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Middle-class jobs vulnerable to an ECFA
By Cheng Li-chiun 鄭麗君
Wednesday, Apr 21, 2010, Page 8
History shows us that economic agreements create winners and losers, that they
have positive and negative consequences. Despite this truism, the government is
determined to sign an economic cooperation framework agreement (ECFA) with China
while doing all it can to avoid discussing the hidden risks behind the deal.
Following the publication of ECFA, The Unspeakable Secrets (ECFA不能說的秘密?), Taiwan
Thinktank more recently released a report entitled “Who Are the New Losers with
ECFA? The Middle Class Unemployment Crisis” (誰是ECFA的新輸家? 中產階級失業危機). This report
suggests that in addition to traditional industry, the service sector, the
electronics and electrical sectors, the steel industry and the petrochemical
industry could also suffer. It predicts a worst-case scenario of NT$12.6
trillion (US$400 billion) in losses and as many as 5.9 million people losing
their jobs.
How will an ECFA hurt the service sector? By joining the WTO, Taiwan was
required to open its job market to foreign white-collar workers and individuals
with special technical skills. Presently, this has not had a serious impact,
partly because of the language barrier but also because China refuses to accord
Taiwan equal status and files complaints against it at the WTO. This has enabled
Taiwan to avoid greater negative impact and limit the number of Chinese citizens
working in Taiwan by refusing to recognize their academic qualifications while
adhering to the Statute Governing the Relations Between Peoples of the Taiwan
Area and the Mainland Area (兩岸人民關係條例). Now the government has declared its
intention to recognize Chinese qualifications by September and relax
restrictions on white-collar workers. Given the central importance of
reciprocity in WTO dealings, how exactly does Taiwan plan to restrict Chinese
white-collar workers from coming to Taiwan after an ECFA is signed?
Exports from our electronics and electronic components industries to China are
already virtually tariff-free, at an average of 0.58 percent. An ECFA will be of
no substantial help to those industries. However, once an ECFA is signed and
restrictions on investment are removed, the two central pillars of Taiwan’s
electronics industry, TFT-LCD display manufacturers and wafer foundries, could
well move their operations to China. Such core technologies would be handed over
to China, and interconnected industrial chains rapidly decimated.
In addition, China’s raw steelmaking capacity has skyrocketed in recent years,
resulting in a dramatic increase in overseas dumping. After an ECFA is inked,
approximately 300 mid and low-stream steel products from China originally banned
for import will flood into Taiwan. This could seriously undermine upstream steel
operators such as China Steel and in the mid to long-term, the survival of
downstream metal product makers will also be questionable.
Despite the government’s efforts to play up the benefits of an ECFA to the
petrochemical industry, the only company that stands to benefit is
export-oriented Formosa Petrochemical Corp. China Petroleum Corp (CPC), which
is more oriented toward domestic sales, and the mid to downstream operators
dependent on it for raw materials would gain nothing. Once an ECFA is signed, it
is not impossible that Formosa Petrochemical would establish upstream plants in
China and then sell its products back to Taiwan. That would have a disastrous
impact on CPC, a major local employer.
The government has shown little in the way of new ideas to deal with the problem
of rising unemployment. Given this, it is hard to muster any confidence in its
ability to deal with the coming storm of unemployment that will be unleashed by
the ECFA.
Cheng Li-chiun is chief executive of the Taiwan Thinktank.
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