Saturday, March 14, 2009

Too close for comfort?

Taiwan debates cross-strait trade pact

Jonathan Adams, Global Post, March 6, 2009

TAIPEI — To integrate, or not to integrate?

That's the question these days in Taiwan, where debate rages over a proposed economic pact with political rival China.

The two sides are already joined at the hip, economically speaking, with Taiwanese firms invested in China to the tune of $150 billion, by some estimates. But many barriers still remain, such as a 6.5 percent tariff on Taiwanese plastics, nearly 70 percent of which are exported to China.

Taiwan's China-friendly president Ma Ying-jeou wants to scrap as many of those tariffs as possible. So he has proposed a broad cross-strait economic deal to do just that. It's backed by many business leaders, who say the island will be marginalized unless it integrates more closely with the economic giant next door.

But when it comes to Taiwan-Chinese relations, nothing is easy. The island's pro-independence opposition objects to both the substance and process of Ma's proposed pact.

On substance, they say integrating with China isn't the right cure for Taiwan's economic ills. And they warn that such a pact would play into China's strategy for absorbing the island, in which free trade paves the way for political union.

"Their worry is that Taiwan could become a kind of economic colony of China," explained Liao Da-chi, a political scientist at National Sun Yat-sen University in Kaohsiung.

On process, the opposition says Ma is doing an end-run around the island's democratic institutions by unilaterally making China policy. Even the legislative speaker — who is from Ma's own party — has spoken out, saying there should be a legislative review of any economic agreement.

The debate is taking place against the backdrop of a miserable economic climate, as Taiwan and other Asian export-dependent economies get slammed by falling demand for their products in the U.S. and other foreign markets.

Ma has tried to calm fears about the political significance of a trade deal, insisting he would not sign away Taiwan's sovereignty. In a recent interview with the pro-independence Taipei Times, he defended his proposal, chiding skeptical journalists for "lacking confidence" about Taiwan's strategic position.

Still, under pressure from opposition critics, he's renamed his proposed pact, from the former Comprehensive Economic Cooperation Agreement (CECA), to the more vague Economic Cooperation Framework Agreement (ECFA).

One reason, say observers: "CECA" sounds too much like "CEPA" — the type of economic pact signed between Hong Kong and the Chinese mainland after the territory reverted to Beijing's control in 1997.

Most Taiwanese, and especially the pro-independence party, reject any parallels with Hong Kong, insisting that Taiwan is an independent state. The island is hypersensitive to any terminology that suggests belittlement.

"There's concern about whether the title downgrades Taiwan's national dignity," said Liao. "But the main problem is the contents. The government hasn't been clear about what it wants to include in an agreement."

Sensing Ma's retreat, opposition legislators hammered his premier Liu Chao-shiuan in questioning this week. They pressed him to clarify the confusing acronyms, and reminded him (actually, screamed at him) about Ma's promises to fix the economy.

In his campaign a year ago, Ma offered a "633" plan, promising 6 percent GDP growth, $30,000 per capita income by 2016, and an unemployment rate under 3 percent.

The government now forecasts GDP to contract nearly 3 percent in 2009, with a corresponding drop in per capita income (from last year's $17,600). And the latest unemployment rate, for January, rose to 5.3 percent, with record numbers now seeking unemployment benefits.

Since Ma took office in May last year, the two sides have resumed negotiations, reaching agreement on cross-strait air and shipping links and tourism. But whatever economic benefit those deals brought has been erased by the global downturn.

The next round of talks is scheduled for the first half of this year in China, but no date has yet been set. Topping the agenda are deals on banking and finance, as well as crime-fighting cooperation.

With its own economy struggling China, meanwhile, is all too eager to sign a broader economic pact. In a speech March 5, Chinese Premier Wen Jiabao called for more cross-strait economic cooperation, and even floated the possibility of a peace deal.

Chu Shulong, a political scientist at Tsinghua University in Beijing, said that China is eager to move the agenda from economic to political issues.

"By the summer, there will be basic resolution of all major economic and social issues," said Chu. "Then, if the two sides want to continue, they'll have to move to political issues. But political talks won't be as easy, because they will touch on fundamental issues for both sides."

With even an economic deal provoking heated protests in Taiwan, a political breakthrough looks like a pipe dream for now.

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