18 April 2019
Taiwanese celebrate national day. Taiwan will become uncompetitive if it's left out of the FTA loop. Photo: AFP
Taiwanese celebrate national day. Taiwan will become uncompetitive if it's left out of the FTA loop. Photo: AFP

Stalled cross-strait services trade pact has wider dimension

The Taiwan-Mainland China services trade agreement, signed in June, is still not in effect having been blocked by the opposition Democratic Progressive Party which is insisting on an article-by-article inspection of the accord by the Legislative Yuan, or parliament.

Since President Ma Ying-jeou came into office in 2008, 19 cross-strait agreements have been signed, resulting in direct sea and air transport links, mainland tourists visiting Taiwan and an explosion in trade which grew 46.5 percent in the first quarter of this year to US$51.44 billion, according to China’s General Administration of Customs.

The most significant agreement of all, the Economic Cooperation Framework Agreement, was signed in 2010 but, as its name indicates, it is a framework and needs to be fleshed out by specific agreements on such things as investment protection, services trade, commodity trade, dispute resolution and avoidance of double taxation.

However, the momentum has stalled. Opponents of the pact charge that it would damage Taiwan industries and result in loss of jobs to mainlanders.

The Ma administration is trying to drum up backing from industry groups by highlighting the pact’s positive impact on such sectors as finance, telecommunications, entertainment, health, tourism and information technology.

This is something the government should have done earlier to ensure passage in the legislature.

The Ma administration has announced that it has set aside US$3.38 billion to help businesses upgrade and workers obtain skills training.

There is little doubt that Taiwan will benefit from the agreement. In fact, Taiwan needs to reform to make its economy more competitive.

The free trade agreement Taiwan signed with New Zealand in July, which envisages the removal of all trade barriers by about 2025, and the as-yet-unsigned FTA with Singapore, should also help to pressure Taiwan to rid itself of protectionist barriers and enable it to compete in a globalized world.

Taiwan recognizes that its future is bleak unless it can join more FTAs involving many more countries such as the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership.

The New Zealand FTA demonstrates the correctness of President Ma’s assessment that Beijing would allow it to reach free trade agreements with other countries once Taiwan had signed ECFA with the mainland. New Zealand already has an FTA with China.

If Taiwan is left out of the network of FTAs being woven by its trading partners, it will find itself increasingly uncompetitive. For example, South Korea, a major competitor, has dozens of FTAs, including with the US and the European Union. Taiwan simply cannot survive in a world where its exports are levied a duty of, say, 15 percent while exports from its competitors are exempt from tariffs.

The opposition DPP generally understands the economic realities facing Taiwan but it is more apprehensive of the political perils of a closer economic partnership with China.

The DPP fears that every accord Taiwan signs with China will tighten the mainland’s embrace of the island, eventually giving Taiwan no choice but to accept political unification.

Such fears were heightened recently by Chinese President Xi Jinping, who told Vincent Siew, President Ma’s personal representative to the APEC summit in Bali, that the cross-strait issue cannot be “passed on from generation to generation”, indicating the mainland’s impatience at the lack of progress toward a political resolution.

On Monday, the state agency Xinhua chimed in with a commentary saying, “Dealing only with economic affairs while ignoring political ones is not a sustainable practice.”

At the Bali meeting, there was also a carefully staged encounter between Wang Yu-chi, minister of Taiwan’s Mainland Affairs Council, and Zhang Zhijun, minister of the mainland’s Taiwan Affairs Office.

This scripted event, in the presence of the media, was significant enough for President Ma to say, in his national day address on Oct. 10: “It’s noteworthy that the two ministers greeted each other by their official titles.”

To the president, this represented progress toward official Chinese recognition of his government. Ma himself is never referred to by the mainland as president but rather as chairman of the ruling party, the Kuomintang. In that sense, the recognition of a Taiwan government official signaled a move forward.

But the mainland may have its own motivations. Beijing wants to move toward political talks with Taiwan and these have to be done by the two governments and not by party officials, or at “track two” meetings attended by academics, legislators and retired civilian and military officials.

In the meantime, if the services sector trade accord is not approved, it will stall talks on other issues, such as trade in goods, which are meant to be concluded by year-end, not to say the holding of political talks some time in the future.

Frank Ching opened The Wall Street Journal’s bureau in China in 1979. He is now a Hong Kong-based writer on Chinese affairs.

– Contact the writer at [email protected], Twitter: @FrankChing1




Frank Ching opened The Wall Street Journal’s Bureau in China in 1979. He is now a Hong Kong-based writer on Chinese affairs.

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