20100627 An ECFA will destroy middle class: TSU head

An ECFA will destroy middle class: TSU head

As the Chinese Nationalist Party (KMT) government looks set to sign an economic cooperation framework agreement (ECFA) with China on Tuesday, Taiwan Solidarity Union Chairman Huang Kun-huei sat down with ‘Taipei Times’ staff reporter Vincent Y. Chao on Friday to elaborate his concerns regarding the controversial trade pact’s possible effect for Taiwan

By Vincent Y Chao
Staff reporter
Sunday, Jun 27, 2010, Page 3

Supporters of the Democratic Progressive Party sound vuvuzelas during a protest in Taipei yesterday against a major trade deal to be signed in the coming days with China.

PHOTO: AFP

Taipei Times (TT): The government released the ECFA’s early harvest lists — goods and services that will be subject to immediate tariff reductions — for the first time on Thursday. It looks like the list will favor Taiwanese exporters as China will lower tariffs for 539 Taiwanese items, Taiwan’s market will open up to 267 items from China. What’s your thoughts on this list?

Huang Kun-huei (黃昆輝): All these figures that the government talks about don’t reflect the true realities of an ECFA.

What we are concerned about is neither Taiwan nor China’s early harvest list of tariff reductions, but instead the continued opening of Taiwan’s market to China — a move that could liberalize up to 90 percent of China’s exports toward Taiwan in 10 years.

Under the WTO [both Taiwan and China are members of the WTO] regulations, both sides will have to significantly lower customs barriers ... 10 years after the agreement is signed. So, while we see that Taiwan has more goods and services subject to tariff reductions than China, we have to take into account that this is only the first negotiations.

For example, the government says that agricultural goods won’t be liberalized, but this is only for now, what about the future? The labor market is the same: It’s not open for now, but how about in the future?

TT: Which exactly is this WTO regulation that you mentioned?

Huang: The WTO’s regulations state that if a free-trade Agreement (FTA) is signed between two member countries, trade between the two must be liberalized by up to 90 percent within a decade. So, if the government considers [an ECFA] to be an FTA under the WTO framework, or a transition toward an FTA, we must accept WTO regulations.

So when they say that agricultural products won’t be opened, it is only for now that we have not included them in our early harvest list. But in the future? Every six months, we have to reopen negotiations, every year twice and in 10 years we will have had 20 meetings that will deliberately and continuously tear down our trade barriers.

TT: So far, we have heard mixed comments from government officials on whether an ECFA would constitute an FTA. Based on your understanding, is an ECFA an FTA?

Huang: Currently, the talks between Taiwan and China on an ECFA seem to treat it like a transitional agreement to an FTA, but it is very ambiguous. After we sign an ECFA, we will have to meet two challenges: If we recognize that this is an FTA, we will have to open up our market. But on the other hand, if we don’t want to follow WTO regulations, then an ECFA will entirely become a domestic law.

Under a domestic law, China will assume a commanding position and Taiwan will be entirely subject to Chinese authority.

However, as I see it, [an ECFA] should count as a transitional agreement to an FTA.

TT: One of the arguments your party has used to oppose the signing of an ECFA is the fear that the trade pact would result in Taiwan becoming part of a “one China market” — a concern the government has denied. The government says the talks have not infringed on Taiwan’s sovereignty, what are you views toward this?

Huang: The Chinese side has already made their position very clear — that signing an ECFA takes place under the “one China framework.” An ECFA is the start of a “one China” market — which Taiwan’s market would become part of and be locked into.

We have to ask ourselves why we cannot just sign an FTA with them; after all, we are both WTO members that have equal rights and responsibilities. Instead, we have to sign an ECFA that degrades our status — a move that puts Taiwan and Hong Kong into the same category. Both Hong Kong and Macau have Closer Economic Partnership Arrangements (CEPA) with China, both of which are not FTAs.

China wants to complete its unification goals by first signing the CEPAs and then an ECFA with Taiwan.

TT: You allege that China harbors dangerous political ambitions toward Taiwan. How does this affect the signing of an ECFA and your opposition to it?

Huang: China’s strategy has been very clear since 2008 — they want to unify Taiwan through the use of economic integration and use this to move toward political ­unification. China’s policies are to use its business clout to further its political interests and use economics to influence politics.

Let’s think about this, if our economy is entirely under their control and we lose our financial independence, it will be very hard to maintain our political sovereignty.

