yu is chief executive officer of the Chen-Li Task Force for Agricultural Reform.

Translated by Paul Cooper