Sunday, July 31, 2011

Vitamin, or poison pill?

China-Taiwan trade deal: buyer's remorse?

July 8, 2010

Analysis: A week after historic pact, many Taiwanese worry that they did the wrong thing.

TAIPEI, Taiwan — Is it a vitamin, or a poison pill?

A week after China and Taiwan signed a landmark trade deal binding their economies closer, Taiwanese can't decide if they've been thrown an economic life-line or, as one paper put it, signed a political "suicide note." And that's the experts.

The two sides inked the Economic Cooperation Framework agreement (ECFA), on June 29 at a ceremony in Chongqing, China. The deal lowers tariffs on a range of goods. It also provides better market access for services, including banking.

All fine and good. Except this is no run-of-the-mill trade deal.

Strange to say, it was signed by two countries who don't recognize each other's existence. In fact, they're technically still in a state of hostilities. China covets self-ruled Taiwan and has some 1,300 missiles piled up across from the island as a reminder it shouldn't be naughty (i.e., make a formal, permanent break with the mainland.)

China's claim is long-standing. But instead of bellicose threats, Beijing has begun using the honey of economic enticements to catch the fly. ECFA's terms heavily favor Taiwan, with tariff reductions on 539 Taiwanese exports to China versus just 267 Chinese exports to Taiwan. In other words, it's a big, fat dollop of honey.

Now, self-ruled Taiwan is wondering whether its fragile young democracy can long endure in the sweaty economic embrace of the hulking suitor next door.

Participants in a protest against the China-Taiwan trade deal in Taipei on June 26, 2010.
(Jonathan Adams/GlobalPost)

"I think we all know why China is making so many concessions," said Taiwanese economist Ma Kai at a forum. "China thinks ECFA is a very important step toward the unification of China. Everyone in Taiwan knows that."

"If that is the political price that Taiwan has to pay to get ECFA, this price is too high for many Taiwanese to accept."

Polls suggest a majority of Taiwanese backed the trade deal [3], at about a 62 percent to 37 percent ratio in May, according to survey data compiled by the Election Study Center's Yu Ching-hsin. But only 10 percent support unification with China.

Even some of the deal's supporters have voiced anxiety about how Taiwan can fend off Beijing's political advances. And they worry about over-dependence. Already, some 35 percent of Taiwan's exports go to China; after the deal some say that percentage could rise to 45 percent or even 50 percent.

"That ratio's too high — it's dangerous," said Hwang Jen-te, an economist at National Chengchi University. "It will endanger Taiwan's economic security; we have to consider this."

The pro-independence opposition thinks Taiwan's been hornswaggled. "In economics, maybe it [ECFA] is good for giant industries, but for the political part, we lose," said opposition legislator Twu Shiing-jer. "I hope the international community will not come to see Taiwan as a part of China because we signed this."

The opposition mobilized tens of thousands of people in a march against the trade deal on June 26. It says the government is exaggerating the deal's benefits, and it wants a referendum.

The pro-independence party has posted Youtube videos warning of ECFA's effects [4]. One shows a Taiwanese applicant passed over for a job in favor of a Chinese applicant willing to accept half the salary.

Taiwan president Ma Ying-jeou said he's well aware of China's unification agenda, but insists Taiwanese should stay calm and have confidence. He's pledged not to enter unification talks and not to allow Chinese workers into Taiwan.

His party, the Kuomintang, holds a large majority in the legislature and, barring an internal revolt, should push the deal through. "We are convinced that our position is strongly supported by the majority of people in Taiwan," said legislator Alex Tsai, adding that they want the legislative review done and dusted by the end of summer.

Other commentators also took a glass-half-full approach, putting the trade deal in the context of decades of troubled relations.

"For the first time in our 60-years history, the two sides, while hostile before, are talking about the institutionalization and formalization of economic relations between Taiwan and China," said Francis Kan, an expert from National Chengchi University. "This will go down in history as a turning point."

So what do normal Taiwanese think of ECFA's impact?

"It's not clear," said the owner of a neighborhood fruit stand, without looking up from his pear-peeling, as his wife cut up the fruit into white, juicy chunks. "Whatever the case, it won't
have a big effect on our business."

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