Taiwan’s democracy is based on the foundation of a strong middle class, but when this middle class becomes destitute, how will we maintain our democratic ideals?

No one can say that politics is politics and economics is economics — it’s not like that. Politics and the economy are directly related, they are interlocked and cannot be separated.

It’s not easy for China to attack Taiwan; after all we live in a highly internationalized society. At the same time, Taiwanese will also not accept both sides heading into political negotiations.

Instead, they are aiming to give Taiwan short-term economic benefits and undermine Taiwan’s business and economy — moves that are easier for them to undertake.

TT: You have said on previous occasions that the government has not carefully analyzed an ECFA’s impact on Taiwan, politically and economically. At the same time, you have focused much of your criticism on an ECFA’s potential impact on Taiwan’s middle class salaries and traditional industries, why is that?

Huang: Let’s start with traditional industries. Now, I have said previously that the part we are most concerned about in an ECFA is that market liberalization will continue to take place after it is signed. Taiwan has a small market, it really cannot stand up to an influx of cheaper goods from China.

Our traditional industries are focused on selling to Taiwan’s own domestic market. The import of cheaper Chinese products will eventually replace our own industries.

On the other hand, the bulk of Taiwan’s export-oriented industries have already moved to China. You won’t find some of Taiwan’s high technology sectors on the early harvest list at all because China wants them to move their entire factories over there.

They want to use our investment dollars to manufacture goods in China and sell them overseas, which allows them to accrue foreign current holdings. Our factories in China also provide their labor market with job opportunities.

How will Taiwan survive if our export-oriented industries relocate to China and our domestic market-oriented companies are replaced because of competition from Chinese products?

And now the government even wants to open up Taiwan’s services sector to China — a move that will expose our middle class white collar workers to competition from the Chinese work force and their lower wages. Our wages are currently high, while China’s are low. If we were to equalize our salaries, the money that we make would be reduced.

Currently, our university graduates are happy if they can earn NT$20,000 to NT$22,000 a month after graduation. But at the end of president Lee Teng-hui’s (李登輝) presidency in 2000, our university graduates were already making NT$30,000 a month. Our wages have gone down and it’s because our investments and our industries have gone to China. Our industries are empty now and our job opportunities are gone.

In a recent job recruitment fair, 40 vacant positions were contested by thousands of people. The newly hired are happy that they’ve been accepted, how are they going to ask for higher wages?

That’s the way it will be. I believe that because of an ECFA, future Taiwanese employment will be limited to low-wage, low-skilled jobs marked by high work hours and no benefits. How can we say that an ECFA will not have a huge impact on Taiwan’s middle class?

TT: These arguments you use against an ECFA, including lower wages and affected industries, are often heard before FTA negotiations worldwide, including when the US signed the North American Free-Trade Agreement with Mexico and Canada. However, these concerns have often failed to materialize or have proven not to be serious issues after the agreement is signed. Could this not be the case here in Taiwan?

Huang: The signing of an FTA will more or less have similar effects around the world — but the signing of an ECFA between Taiwan and China is different. We have to take into account the cultural and linguistic similarities between both sides. While the FTA between the US and Mexico has its impact, Taiwan’s will be much more serious because of these similarities.

Let’s use the US fast food chain McDonalds as an example, after it came to Taiwan, it had a direct impact on [Taiwanese restaurants]. Our competition with the US is a competition between steamed buns and hamburgers; but some people don’t like to eat hamburgers. On the other hand, our competition with China is between steamed buns and steamed buns, their products compete directly with ours.

What I mean is that any competition between two other countries will always have its slight differences in goods and products, but these differences are very small when it comes to Taiwan and China.

Furthermore, when we talk about differences between an ECFA and other FTAs, we cannot but take into account political considerations. While the US does not want to annex Mexico, China has very publicly said that it wants to one day unify with Taiwan.

Signing an ECFA sends the international community the wrong message. It says that Taiwan wants to be part of China, like Hong Kong and Macau. It makes it seem that Taiwanese development is entirely dependent on China.

The fact is, instead of reaching out internationally, an ECFA locks Taiwan into a “one China” framework. The government insists that an ECFA has to be signed ... but in all this time that we haven’t yet signed the agreement, hasn’t Taiwan continued to move forward?

This is Part I of a two-part ­interview. Part II will be ­published tomorrow.